Identifying what expertise is needed on the board and orchestrating different—if not conflicting—points of view into constructive conversation can be a challenge. During a session at the second annual NACD Diversity Symposium on the opening day of the Global Board Leaders’ Summit in Washington, DC, panelists James Lam, director and chair of the risk oversight committee at E-Trade Financial Corp. (E*TRADE); Myrna Soto, director of Spirit Airlines and CMS Energy Corp.; and Charlotte Whitmore, vice chair and chief, brand strategies, of Analytics Pros., discussed how boardroom talent and a robust mix of perspectives are critical to ensuring a company’s success.
Conversation centered around two themes:
1. Striking a Balance. When considering the future needs of the company, Lam recommended that directors think about their business and its risk profile and then consider the following questions: “What are the key megatrends that will impact the business?” and “What director skill sets will be needed to mitigate this potential impact?”
Considering the continuously growing list of threats and disruptors facing businesses—such as cybersecurity, globalism, and climate change—some boards debate the need to focus on recruiting subject-matter experts to help them oversee these risks. But panelists agreed that new perspectives should replace long-standing expertise.
“Seasoned directors can be a voice of reason,” Soto said. “New executives can be what you need to push the strategy. When you have that diversity of thought, you really challenge the strategy, but it comes down to the nominating committee and how it thinks about what the next director is going to bring to the table.”
Drawing on her own experience, Whitmore concurred. Whitmore is cofounder of the data analytics start-up, Analytics Pros, and knows what it’s like to both recruit directors whose business experiences are different from her own and to be recruited to a board because of her particular expertise. At her own company, Whitmore said she has learned from more seasoned directors that taking actions to grow the company too quickly might do more harm than good. “They bring a sensibility to corporate culture that’s not just about driving results,” she said. In her role as a director, she said her older colleagues often look to her data-analytics savvy to discover new ways to support the organization.
2. Facilitating Dialogue. Having diverse perspectives around the board table does the company no good unless they are heard. Effective director onboarding is vital to acquainting a new director with the company and establishing both the board’s expectations of the new recruit and what that director expects of fellow board members and management. A director’s ability to successfully contribute to the conversation is contingent on the conditions on which they were onboarded. Soto said that she turned down several directorships based on what she learned about the companies’ governance structures. Lam recalled having his own agenda during his onboarding at E*TRADE, ensuring, for example, that he was able to meet with the risk committee and senior management.
In addition, the lead director plays the very important role of ensuring that all directors are heard. When new directors are called upon to join the board of a company in crisis or during a transition—such as a CEO succession—the lead director can be instrumental in managing and balancing the perspectives and experiences represented around the table and getting the full board to a point where it feels comfortable not only in making major decisions, but also in communicating those decisions to stakeholders outside of the boardroom.
The first panel at the 2016 Global Board Leaders’ Summit’s Diversity Symposium provided directors with real-life examples and related metrics from four executives who have successfully linked diversity with competitive advantage.
Leslie Mays, partner at Mercer, moderated the panel that included Rohini Anand, senior vice president and chief diversity officer, Sodexo; Phillip Goff, president and cofounder, Center for Policing Equity; Herschel R. Herndon, founder and president, HRH Global Connections; and Sonya F. Sepahban, director, Genomenon and Cooper Standard.
The panel suggested four essential steps to build a more diverse workforce and create value through innovation.
Start With the Board
Anand noted that because the Sodexo board does not take its commitment to diversity lightly, performance metrics for the CEO are directly tied to diversity initiatives. Sodexo, a facilities management company, sets ambitious recruitment goals across every department, with the aim of achieving a C-suite consisting of at least 40 percent women by 2020. The CEO’s commitment to Sodexo’s diversity goals has in turn driven deeper engagement in diversity and inclusion at all levels of the company. The result? Anand said that the division of Sodexo that she leads has realized $1 billion in new business that can be directly tied to the company’s diversity and inclusion efforts.
Set the Metrics for Innovation
Herndon defines innovation as “anything new that creates value.” The value of a more inclusive workforce will be revealed if specific business practices are established:
Tie recruiting metrics to the statistical makeup of the market the company serves—or seeks to serve.
Monitor if and how diverse talent is being cultivated through the leadership pipeline.
Establish new-business lines targeted to previously underserved populations and then track their success.
When planning strategy, challenge your board to keep diversity top of mind.
Work to Remove Biases
Goff noticed that workers at a company he consulted to performed with greater efficiency when paired with a coworker of the same race. These workers had little training in how to work with someone who was not from their own background, and when paired with a colleague of a different race, faced tensions that slowed their work.
To realize the full economic value of diversity and empower teams to do their best work together, companies should provide training in how to overcome unconscious biases and in how to be mindful of tensions caused by misunderstandings when evaluating workers’ performance. “Bias can be baked in,” Goff said. “If we define all the things we care about and measure based on them, we will see greater success.”
Inclusion Must Be Pervasive
Sepahban, who currently works closely with start-up companies and venture funders, said that while only 12 percent of venture capital is awarded to companies with diverse leadership, companies with at least one woman founder performed 63 percent better than those without a woman leader based on exit valuations.
To change the tide towards inclusion at start-ups and larger companies alike, Sepahban urged her fellow directors to make inclusion pervasive. “This isn’t someone else’s job,” she said. “Even with all the great work done by diversity leadership, it’s still everyone’s job. Leadership should educate all to ask themselves what they are doing to help.”
How will boards find the next generation of talent—directors who will be able to maintain their companies’ competitive edge in a global marketplace? This was the question raised in the third session of the Diversity Symposium at this year’s NACD Global Board Leaders’ Summit, and it was addressed by a panel composed of Lt. Gen. (Ret.) Michael Rochelle, founder, president, and CEO of MDR Strategies LLC; Pablo Schneider, CEO of The Wider Net, a firm dedicated to advancing diversity in top leadership roles; and Caroline Tsay, vice president and general manager at Hewlett-Packard Co. and director of Rosetta Stone Inc. and Travelzoo. The panel was moderated by Andrea Hoffman, founder and CEO of Culture Shift Labs, and the discussion broke down the talent search process into three parts:
identifying opportunities for increasing diversity,
analyzing the impact of force multipliers in the boardroom, and
locating these wellsprings of new talent.
Schneider observed that the most promising opportunities for increasing boardroom diversity arise where the board’s biggest knowledge and talent gaps exist. Because demographics and technological innovations are transforming companies everywhere, boards must assess not only a candidate’s skill sets and experience but also whether he or she has the mindset to oversee those transformations. Rochelle added that boards must look at disorder and disruption in order to ensure that director talents correspond to those forces. Tsay advised boards to analyze the skills of prospective directors in terms of their alignment with the company’s overall strategy.
Discussion then moved to the force-multiplier effect—i.e., how having subject-matter experts dramatically increases the board’s effectiveness by providing diversity of thought and cultural perspectives on the profiles of these candidates. Rochelle again brought up the issues of disorder and disruption, asserting that it will be impossible for boards to manage these forces if they continue to rely on traditional approaches. He also noted that an outsider’s view is critical, both because it prompts the board and the executive team to be more diligent in how they analyze day-to-day business and because it provides new insights into potential problem areas.
Tsay echoed this point, offering the example of a Rosetta Stone director who is also the CEO of a media company and who established an advisory consumer focus committee on the board in order to acquire a more granular understanding of the company’s customers. Force-multiplier talents can help boards to rethink the tools they use to reach consumers and how the board can gain an end-to-end view of the industry. “There are opportunities to get candidates with expertise, but how do you best leverage them?” Tsay asked.
Finally, the panelists discussed two key questions: who are the people best qualified to raise the company’s profile, and where can one locate these wellsprings of talent? On this score all agreed that networking is critical. By attending corporate, industry, and/or director education events, current board members will be able to meet and foster professional relationships with potential candidates.