Over the past 10 years, I have watched the topic of board diversity pop up in headlines, management journals and policy discussions – and the debate continues: should boards have quotas? Will this approach increase tokenism? Should we diversify the candidates or will it make boards accountable only for who is considered, not who is selected?
Unfortunately, increased public recognition of the issue has not done much to increase diversity – at least, not at the rate desired by leading organizations. A recent Washington Post article highlighted the fact that there are “more male directors named John, Robert, William or James than there are woman board members”. Although I’m familiar with statistics on gender and minority representation, this latest finding confirmed the poignant lack of progress. Why is change advancing at such a glacial pace?
Problems in the pipeline
One of the most common barriers to boardroom diversity is the absence of women and people from minority groups in the executive positions that feed into the top level. Individuals who reach these roles are often perceived to have the experience, credibility and seniority to be an effective board member. A recent McKinsey article, Why Diversity Matters, states:
“Women, accounting for an average of just 16% of the members of executive teams in the United States, 12% in the United Kingdom and 6% in Brazil, remain underrepresented at the top of corporations globally. The UK does comparatively better in racial diversity, albeit at a low level: some 78% of UK companies have senior-leadership teams that fail to reflect the demographic composition of the country’s labour force and population, compared with 91% for Brazil and 97% for the US.”
The harsh reality is that few women and people from minority groups make it to these feeder roles, and efforts to address their absence continue to fall short. These include paying large sums to executive recruiters to reach people outside board members’ immediate networks, and setting mandates for diversity among candidates. This often results in the same small, select group of executive women and minorities being proposed for a wide range (and disproportionate number) of board roles. A band-aid approach of this sort can only perpetrate the slow pace of change.
Several organizations are attempting to increase the percentage of women and minorities in their upper ranks. But, while I do not wish to undermine their development, sponsorship and advancement strategies, the reality is that these efforts take time. Even the best intentions and most efficient plans won’t result in a large number of women and minority-group representatives landing executive roles overnight. The real question is: are we willing to wait?
Don’t put it down to experience
Let’s stop to consider whether the slow pace of change is due to the manner in which researchers, executives and the media have defined the barriers to board diversity. Is the problem actually the low percentage of alternative candidates in executive roles, or is it the fact that we focus our selection process almost exclusively on these roles?
While several factors are taken into consideration when selecting a director – such as geography, market knowledge and industry expertise – there is one common requirement among today’s candidates: experience. In a recent CEO Magazine blog, Deborah DeHaas, Vice Chairman and Chief Inclusion Officer for Deloitte LLP, explained that discussions tend to focus on skills and experience. As long as we are bound by this model (which often equates to a reliance on executive “feeder” roles), we will continue to see boards diversifying at a snail’s pace.
The promise of potential
To achieve real diversity, board members and those who hire them must expand beyond experience-based selection criteria. Without a doubt, this call to action is going to raise questions.
First and foremost: isn’t experience one of the primary predictors of future success? Surprisingly, the answer is no. In an article in the 2014 Harvard Business Review, titled 21st-Century Talent Spotting, Claudio Fernández-Aráoz states: “Having spent 30 years evaluating and tracking executives, and studying the factors in their performance, I now consider potential to be the most important predictor of success at all levels, from junior management to the C-suite and the board.”
How do you measure potential? While there are many different ways, Fernández-Aráoz suggests “mining a candidate’s personal and professional history”, “conducting in-depth interviews or career discussions” and carrying out “thorough reference checks to uncover stories that demonstrate whether the person has (or lacks)” five main qualities: motivation, curiosity, insight, engagement and determination.
Boards are designed to manage risk, and therefore the next question might be: is there heightened risk in appointing an “emerging leader”? The reality of the situation is that when it comes to appointing less experienced candidates, the benefits far outweigh the risks. One advantage is that an emerging leader can challenge “groupthink” and thereby have a transformative impact on the way an organization operates.
Could reframing our board-selection criteria really allow us to reach the presently unattainable goal of true diversity? With the percentage of women and minorities in the workforce steadily increasing year on year, the answer is yes. As long as we look beyond traditional executive roles, where the representation of these groups is still minor, we can tap into the potential of growing talent pools.
Fernández-Aráoz concludes: “As business becomes more volatile and complex, and the global market for top professionals gets tighter, I am convinced that organizations and their leaders must transition to what I think of as a new era of talent spotting – one in which our evaluations of one another are based not on brawn, brains, experience or competencies, but on potential.”
The case for emerging leaders
So, what will true diversity look like, in practice? My proposal is for boards to be open to the potential of emerging leaders, and to interview professionals regardless of their seniority and experience.
There are benefits associated with this approach, including (but not limited to) improved financial performance, and the money and time that organizations will save if they can avoid fighting over the same pool of candidates.
The less obvious benefits – but ones not to be overlooked – are those associated with opening up board positions to the younger generation, themselves a growing talent and consumer group. Deborah DeHaas argues that boards are also lacking generational diversity, posing “a risk for nearly every business and industry”. With millennials expected to account for 75% of the workforce by 2025, their perspectives in the boardroom could help inform talent strategies and practices, while simultaneously driving marketing and product innovation towards this growing consumer group.
It is worth also considering the potential brand impact of such a decision. If there is anything that would indicate an organization’s commitment to diversity, it’s supplementing their traditional selection criteria with the consideration of “potential”.
As Emerson Csorba, Director of Gen Y Inc, states: “If a Fortune 500 company like BP or Toyota opened an application process for a millennial (or emerging) board member, the amount of media coverage and attention that company would receive across the world would be enormous.”
For true and measurable change to happen at the board level, selection must be based on more than experience and seniority. If we succeed in reframing the selection criteria, we will be expanding our pool of talented candidates – women, minorities and millennials – as well as our potential to shape organizations for growth.
We know diversity matters. We know our current efforts are falling short. I believe emerging-leader board positions could be the answer. The case for change is supported by the benefits to finances, resources, talent pools, consumers and branding. All we need is for a group of trailblazing organizations to make the leap and lead the way.
Author: Christie Hunter Arscott is a consultant, a Rhodes Scholar and a World Economic Forum Global Shaper.
Image: Swiss Economy Minister Johann Schneider-Ammann (2L) welcomes participants before a round table talk on the shifting of lower import prices to customers due to the strong Swiss franc in Bern August 10, 2011.REUTERS/Peter Schneider/Pool