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Tuesday, May 6, 2014

Why Diversity on Boards Can’t Happen



For decades, we have heard about the benefits of diversity on corporate boards. Yet, only 18% of Fortune 100 organizations include women or minorities. The argument is that 50% of the US population consists of women.  And 50% of the US population is made up of Hispanics and black Americans. Therefore, boards should have a proportionately higher percentage of women and minorities. Since we clearly are not there, why the disparity?

While it is true, women and minorities make up a significant portion of the US population, the push for diversity on boards has
only occurred for the past 3-4 decades. To qualify as a director on a corporate board, members have traditionally worked their way up through the ranks of leadership to director. This is not an overnight process. With that said, as more women and minorities elevate themselves to executive management, diversity will increase in the boardroom.

However, the real challenge of diversity in the boardroom will not end because women and minorities serve on corporate boards. Why? It is possible to have diversity on a board of directors if it consists of all men from the same race. The need for diversity is to increase diversity of thought, cultural background, professional expertise and ultimately, perspectives. An all male board can surely carry out this directive. For example, in the 1984, General Motors Corporation purchased Ross Perot’s company, EDS. This acquisition gave Perot a seat on GM’s board. For GM, Perot was considered a thorn in the side. He demanded faster change. He made suggestions that were unpopular. And complained publicly about the problems inside of GM. Ultimately, the board agreed to purchase Perot’s shares and remove him from the board.

Perot was an example of diverse thought. Except, the board was unable to manage the apparent chaos Perot presented. And Perot could have done a better job of responding to the lack of alignment to his ideas.  

Perhaps the status quo of boards has been to avoid disruption, which diversity can imply. As in the case of Perot, his diverse thoughts had nothing to do with being a woman or minority. And that points to a bigger reason for the lack of diversity on corporate boards.

To have an effective and diverse board of directors, the Chairman must be able to manage conflict and disruption. In fact, he should be able to extract value and/or opportunity from conflict. With diversity will come a number of heated disagreements amongst directors. On the surface, this may seem dysfunctional. At the same time, it is only through discourse that new ideas are revealed. In peaceful conversations where everyone is in agreement, it is possible to have the kind of group think that creates blind spots.

While I am not advocating disagreement, I am advocating open and transparent dialogue where divergent perspectives are put on the table to be examined by board members. Furthermore, part of the reason diversity can be ineffective is because people are trained to listen to one another in a constrained way; we listen for what we agree or disagree with. While listening for what we find agreeable, we are not listening to what is being said. It is rare that we just listen and allow the person to be heard, without judgment or assessment.

Going forward, to make diversity part of corporate boards, it will be imperative to significantly increase the Chairman’s ability to listen to others without the need for agreement. If the Chairman can listen to what is said, and often unsaid, in communication in or out of board meetings, he will be better positioned to extract value from each director. That would require the Chairman to be able to facilitate diverse perspectives or heated disagreements. In many cases, heated disagreements will uncover hidden liabilities or untapped opportunities.

Ultimately, it would be desirable for each board member to be trained and developed in the same skills to manage extremely diverse discussions. With this training, what they will find is that conflict is not conflict. It is how you respond to what occurs that determines whether it is conflict or an opportunity to discover something new. When that becomes part of board training and development, the fear of managing diverse boards will disappear. And women, minorities or people with radical ideas will be welcomed on any board of directors.       

What do you think? I would love to hear what you think. Or if you want to write me on a specific topic, let me know.

2 comments:

  1. How we respond is paramount in all decisions. Somewhere within the chaos of diverse responses, a skilled and experienced person, will navigate a favorable, effective outcome, through the diversity of those ideologies. The success of my dialysis clinic is bringing those ideologies together and making them work. Improved treatment of comorbidities with a decline in mortality rates. That's real progress through a unified response.

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    1. Well said, Mark. It sounds like your dialysis clinic is a great example of how to leverage diversity in an organization. It's great when a leader can bring it all together. It's better when everyone has the skills to come together.

      Thanks,

      Ted

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