Study: Diversity of thought in the board room is key to business success, but less than half have a process for recruiting candidates with diverse skillsetsNew research from Deloitte. Visit here.
NEW YORK, Dec. 5, 2017 /PRNewswire/ — A new survey by Deloitte U.S. Chairman Mike Fucci, “Board Diversity: Seeing is Believing,” takes a thoughtful look at the need for corporate boards to become more diverse in skill set and thought to keep pace with the evolving business environment.
While corporations eagerly adapt new technologies, disrupting age-old business operations to activate the digital organization, the recruitment and selection processes of the board often remain firmly stuck in the last century. This, despite near unanimous agreement among survey respondents (92 percent) that diverse perspectives and experiences provide a competitive advantage to improving business performance.
What accounts for this disconnect? One of the main findings in the study is that many corporations perpetuate the cycle of board uniformity; they often lack the processes and the will to reach diverse, innovative candidates.
Cycle of Uniformity: C-suite Experience Remains Cost-of-Entry
Despite consensus around the need and value of diverse perspectives, it typically remains a stark contrast to the actual criteria for board selection. Simply said, boards struggle to achieve diversity because their priorities on business strategy often exceed their desire for greater diversity.
When respondents were asked to select and rank the three most important criteria when considering candidates to serve on a board, a traditional image of recruiting emerges:
- Forty-four percent prioritized C-suite experience
- Forty-three percent said specialized business skills
- Forty-one percent mentioned approach to corporate strategy
With CEO experience valued above all other criteria, and the lack of diversity that exists at the C-suite level, the diversity challenge will likely continue to impact U.S. boards:
- Eighty-seven percent of board members agree that retired or acting CEOs make for the most effective board members
“Our study cautions corporations not to remain in the same cycle and take an immediate and aggressive approach to achieving board diversity,” said Fucci. “We must fracture the current system and engage candidates who are not typical, C-suite executives in our industry. In fact, those who fail to make this change may be at risk of backlash from business partners, as well as current and prospective employees, who are prioritizing diversity when deciding with whom they want to work.”
Mixtocracy: A Solution to Board Composition?
Though demographic diversity remains an essential goal of organizations, an overwhelming 89 percent of U.S. board members believe moving beyond demographic diversity is necessary to be innovative or disruptive. Ninety-five percent agree that there is a need for their board to proactively seek out a greater number of board candidates with diverse skill sets and perspectives.
“Creating a mixtocracy — a melting pot of individuals with differing viewpoints, skills, backgrounds and experiences in the boardroom — can have tremendous impact on an organization’s ability to compete in the volatile and fast-paced business environment,” Fucci stated. “As leaders, we must challenge the way we approach board composition and advocate to disrupt today’s evaluation and recruiting process, which is currently broken.”
Evolve Board Policy and Practice Norms to Change the Status Quo
According to survey results, organizational approaches to both recruiting and succession planning have not kept pace with the desire for a board with diversified and disruptive views. A common practice for many organizations is to retain executive recruiters. However, strict, traditional search criteria can hinder organizations already struggling to reach nontraditional members, with 75 percent of organizations that frequently consider candidates primarily because of their resume, rather than their life experiences.
Data show that succession planning requires policy solutions to address low turnover, including:
- Eighty-seven percent of board members who have served on boards for more than 10 years agree corporate boards should have term limits
- Eighty-five percent of board members who have served for more than 10 years agree corporate boards should have a required retirement age for members
Fucci continued, “Corporate America’s leaders are asking for term limits and retirement ages for board members. Why not plan for the succession to come by widening the aperture on possible candidates to fill those seats and help modernize your organization? Though we have a lot to do on the executive side, we also advise professionals to look at how we’re moving forward. By building diverse life experiences and taking risks, the future workforce and boards can have an exciting collection of individuals from all walks of life — that can truly help us innovate.”
Fucci will be leading a discussion on how diversity of thought can lead to innovation Dec. 15 at the National Competitiveness Forum in Washington, D.C., a premier conference that aims to examine America’s competitiveness standing, and present the opportunities and challenges for U.S. innovation, growth and productivity.
About the survey
The 2017 Deloitte Chairman Survey, “Board Diversity: Seeing is Believing,” was conducted by Wakefield Research between April 6–28, 2017. It polled 300 current C-suite and executive board members at organizations with 1,000+ employees and $50MM+ in annual revenue. Respondents’ organizations are privately held (80 percent) and publicly traded (20 percent).