Diversity is a big subject in business today, but while most people believe in the need for greater diversity, making it happen has been slow to progress. This is especially true on corporate boards, which often are reluctant to bring new perspectives and skillsets into the fold. Deloitte’s recent Board Diversity Survey revealed a disconnect between the number of board members who agree more diversity is a good thing and boards actually doing something about it. Consulting caught up with Mike Fucci, Deloitte’s Chairman of the Board, for some insight into that disparity and what boards can do to broaden their diversity.
Consulting: What are some of the problems with the composition of boards today?
Fucci: In our survey, 95 percent of our respondents agreed that having more diverse skillsets and perspectives on boards is important. However when you dig a little deeper and ask what they’re doing differently to obtain that, it’s a bit of a different answer. Some companies aren’t doing anything differently, using the same process they’ve always used to replace corporate directors. Some companies, probably half of them, have a succession plan where they either do it internally or have an outside company help them get different perspectives on boards. When we look at the term diversity, some people think of it just in terms of gender and ethnicity, but we’re really looking at diversity of skillsets.
Consulting: Why is the conversation happening at this moment in time?
Fucci: If you look at business today, the needs you’ll have from boards over the next 5-10 years could really be different from what boards had over the last 10 years. The concepts of innovation and disruption are really taking over, it’s probably the majority of conversations in boardrooms and management committees; what’s happening in innovation and disruption. If you believe that, and most companies believe that’s a core thing they have to worry about, how do you get boards to match that and have different skillsets on board? That’s where you really see the dichotomy; a lot of people believe diversity of skillsets needs to be on the boards, yet they really haven’t done anything different than their current practices to actually make it happen.
Consulting: How do you account for that disconnect?
Fucci: They believe in the concept of diversity, but I don’t think they’ve actually prioritized it in terms of something that has to change. We asked them how they find directors, and in a lot of cases they use recruiting firms or go by recommendations of current directors. Typically a CEO of a company may recommend a CEO of another company who may recommend a CEO of a third company, and you see very similar skillsets. One of the things I say is if you really want to break that sameness, you have to change the way you recruit. I think putting things like term and age limits on more boards at least at a minimum opens up the pool of candidates to be replaced. Right now it’s only a 5 to 10 percent turnover on boards. Sometimes people are on boards 15, 18, 20 years, which is great because I’m sure they know the organization well, but at the same time if you really believe in getting different kinds of skills on the boards and shorten that average tenure to seven to 10 years, you’d get a bigger pool of candidates. That means you’ll get more gender diversity, ethnic diversity, and diversity of thought.
Consulting: Why are boards drawing from such a shallow candidate pool?
Fucci: It’s a comfort level thing. We asked in the survey would you feel comfortable having someone on the board with no board experience. While 95 percent of people agreed they need more diversity, but about half of them said they’d feel uncomfortable having someone on the board for whom it was their first board. Everybody has to start somewhere. So if you believe that, I call it a cycle of uniformity, it’s going to be really hard to break out of that. Somebody’s going to have to take a risk and say by putting Person X on the board, and that person has the following skillset, it’s actually going to be better for them in the long run.
Consulting: What’s the negative impact for boards lacking diversity?
Fucci: I always say, this is not a social cause, it’s a business imperative. Our survey respondents said they believe by having diverse boards they’d be able to manage disruption better, and improve overall business performance. Over 90 percent said they believed greater board diversity would enable those two things, so I don’t actually understand why we’re not getting more of it.
Consulting: Will we see a domino effect once a few big firms’ boards prioritize diversity?
Fucci: I’m hoping that as boards start adding diversity of skillsets and those companies start performing well and people start seeing that, we’ll have a bit of a movement here. I’m hoping that happens over the next five to 10 years, but I don’t think that’s going to happen until there’s some courage in the boardroom to make this a priority.
Already have an account? Sign In
Already have an account? Sign In
*May exclude premium content