It may be human nature to protect whatever is perceived to be the center of influence or base of power, but, as I read this recent article in the Wall Street Journal detailing a study by McKinsey & Co. connecting executive team diversity and the bottom line, I realized that research like this could finally open eyes to the benefits of board diversity.
I've felt for years that, as technology makes the world smaller and buyers everywhere have access to more information and power, it should be a no-brainer that more diverse boards of directors and more diverse management teams lead to higher performance. But my view stems from my unique perspective of helping companies fill these essential roles with the right leaders.
Perhaps the millennials will pick up the pace as they advance in industry, because I see no group more open minded about diversity than today's youth. However since the millennials' affinity for diversity appears to be more altruistic than profit driven (which makes me smile), let's return to the for-profit world in which most of us live and try to offer suggestions for improvement for both management and individuals.
More diverse leadership teams more accurately reflect today’s markets, and truly diverse leadership teams also behave better when working as a team (Nina Kjellson's overview published by Canaan confirms this). Note the relevance of the 2011 study mentioned in the WSJ that made reference to the higher returns on equity and earnings by companies that had at least three diverse board members. When companies have at least three diverse members on the leadership team, you no longer have a situation where it’s just his opinion or her opinion or their opinion.
I recall a frontline experience years ago when we were meeting with the corporate human resources leader and several line executives in a large pharmaceutical company. It had become imperative for the company to add more diversity to their senior leadership team. During the meeting, we learned that diversity hiring would be included in their management-by-objectives annual review and tied to their incentive compensation. I recall being very proud of the diversity of executives we presented.
In the end, our client hired an outstanding white male candidate (who became the president of Sandoz in his next assignment). I remain friends with this person today and he is one of the best leaders in the life-sciences space. However, I also remain close with the other finalist candidates from that search, and several of them have done equally well.
If we autopsy what went wrong with respect to the client's efforts to improve diversity hiring, I would say that they underweighted the incentive bonus for diversity hiring. Maybe this also was human nature or subconsciously sticking with what they knew. While I agree with our client's decision on that placement to this day, I also acknowledge that we had equally talented diverse candidates who were just as competent to receive that offer at that time.
I’d like to believe that most of us agree there are tremendous benefits and opportunities when all candidates from all colors, countries, experiences, and religions are considered. In an effort to move beyond more studies and another report, I offer the following thoughts. Education goes a long way and, for me, this includes how much I’ve learned by working in the highly diverse life sciences industry. I've spent entire years building networks to help companies from India and Japan, etc., build diverse teams in the U.S. and Europe, and this can be both a challenging and exciting learning curve.
Mentoring can be even more effective than education alone because it offers firing-line experience and goes beyond an academic setting. When companies combine training and mentoring with cross functional assignments, I think everyone wins. When I was an associate in big, brand-name search, my managing director would send me to far-away countries and offices to work with our top performers. I learned a lot about working with and motivating top executives, and filling all my search projects was simply expected. If we want to promote and develop more diverse management teams, then today's leadership should invest more time developing better mentoring programs.
Candidates should also invest in themselves and seek mentors both within their companies as well as through related associations. For example, yesterday I was coaching a marketing leader in the diabetes space, and I discovered that she is quite the brand builder across multiple therapeutic areas. I encouraged her to join the Healthcare Businesswomen’s Association because, in doing so, she could meet exceptional leaders like Julie Gerberding from Merck, Rossana Gray at Sandoz, and/or Julie Hakim at Lundbeck. The HBA even has formal mentoring programs.
I would like to think the pace of industry's diversity hiring is about to take a quantum leap forward. This is simply good, smart living, and thanks to our friends at McKinsey and others, we now have empirical evidence, which shows that working in diverse environments improves business performance and should also enhance our career development opportunities.
