Create a Diverse Board of Directors for Your Business
Rule No. 1: Be intentional with your choices when building a diverse board of directors.
When it comes to creating diversity in business, most people think of gender and racial differences.
But a recent YPO Women’s Business Network panel discussion uncovered much more than demographics.
Age and economic diversity come in to play more than you may think.
Carl Bates, YPO member and Founder and CEO of Sirdar Global Group — the largest provider of independent nonexecutive directors to private companies in South Africa, met his first opportunity to join a board as an independent non-executive director at age 18. At that time, Bates was appointed to the board of an independent private hospital in New Zealand and later to the boards of large governmental and non-governmental organizations ranging from public stadiums to education.
“There’s a responsibility on you to build your board with diverse, up-and-coming candidates that have the ability to be that next generation of leaders — both around your own board table and around the board tables of the organizations that dominate the economic landscape,” Bates says.
So, when you’re thinking about your business, geography, and the environment that you operate in, does your board represent that environment and the diversity of your customers?
Karen Fagg, a member of YPO and longtime business owner who has overseen the growth of one of Montana’s largest engineering firms, HKM Engineering, says the most exciting part of business has been building teams and watching their success.
“That’s what business is about,” Fagg says. “It’s building a team and letting that team flourish.”
Fagg should know. Today, she serves as the firm’s majority owner and its retired president. She spent more than 20 years in business leadership and management, including eight years as President, CEO and Chairman. She’s served on a number of community, state, and regional boards, and she currently serves on the board of MDC Resources Group Inc.
Diversity in the context of your organization
International research has shown the average gender diversity breakdown of a business board is roughly 75% male and 25% female.
The world mandates a significantly higher percentage of female members on a board says Bates.
Additionally, consider the “rule of three.”
How it applies to board composition: When there are three or more of a particular group sitting around the table, you’re more likely to reap the benefits of that diversity.
Also, throw out the idea of key performance indicators (KPIs).
These truly have no place when it comes to putting together a board of directors Bates says.
“It’s not a game of KPIs. It is a game of having the right people sitting around your board table. If we don’t provide the opportunity for new directors coming into board rooms, particularly in private companies and family businesses, we don’t provide the learning room or learning space for the next generation of directors.”
A highly functional team offers different perspectives.
These perspectives enhance the quality of problem solving or debate, the ability to see around corners and identify risks and challenges, and provide a good atmosphere for strategic ideas.
Building a diverse board of directors begins with a clear vision
Shannon Gordon, a member of YPO, is a technology executive and the CEO of theBoardlist, a San Francisco-based curated talent marketplace that connects highly qualified female leaders with board opportunities at public and private companies. She also served as the former Senior Vice President of Operations and Customer Experience with Shyp and was the former Vice President of Customer Experience with Walmart.com.
Gordon is specific in her advice with making sure you have the right people at your board table. Her tip: Be intentional. If you want a diverse board, it needs to be a deliberate choice.
Be willing to consider non-CEO/CFO candidates. Understand gaps in your board composition and seek talent that fills them. Companies can get stuck in this mindset that only CEO/CFO-level people can be board candidates, and that’s not always the skillset needed.
Create opportunities to bring new talent onto your board. Regular board assessments and term limits can be effective tools to ensure your board remains fresh and relevant.
But it’s not enough to just put these creative minds together. There has to be give-and-take and a natural energy flow.
“It’s important for boards to have open, honest dialogue and bring forth diverse opinions,” Fagg says. “You don’t want diversity if an individual is not going to participate and feel comfortable bringing forth diverse perspectives.”
Tough issues: Age, acceptance and connection
Here’s how to make a board member feel unwelcome: Walk out during a young board member’s birthday presentation and make it obvious that you don’t care.
Bates recalls this happened once, while he served on the board of a large organization. He had just turned 21 and the board chairman made a public mention to celebrate this.
One of the company’s directors was an elderly gentleman, who Bates remembers “clearly did not think that I had any contribution to make … and this individual stood up and walked out of the room.”
Bates’ experience highlights a key point: Board engagement is important.
One-dimensional engagement isn’t going to cut it in today’s business climate.
“Boards must be exceptionally critical of their own performance,” he says. “If you don’t feel that your board has created an environment of being prepared to be exceptionally critical of its own performance, there’s probably work you could do to make it a safer environment for engagement.”
Now, let’s talk about whether someone who’s sat on your board for 10 years to 15 years will have the most relevant experience today.
The answer: Maybe not.
“Age is a factor,” Fagg says. “Boards should constantly be refreshing. We have to evaluate and be honest in evaluating our existing board members, evaluating their strengths, their weaknesses, their competencies, the experience, and (whether) they represent our business strategy.”
The Boardlist is a YPO alliance partner.