Estimated reading time: 8 minutes
Look at the boards of directors of most companies.
What do you see?
- People who look like each other
- Trusting relationships
- Team of one mind
- Unity.
Let’s be honest. Wouldn’t it be a dream to have all your friends on a board with you? They think like you. They like what you like. It would be a blast!
Or not?
Let’s get back to the essentials of a company’s decision-making.
- Strategic direction
- Governance of risks, finances, and other resources
- And increasingly, governance of the sustainability agenda
We summarize these functions by:
- Seeing further
- Seeing before
- Seeing the invisible
- Linking the dots between all factors (internal and external, visible and non-visible)
But you say: “The most important is to carry the vision and purpose of the company”.
And you are right.
Nonetheless, there are significant risks:
- To be blinded by the vision
- Not to question the highest-level leader
- To try and fit, and thus
- To not challenge the status quo
Thus, the board can become the “guardian of the temple”. It protects the status quo. This includes how we are doing things and how we already decided we will do.
I believe this fails the mission and the board’s goals.
Lehman Brothers’ board didn’t see the risks of the residential real estate crisis.
Kodak’s board didn’t see the digital camera taking the market (although they owned the patent for it!)
Blockbuster’s board didn’t see the streaming video services’ threat
And the list goes on.
I believe that there are five reasons:
- Not enough diversity on the board
- Not enough inclusion on the board
- Discussions focus on finding agreement, not alignment
- Too authoritarian a leadership
- Not enough ability to listen to different opinions
Wow, that’s quite a list.
Yes, it is.
Let’s unpack together the five steps that lead to significant business innovation on your board:
More diversity
The first step is to increase board diversity.
Many countries and U.S. states have mandated this stage, primarily for gender equality and, as in California, for underrepresented groups.
“To truly embody and govern inclusion, the board should reflect the diversity of [the organization’s] customer base in its composition, create an inclusive culture within the boardroom itself, and integrate inclusive thinking and behaviors into all of the ways that the board operates.”
—Trudy Bourgeois, founder and CEO, Center for Workforce Excellence
Why is this important?
One executive board I worked with consisted of executives with over 50 years of experience. They were all white males from a single cultural background. Our clients were globally active and trying to target younger clients. We presented a mobile solution for ordering a car. One executive told us, “I would never order a car on a mobile phone!” That is the problem. Board members view the business as their issue. Typically, the boards are too conservative. They are slow to innovate and risk-averse.
Another advantage of diverse leadership is improved financial performance. A McKinsey study conducted in 2019 reveals a significant finding. Companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability. These companies outperform those in the fourth quartile.
Diversity encompasses not only gender, ethnicity, LGBTQ+ status, and disability, but also personality. At CEO Talks, we have been developing a tool to offer a dashboard of individual personalities. This tool guides team composition and highlights strengths and weaknesses. It shows how hiring can improve the team’s ultimate performance.
You probably notice that not every company that hires the right people for its boards and committees sees such benefits. Why?
Because you need to take one more step: inclusion.
More inclusion
We now have everyone around the table.
Do we see the results that we discussed in the diversity section?
Not always. Why?
Because being at the table is not enough.
I noticed that not everybody has a say on the executive boards, I observed. Some are there to collect statistics or to listen and convey the official message to their department.
We must guarantee we are here (diversity). We also need to focus on welcoming everyone. Giving everyone we have invited a voice is crucial. This is inclusion, and it is required for the actual value of innovation to be experienced.
The point is that these diverse options and voices are needed to come to balanced, thorough and wise decisions, as Janet Foutty, Executive Chair of the Board of Deloitte US, says it so well:
“Diversity is having a variety of voices and people in the conversation and inclusion is an environment where all those voices really can be heard. We could have very diverse boards but still not get to better answers and better outcomes for organizations and our society unless we create a really inclusive boardroom and inclusive governance.”
Fossil is another company that understands the long-term value of inclusion:
“Shareholders ask about diversity and inclusion because they know [diversity and inclusion] add to long-term shareholder value,”
—- Kosta Kartsotis, chairman and CEO, Fossil Group.
Create a divergent opinions discussion
I believe we have now reached the heart of this exciting topic: an innovative team.
This is one of the most important lessons I have learned. It covers management, strategy, leadership, and coaching over the last few years.
Why is this important?
Because the honest answer is not obvious!
You can find an ideal solution in just a few minutes. Making a decision quickly is not a good sign.
Why?
We need to examine a situation and make a decision from multiple perspectives.
Here are a few examples:
- Who is affected?
- What difference does it make for all stakeholders?
- What happens if we do/do not take action?
- What are we missing?
Those questions are complex and need contributions from people with diverse opinions, perspectives, experiences, ages, and backgrounds.
It also requires authentic discussions where every contribution feels emotionally safe to share a critical view. It must be safe to share an idea without being criticized and judged.
You get better answers and perspectives by having a diverse and inclusive board,” Foutty said. “A variety of voices and perspectives around the table, I believe, leads to much better outcomes for the organization.”
Why should we have all these perspectives?
Vittorio Colao, CEO Vodafone Group Plc, summarises it in the next words:
“The world is changing at a faster rate than ever before. To keep up, businesses need a variety of sensors. These sensors are essential to effectively interpret different signals. This helps in both mitigating risk and seizing opportunity.”
We discovered this with the Leadership Table Workshop that CEO Talks conducts with executive teams. Creating a surprising, differentiated environment enables discussion. It encourages deliberation on several essential questions about the team. The questions also pertain to the company and the individual. As a result, the team begins to uncover answers and pose new questions. They also find new areas that we have not necessarily discussed. Every team has its taboo topics or areas we “don’t need to discuss (again)”. Two experienced external executive coaches lead the discussion. They use their intuition to guide the conversation on a topic they consider critical. At the same time, we don’t know “the whole story”. Yet we have had more substantive discussions within the team. These discussions are strategic and liberating. In summary, authentic, safe, and creative conversations are essential for every team.
Bring alignment
I already hear you say, “But we need cohesion, not divergent options and ideas”.
Thanks for raising this point! You are right.
Within the coaching framework we use for executive leaders and teams, we explore the options discussed in the earlier section. Then, we evaluate these options. We select the most suitable one for this stage and the current context.
This is a delicate moment. The participants have contributed to the thinking process so far. They are sometimes asked to accept that their solution is not the best. Perhaps other colleagues have more valuable suggestions at this stage. A solution sometimes combines different opinions, but not always.
This joint solution development, the acceptance of that collective solution, and the support of such a solution is called alignment. It is instrumental to the success of any strategy and innovation.
For such a stage to work well, humility is required. Do I want to see the right solution for the good of the team or the organization? Or do I want to always be right and recognized as the expert on every topic?
This is one of the biggest traps of leadership, in my opinion, but that’s a topic for another day.
Empower others to innovate
Great!
Now that you have reached a great solution, supported by the entire executive team, how do you implement it?
By having all the executive team members fill all the roles and keep them to themselves?
No, I was joking.
The answer is so obvious that I am almost embarrassed to share it with you:
Finding the best team requires focus solely on skills, experience, and potential. Do not consider cultural background, age, gender, or other areas.
Sounds easy!
Again, you need to look far and wide. Finding the “right” person in a few minutes is not always the best choice.
The good thing is that, with a diverse and inclusive team, you can find suitable candidates.
When you have found them, keep them motivated.
Sounds obvious!
This topic often arises in my coaching.
I often share that we can’t motivate people; they must devise their own goals and reasons for doing the job.
What we need to do is to “un-demotivate them”. This word doesn’t exist? Too bad, somebody should invent it!
Leadership transformation
Would you like to see your teams being
- 25% more engaged
- 47% more creative
- 41% more loyal (feel that they belong)
- 43% more likely to stay
The results came from a 2017 research study conducted by Russell Reynolds Associates. It demonstrated benefits when senior leadership implemented a diversity and inclusion culture in 57 companies.
The goal of diversity and inclusion should not be limited to KPIs. It should also go beyond achieving the correct balance of diverse profiles on your boards. We have seen that this does not create diversity, inclusion, or innovation. Hence, it should focus on creating a company culture that encourages authentic dialogue. This dialogue should be open and critical. The change must start at the board level. It should then permeate the entire company.
Once you have experienced this transformation in diversity, inclusion, and innovation within one team, repeat the process in each team. Follow steps 1 to 4.
The lowest level of the team is closest to the daily challenges. This group will find the most efficient and sustainable solution. The innovation transformation will follow.
Why not start directly there?
Senior management must first set the right example and create the right culture. That’s what transformative leadership is about!
References:
- Redefining board responsibilities to support organizational inclusion
- How Diversity & Inclusion Matter
- Why inclusion is just as important as diversity in board governance
- Driving diversity and inclusion, the role for chairs and CEOs
- Dysfunction in the boardroom
