By now, study after study and report after report has made it clear that there is a strong — perhaps, indisputable — argument that top-to-bottom diversity is a winning business strategy.
It’s becoming common knowledge that gender-diverse boards that more closely match a community’s demographics outperform boards consisting of only men. In fact, research has shown that gender-diverse boards have fewer instances of controversial business practices.
With the why portion of the board gender diversity debate largely settled, it’s time to focus on the larger and more complicated question of how. The number of women serving on Fortune 500 boards has increased in recent years — to 22.5 percent, according to Deloitte’s 2018 Missing Pieces report — but the growth has been slow, and slower than the demographic shifts taking place in this country.
The Alliance for Board Diversity (ABD) has set a benchmark, aiming to have at least 40 percent women and minorities on Fortune 500 boards by 2020. Right now, that number stands at 34 percent. The ABD predicts that threshold will be met by 2024, which is a slightly more optimistic projection than the last study it performed.
But the issue is starker here in Michigan, where women hold 15 percent of board seats in the state’s 100 largest companies, according to Inforum in Detroit. One third of those organizations don’t have female representation on their boards.
For years, Fortune 500 companies followed one of two methods to fill their board seats, and the majority of the time those paths led to male candidates being chosen. It’s time to seek new strategies and refresh the approach where current board members have often selected friends or colleagues, or relying on outside firms, who often stick to the same talent pool.
Corporate training and education programs, like Deloitte’s Board-Ready Women program, could help inject fresh candidates into the mix. Now convening our second class, the program offers educational and networking opportunities to Michigan business leaders who are seeking to become viable board candidates.
The class meets throughout the year to discuss a range of topics, such as corporate governance, the responsibilities inherent to serving on a board, the regulatory environment, personal brand development, and how to articulate their value proposition. Participants also get a view into the corporate board recruitment process and learn which skill sets companies value most in board members
Five women from the inaugural class have secured seats on public boards. The program has been delivered in more than 26 other U.S. cities, including Boston, Houston, and Pittsburgh.
Programs like Board-Ready Women help accomplish another essential imperative: injecting new candidates into the field. Getting more women on boards is an important initiative, but the impact of a higher percentage of female representation can be blunted if several boards are including the same individuals.
The “recycle rate,” or rate at which an individual serves on more than one board, is higher for women and minorities than it is for white men. This muddies the true impact of diversity numbers because they may be increasing while the number of new voices on boards remains stagnant. This means that as we continue to press for higher women representation on boards, we should be mindful of the unique number of women and minorities who are filling these spots.
It also should be noted that even though there is still much work to do and that headway has been slower than desired, the rate of progress is quickening. In an encouraging sign, women and minorities have made more progress in board representation among Fortune 500 firms between 2016 and 2018 than they did in the four years preceding it.
In fact, according to the Missing Pieces report, more than half of the Fortune 500 have above 40 percent board diversity. That number is double what it was in 2012, and triple the 2010 mark. Additionally, 145 Fortune 500 companies boast boards that are more than half-filled by women and minorities.
These companies are likely already enjoying the business benefits of having a more diverse board. They are likely better positioned to serve an increasingly diverse customer base, while empowering fresh voices to inject new ways of thinking. As the challenges these companies face, such as fiercer competition, tighter regulation, and more disruptive and constantly changing technology, grows, the need for innovative perspectives will likely only increase.
Now is the time for companies to use bold new ways to find those voices.
Mark Davidoff is Michigan managing partner of Deloitte, a large professional services organization in Detroit. He oversees more than 1,200 professionals based in Detroit, Grand Rapids, and Midland.