🏢Work-Life Wednesday: Navigating Workplace Diversity for Success

Welcome to Work-Life Wednesday, where we deep-dive into leadership best practices to maximize your growth potential.

Good morning.

Here’s a red flag when looking for a place to work:

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What do the above groups have in common? They’re Board of Directors who all look the same. I’m talking genders, hair styles, skin colors, tattoos, suits/dresses, and everything else that visually makes someone stand out. I know what you’re thinking, “But Bailey, we’re not supposed to judge people by their appearance, but by their character.” While that’s true when making friends, business is a world of cross-functional problem solving that requires representation for all types of people through diversity, equity, and inclusive (DE&I) hiring practices.

A “copy & paste” board of directors might share similar life experiences that limit their decision making capabilities. For example, a board of all men tasked to make benefit decisions around maternity leave for women employees are less likely to make inclusive decisions because their genetic makeup limits their ability to empathize with the needs of the other gender. Adversely, boards from different backgrounds bring unique life experiences, perspectives, and cultural insights to the decision-making process. This diversity can lead to more innovative and well-rounded discussions and decisions, as it encourages a variety of viewpoints and ideas.

Types of Diversity:

• Demographic Diversity: race, ethnicity, age, disabilities, genders

• Cultural & Ethnic Backgrounds: nationality, religions

• Socioeconomic Status: income, social class

• Thinking and Communication Styles: cognitive diversity, communication styles

• Lifestyle: dietary, leisure activities, hobbies

• Sexual Orientation: LGBTQ+

Why Go Diverse? A diverse board of directors reduces groupthink¹, allowing companies to navigate quickly changing business environments and unexpected disruptions, like the COVID-19 pandemic. BoardReady, a nonprofit group that promotes corporate diversity, found a positive correlation between the diversity of S&P 500 boards and revenue growth during the pandemic. There are many reasons diverse companies are quicker to adapt to changing business conditions:

• Enhanced Decision-Making: Diverse boards tend to make better decisions by avoiding groupthink and considering a wider range of perspectives.

• Broader Perspectives and Innovation: Diversity on the board brings together unique experiences and viewpoints, fostering creativity and innovation in problem-solving and strategy development.

• Market Responsiveness and Customer Understanding: A diverse board is more likely to understand and connect with a diverse customer base, which is essential for adapting to changing market dynamics and customer preferences.

• Risk Mitigation and Compliance: Diverse boards are better equipped to identify and address various risks, helping companies navigate challenges and comply with legal and governance requirements.

• Talent Attraction and Reputation: Companies with diverse boards tend to attract top talent and maintain a positive reputation, which can lead to stronger employee retention and investor confidence.

The importance of diverse leadership within companies is on the rise in as different ethnicities, age groups, and women engage in the workforce more and more every year, shaking up the melting pot.

• The US Bureau of Labor Statistics says the share of US workers who are nonwhite, Latino, or both have nearly doubled from 23% in 1979 to 40% in 2019.

• People are also working well into their golden years as over 37 million US workers are 55+ today which is nearly 1 in 4 of the 160 million Americans engaged in paid work. In 1979, less than 1 in 7 US workers were in that age group.

• The BLS predicts the share of white workers will decline to 74.7% in 2031, from 77% in 2021.

• The labor force participation rate for women in their prime working age hit an all-time high in June, reaching 77.8%, according to Bureau of Labor Statistics data.

More than Public Opinion. The pressure for public companies to refresh their board of directors is deeper than public opinion. Shareholders have sued at least a dozen public company boards since mid-2020, as companies have only “gone through the motions” of diversifying their board of directors. MIT reports “from July 2020 through June 2021, investment manager BlackRock voted against more than 1,800 directors at close to 1,000 companies for insufficient action to increase board diversity.” Rather than actually hiring candidates who have different academic/professional backgrounds, underrepresented cultures, or perspectives, companies are pushing off diverse hiring.

So why are companies putting off this push for diversity? Surely they know the success stories of those pandemic survival companies. Surely they know a board with diverse viewpoints are more adept at identifying long-term trends and opportunities. Surely they know diverse boards understand and represent a more diverse customer base and markets that the company serves.

So what’s the hold up? Why aren’t more companies diversifying leadership?

❌Problem: Low Turnover and long term-limits allow non-diverse boards to overstay their welcome. Good companies don’t explode, they implode. In other words, a good company doesn’t get destroyed by external factors, but by the people who work for it. At S&P 500 companies, there were only 395 new directors appointed in 2022, which averages out to less than one per company. Nearly three-fourths of these new directors are from historically underrepresented groups, which shows that diversity is a focus.

Boards usually have elections once per year or once per three years if there are staggered terms, but directors can run uncontested giving them unlimited terms.

On top of that, only 6% of companies have term limits for board members, and 73% of those companies have term limits of 15+ years.

These unfortunate rules don’t allow for board refreshment until retirement, voluntary step-down, or death in most cases.

✅Solution: Board Evaluations examine the workings of a board and its members along with its effectiveness, the quality of its decision making and strategy, and its relationship with the executive management. This gives power to the people by giving them a voice in advocating for diversity.

✅Solution: Increasing Board Seats allows companies to diversify their board without firing. It allows for more representation for employees, shared responsibilities, decision-making may be quicker, and there will be a broader base of experience to draw on during challenging times.

✅Solution: Create Term Limits to keep a good refresh schedule.

❌Problem: Recruiting practices rely too heavily on networking. It’s human nature to build our network with people like us. Others with similar interests, same geographical hometown/schooling, areas of study, etc. Although the tools used to find diverse candidates are mainstream now, they don’t balance out for human error. Recruiting practices severely limit a companies ability to gain diverse talent.

✅Solution: Educate on the benefits of diverse leadership. The best way to rewire our brain to believe something other than the norm is to educate it on the benefits of DE&I.

• Talent Acquisition & Retention: A board’s ability to represent a wider range of employees will trickle down to talent acquisition & retention by making your company/team more attractive.

• Global Growth: A board with diverse ethnic backgrounds can provide global perspective to international markets, cultures, and business practices, which can be invaluable for companies with global operations or ambitions.

• Innovation and Creativity: Different perspectives can challenge traditional thinking and lead to more creative solutions to business challenges.

In Conclusion. It is an ongoing effort to establish diverse leadership as the standard. Equity and inclusion are pivotal components of your business's framework, necessitating action and regulatory compliance on your part. Not only does this advance Diversity, Equity, and Inclusion (DE&I) initiatives, but it also generates positive business impacts. Through collective efforts within our communities, leadership can undergo transformation...

…from this…
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…to this…
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_{Written by Bailey Hepler}

GLOSSARY

1 - Groupthink: the practice of thinking or making decisions as a group in a way that discourages creativity or individual responsibility.

BONUS SIDE NOTE

Remember this book? The Holes in Your Nose by Genichiro Yagyu

It’s about the different shapes of holes in everyone’s nose… obviously. I remember reading this book as a kid. It might’ve been the first time I considered people being different. The holes in our nose come in all shapes and sizes but serve the same purpose of allowing us to breath. Funny enough, I thought of this book when writing about diversity of board of directors. Leadership gives our company’s breathe and they come in all shapes and sizes too. We should embrace that.

Happy Wednesday 😊

Click the link to purchase: https://www.amazon.com/Holes-Your-Nose-Genichiro-Yagyu/dp/1929132824

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