Millennials and Gen-Z are the most diverse generations to date. As they are progressing through their careers, diversity at leadership level is still deeply lacking. Longer-term, companies need to focus on creating a clear, achievable pathway into senior leadership for them in order to drive organizational change. A short-term solution is to rethink the typical organizational structure that equates experience with expertise.
The recent impact of the Black Lives Matter movement, along with the timing of Pride month has forced organizations to shine multiple spotlights onto their internal and external diversity strategy. While highlighting their progress and support, organizations need to capitalize on this momentum for longer-term, positive change to happen. Such change can partly come from the top down, which is why the impact of diversity on the board room is impactful.
Statistics surrounding the board rooms of the Fortune 500 companies in the United States have seen a small increase in various diversity categories. The increase of minority representation has increased by 212 seats (3.3%) between 2012-2018. Representation of the LGBTQ+ community is harder to track because of the self-identifying nature of this group, but Out Leadership estimates that there are fewer than 10 openly LGBT members of corporate boards in the entire Fortune 500. Compared to 4758 (83.9%) of seats taken by Caucasian/White board members (of which 17.9% are female and 66% male), the statistics highlight the work that needs to be done.
Although there is consensus that the diverse demographics of Millennials and Gen-Z will naturally increase diversity in the workplace, actual representation at the junior ranks is still low. For example, in The American Lawyer’s 2020 Diversity Scorecard, which collects information on minority legal staffing levels at law firms in the NLJ 250 and Am Law 200, only 71 firms had at least 20% minority attorneys. In the Banking sector, while Goldman Sachs had its most diverse graduate class to date in 2019, the percentage of Black executives dropped from 3% in 2012, to 2.7% in 2018. At the higher level, however, Goldman Sachs, along with several other big banks, refuses to publicly disclose their complete workforce diversity statistics.
Traditionally, senior leadership roles focused on experience to add value, but is it time to give junior people a seat in the boardroom to facilitate real change? Similar initiatives such as reverse mentoring have been a popular way to facilitate new conversations in the workplace and improve rainmaker productivity, so could junior employees on the board make sense?
Heather Wolf, a Managing Director at Allegis Partners in the Board and CEO Search practice, thinks this could be a breakthrough moment for diversity in the boardroom. “There was concern that with Covid-19, diversity would be pushed aside to respond to the crisis. However, the Black Lives Matter movement at the same time as the pandemic has pushed public company boards to reflect on what they don’t understand and need to improve on.”
Heather noted that traditionally, there has always been an age and experience factor in the equation of boardroom hiring, but sectors heavily staffed by millennials, such as technology, have really impacted some organizations. “The more open-minded CEOs have welcomed tech mentors and brought technology expertise onto their boards from a variety of industries.”
While this can provide opportunity and change, does the junior mentor get access to share their real views and thus impact change? “Absolutely,” Heather said. “The people asking for younger mentors are open to hearing new views. I’ve heard many reports of these newcomers asking questions that are completely different to the rest of the board and it’s powerful. They know companies perform better when there is cognitive diversity.”
The retail industry is already making strides and is where professional services could easily take inspiration. Fashion house Gucci recognized they needed to appeal to a younger audience as early as 2015 and created a ‘shadow board’ consisting of younger talent in the organization which “served as a wakeup call for the executives.” By providing their advice and insight from a younger perspective, there was a 136% growth in sales between 2015-2018. Compare that to Prada, who operated without the shadow board model, where there was an 11.5% decrease in sales over the same period.
By introducing younger, more diverse employees into the management equation of larger business issues such as hiring, strategy and marketing, companies can not only increase their own diversity numbers, but also benefit in making decisions based on advice from these unique viewpoints.
If public companies lead the way by diversifying their boardroom, or at least access to the boardroom, smaller and private companies may look to do the same. While leadership in private and smaller companies do not have the same scrutiny, the positive effects of radical programs on an organization and its culture and profit margins are clear. By diversifying your people, especially at the top, you diversify your thought and work product which results in a more positive working environment for everyone. You can also use that new insight to access new markets to sell your products or services to, resulting in an increase in productivity and profit.