OPED: Can a new bench of executives finally lead to diversity in the boardroom?
Spencer Rascoff, the CEO of Zillow Group and my manager, encouraged me in my board career by being a vocal advocate and advisor.
Today, I sit on two public company boards: Washington Federal and TrueCar.
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Top corporate leaders can help bolster diversity in the boardroom by encouraging executives on their team to seek out new opportunities for board service when appropriate. That’s just one of many ways for companies to start preparing the next generation of board members.
Companies must also consider the advantages that a broader range of perspectives provides.
There’s value in widening the search for candidates beyond current or retired CEOs and sitting board members, but the bottom line is that organizations need to be committed to diversity and not just give it lip service.
Fortune 250 companies indicate that diversity in the board room – including skill sets, backgrounds, gender, age and career trajectories – definitely matters. A report from Russell Reynolds Associates found that, “diversity of perspective leads to more innovation, better risk management, and stronger connections with customers, employees and business partners.”
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Starbucks is doing this well. It has been recognized in the top 97th percentile among the S&P 500 in terms of board diversity. It’s 14-person board is 29 percent female and 36 percent minority, with directors of all ages – from millennial to baby boomer.
General Motors recently became the first major industrial company to achieve an even gender split on its governing board. It’s an important milestone in an industry that’s traditionally male-dominated.
However, while 96 percent of directors think that adding diversity to boards is at least somewhat important, many believe there are significant obstacles in doing so, citing challenges like a limited pool of qualified candidates.
BUILD YOUR PIPELINE
It important to leverage the network of your current sitting board members and ask them to identify candidates through their own connections.
Nearly half of all S&P 500 boards have an average age range between 60 and 63. That means many of today’s sitting board members are retired. Without actively participating in the day-to-day workforce, some of these board members may be less engaged with the latest business and tech changes that are heavily impacting companies.
Additionally, most companies do not have a standard board recruitment process for seeking leaders with specific expertise or functional specialties that could complement the existing directors’.
So when it comes to filling a board seat, companies should ensure they aren’t only targeting a demographic of ‘seasoned’ or retired CEOs since they might be omitting some critical qualifications that younger candidates in operating roles can provide.
According to the Heidrick & Struggles Board Monitor report, approximately 400 vacant or new board seats were created for independent directors at Fortune 500 companies in 2015. While this number isn’t staggering, it is increasing. Boards need to be prepared for vacancies by making a solid effort to build out a pipeline of candidates that suit their needs.
RECOGNIZE FUNCTIONAL EXPERTISE
Identifying new skillsets and perspectives that are underrepresented on current boards, and looking for candidates who meet those qualifications is an effective strategy.
Functional expertise should be considered a building block to enhance company values and more effectively achieve goals. More than six in 10 directors said their board added a new member over the last year with a specific skill set.
For example, Lynn Vojvodich was recently elected to the board of directors of Ford Motor Company.
Although she’s spent many years serving in leadership positions at large tech companies like Microsoft and BEA Systems, and most recently she was Executive VP and CMO of Salesforce until February 2017, Vojvodich started her career as a mechanical engineer. Her appointment provides Ford with deep tech and software expertise at a time when automakers are increasingly interested in consumer data.
Instead of focusing the search for a new director on former CEOs with a lot of broad experience, consider critical, niche areas, like cyber security, risk management or consumer tech, that are also of great importance to businesses today.
So, what comes next?
The future of boards is not so far away. Companies that have recognized the value of broader perspectives are already seeking out the skill sets missing among their leadership teams, gaining significant insight from their newest directors.
Erin Lantz is the VP & GM of Mortgages at Zillow Group. Prior to Zillow, Erin was senior vice president at Bank of America and before entering the mortgage industry, she worked at the Boston Consulting Group. She holds a BA from the University of Pennsylvania and a MBA from Harvard Business School.