Mar 13, 2015 6:00:00 AM / by Mary Dowell
What is the “New Normal”?
As the Baby Boomer generation begins to retire, corporate America is faced with the inevitable and most dramatic work force change in US History. We are starting to feel the initial backlash of the largest exodus, and greatest void, of work force talent that has ever been experienced. With an estimated 10,000 Baby Boomers retiring every day, companies are facing talent shortages, leadership changes and a lack of mentors. While there has been much consideration over the effects of these changes, there is one area that I would like to focus on – how the mass exit of Baby Boomers from the workforce will affect the traditional boardroom.
Historically, most boards have been dominated by white males, largely due to the Baby Boomer generation. In 2013, the 2020 Women on Boards Gender Diversity Index of Fortune 1000 companies identified that only 16.6% of corporate director positions are held by women, while, for S&P 500 companies, women account for only 4.8% of all CEO positions.
Although these numbers are relatively small, they will not necessarily stay this way. With the shift of traditional Baby Boomers exiting the workforce and the Millennials entering, we will soon see a drastic difference in the makeup of the job force. For example, today women are outpacing men in gaining both bachelor’s and advanced college degrees. Furthermore, the Millennial generation is more culturally diverse than the Baby Boomers. How will these trends impact the role of CEO’s in organizations?
A Need for More Women on Boards
Women will soon find themselves moving into more leadership roles as many male Baby Boomers retire. These women will not only take on new responsibilities, but also become the next voices of their companies. As women continue to grow as key players within their organizations, the need for women to serve on boards is especially apparent.
2020 Women on Boards is a non-profit organization that is dedicated to raising awareness for the need of greater women representation on US boards. This organization has launched a national campaign to increase the percentage of women on corporate boards to 20% by the year 2020. Besides educating the population on why gender diversity is important in the boardroom, they also serve as a resource to help organizations find qualified women to serve on their boards.
Where do Boards Stand on Cultural Diversity?
Now, more than ever, it is expected that CEO’s and other board members be culturally aware and have the ability to speak foreign languages. As more companies go global, understanding cultural diversity is necessary for leaders to successfully conduct business in other countries.
While the UK has recently taken steps to encourage more ethnically diverse boards, the US seems to be lagging behind in these initiatives. In November 2014, the UK’s Secretary of State for Business, Vince Cable, announced an initiative to bring more members of ethnic minorities into the largest UK boardrooms. The goal is to end all-white boardrooms in the UK by 2020. This plan came in response to Cable’s 2011 initiative geared towards increasing women’s board membership, which led to women holding 22 percent ofFTSE 100 board seats in 2014 – an increase from 12.5 percent in 2011.
What Does This Mean for Your Company?
With more women and more people of diverse cultures taking over leadership positions, we will start to see an impact on how businesses are being run. Companies need to be aware of how they are using the talent that is available to them. Businesses that embrace diverse hiring now will be ahead of the curve when their current leaders start retiring. By doing so, they will be in a better place to fill their roles with the women and culturally diverse leaders that are already active in their companies. Organizations would be wise to take the time to handle this talent shift proactively, instead of reactively.
Why is Diversity Important in the Board Room?
With so many board rooms having traditionally been very non-diverse, many wonder why this need for diversity is so important. There are four main reasons:
- Diversity of thought. It may be cliché, but the more diversity that exists in a given group, the greater the range of thought among those individuals. Traditionally, women and people of diverse cultures lacked presence in the boardroom, causing any potential perspectives they could offer to be absent. I have personally served on many nonprofit boards with many wonderful thought leaders and strong personalities. However, one thing I have noticed is that it can be very easy for a group of like-minded people to get swept up in the concept of “group think.” When this happens, we are losing the possibility of coming up with a better solution or a better project – the discussion can be closed too soon. In turn, companies that don’t allow for diverse boards will lose a competitive edge by not allowing true creativity to flourish.
- Better stakeholder representation. It is important to remember that members of the Board of a company are the key decision makers for the organization. Their decisions not only affect the employees of the company, but also the community within which the organization exists. Becausewomen make up about half – and diverse cultures make up over a third – of the US workforce, having a boardroom predominantly made up of white males may not always reflect the individuals that are affected by their decisions.
- A competitive advantage: Because diverse boards have board members with a greater variety of skills, these boards will be much better prepared to handle the challenges that are part of today’s global economy – where the environment is fast paced and requires an assortment of talents. A 2012 study of Asian boardrooms conducted by the Monetary Authority of Singapore found that, on average, diverse boardrooms perform better than those that are run by all males or one family. According to this study, gender and ethnically diverse boardrooms were especially important criteria for a better performing boardroom.
- Greater availability of essential skills: This final point ties into all the others mentioned above because the greater variety of skills that a group offers, the greater the likelihood that boards will be equipped to handle various problems. For example, women executive leaders are often experts in their field and have a wealth of business knowledge and experience. If boardrooms overlook this large pool of talent, companies will find themselves losing opportunities and valuable experience.
Leading the Way
We are at the beginning of many changes taking place, not just within our organizations but also within our boardrooms. Companies that embrace these changes, and are proactive about securing and supporting that next set of talent, will find themselves not only gaining a competitive advantage, but also building strong teams. Although women and ethnically diverse groups have not played large roles in the boardroom in the past, there is a shift happening. With companies opening up their boardrooms to greater diversity, women and those of diverse cultures will assume more board positions, allowing us to see real changes within our boardroom dynamic.
Written by Mary Dowell, Guest Blogger: Mary Dowell is the Vice President of Foundation Affairs and Global Community Relations at Johnson Controls. She joined the company in 1996, and has led its community relations outreach for over ten years, taking it from local to global status through alignment and leveraging of company financial resources and employee engagement. Through her leadership, Mary has enhanced Johnson Controls’ community image and visibility for internal and external stakeholders around the world. She holds a BA degree in Management & Communication from Concordia University, WI. Mary has been an active supporter of the Milwaukee community for many years. She serves as a board member of many organizations including: After Breast Cancer Diagnosis (ABCD), Goodwill Industries of Southeastern WI, Milwaukee Women Inc., United Way’s Women’s Leadership Council, and she is a founding member of UPAF’s Notable Women. For her community involvement, Mary has also received numerous awards including The NAACP’s “Drum Major for Justice” Award and “Staying Connected with Our Community” Award, TEMPO Milwaukee’s “Mentor” Award, the Business Journal’s “Women of Influence” Award, and UPAF’s “Notable Women Award.”