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We have all seen the data and research on how board diversity improves the bottom line. The message is clear, take diversity seriously, make the necessary changes, and your company will thrive. (Although there are many ways to measure diversity in a family business board, including independents vs. family, inside vs. outside, gender, racial, LGBTQ+, director skill sets, age, etc., this article will focus on gender diversity.) Given that 49% of boards have at least one director on their board, needs to step down, and 21% say that two directors need to go (2020 PWC Corporate Governance Survey). One would think that if board diversity is a proven way to increase profitability in one’s company, and many boards have at least one dud-director, why aren’t we making more progress?

I’ve been struggling to understand this lack of motivation to address the board room’s diversity shortfalls. In the same PWC study, only 12% of boards chose not to renominate a director, and only 14% was a director asked to retire from the board, even though there are close to 50% of the boards should ask at least one director to step down. Why are Chairmen and Nominating Committees willing to wait out low performers? Why are they willing to forego a high-performing, results-driven, diverse board?

It all boils down to complacency and fear.

Complacency

After all, directors become friends with each other; they can spend a decade or more in each others’ company. We all have a friend who may not exhibit good judgment all of the time, but that doesn’t mean that we cut them loose. The same is true in the board room. The camaraderie and kinship in the board room cloud judgment and that clouded judgment can quickly gloss over a non-performing or disruptive director’s actual contribution. It’s easy to let term or age limits take the place of a difficult conversation. In a sense, waiting it out preserves the friendship.

One of the most compelling findings I uncovered as I struggled with this question is that there are thousands of articles on term limits and age limits, but few on how to ask a director to resign. Google doesn’t lie; people would rather set an artificial time limit than proactively fine-tune the board with the talent and expertise needed to propel the company forward.

Fear

I recently spoke with the private company Chairman of a diversified portfolio of businesses. In our discussion, she mentioned that this unwillingness to have a difficult conversation or make a difficult decision is keeping boards from taking that first step towards a high-functioning diverse board.

Asking a peer to step down from the board room, especially one with decades of experience, can feel risky. After all, how do you know if you will find someone as talented or knowledgeable about your business? Isn’t history and legacy worth something in the board room?

Another Chairman I know had to ask two beloved directors to step off her board. They had served tirelessly for more than 40 years combined. These directors had seen the company through multiple CEO changes, Chairman transitions, and an unparalleled growth spurt during their tenure. She struggled with this mightily. Although it was the right thing to do for the board and the company, how did she ask her directors to step down in a way that conveyed respect and the honor that it deserved? She was worried about how the board, company, and family would react to the transition. Bucking the wait-it-out trend of so many of her peers, however, she mustered the courage and made the transition.

How to work towards board diversity

I have read many board prospectus over the years, and almost all require applicants to be a CEO. What happens when only 6% of CEOs are women? How many of them are highly coveted and already sitting on several boards? Of the 25% of women in the c-suite, many have never had P&L experience. That rules out almost all of these successful and talented women from obtaining a board seat.

If a board wants to work towards board diversity, consider these steps:

1. Ask your non-performing directors to step down to clear a space for new talent and fresh perspectives.

2. Review the company strategy and identify the skill sets you need in your directors, not their experience. Focusing on skill sets broadens the pool for your recruiter. If this is your first diverse director, consider bringing on more than one diverse director in this round. It will save her from being “the only woman in the room” or “the only minority in the room” and give her a better chance of having her ideas thoughtfully considered and her voice heard.

3. Find a recruiter who will take the time to understand your company, culture, and values. She will screen out all those candidates who don’t meet the basic skill sets or live the values.

4. Tell your recruiter you only want to interview diverse candidates. That’s one way to ensure that you find a diverse director with a suitable skillset and values fit.

5. Create a board succession committee, ensure that all participants are excited about the project, and bring diversity into the board room.

6. Consider appointing your diverse director to a board leadership role. Appointing women to board leadership roles is the fastest way to achieve diversity in the board room and will provide unique and valuable input into the board agenda.

7. Develop a robust onboarding program and ensure that the diverse director, especially if she is your first, feels welcome and can make a meaningful contribution from the first meeting.

8. Implement a Diversity and Inclusion program at the company to ensure that the company reflects the diversity values up and down the company ladder. This ensures that future boards will have an abundance of qualified women from which to choose.

Waiting for a director to age out or term out is the recipe for a low-functioning board that won’t bring strategic value to the business. Fear and complacency prevent all of the positive things that come with change. Bringing on new, diverse directors will energize your board. You will be challenged in your

The article was first published here.

Photo by Clay Banks on Unsplash.

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