As the topic of boardroom diversity has gained prominence over the
years, considerable attention has been given to the value that women and
minority representation can bring. For the most part, however, generational
diversity hasn’t been discussed as much as other forms of diversity. This
situation has recently started to change.
The 2018 US Spencer Stuart Board Index indicated that independent directors of S&P 500 companies are 63 years old on average. It also reported that 17 percent of new directors were age 50 and younger in 2018, up slightly from 16 percent the previous year. What is driving this trend? The Index indicates that some boards may be bringing on younger directors to obtain specialty skill sets and diverse perspectives. Others may be seeking not only to obtain particular skill sets but also to gain insight into what motivates customers and employees within certain demographic groups.
New Director Differences
It’s becoming clear that introducing more generational diversity
into the boardroom is a priority, and that doing so may bring new perspectives,
unique skills, and varied backgrounds into the board’s oversight role. But, if
not managed properly, adding directors with different experiences and
perspectives may not be as successful as hoped. For some time, new directors
were automatically exposed to either their own boards or nonprofit boards
through their C-suite experience. This often gave them an intrinsic understanding
of the role of the board as well as a good sense of the information they would
need from management in order to perform their roles.
As the search aperture widens beyond the C-suite, candidates may
hold positions that are two or three layers down from the CEO or lower—or, they
may come from academia, the military, government, or other nontraditional
sources. This means they may not have had previous exposure to how corporate boards
operate. Even though less-tenured directors can bring extremely desirable
skills and capabilities, they may not be as familiar with the role of the board
in terms of governance—particularly, the nuances of oversight versus
management. Without this understanding, they can sometimes struggle to find
their voices and to deliver meaningful insights. This suggests that more
education and better onboarding may be required in order to enable new board
members to contribute effectively.
Leading Practices for Generational
A first step in optimizing the contributions of directors of all
ages is simply recognizing that there may be perceptual and experiential differences
among different cohorts, and that some may be less savvy about the workings of
a board than others. Mentorship
and coaching are initial ways to bridge these differences, with more-tenured
directors offering guidance to new directors on what is expected of them in a
governance role. This includes suggesting strategies for adding value, such as how
and when to lean in and add perspective.
Targeted committee assignments are another way
of including less-tenured directors. For example, consider a new director who
is deeply experienced in technology but less so in finance. The audit
committee, which often has responsibility for overseeing technology risk, may
invite that director to take a lead role on technology
strategy or cybersecurity. This type of assignment can provide newcomers with
an opportunity not only to showcase their strengths, but also to gain valuable
insight into areas where they have less experience. There may also be
opportunities outside the boardroom to invite members to offer their
perspectives, such as meeting with employee councils or customer focus groups
to explore talent strategies, product development, or consumer trends. Offering less-tenured directors specific,
well-defined opportunities to add value within a more informal setting, such as
a committee or working group, can help them form connections and feel more
comfortable in larger meetings of the full board.
Although targeted assignments can be helpful in creating
an inclusive culture, directors should bear in mind that newcomers can feel demoralized if they perceive that they’ve been brought in to “check
a box” or if they are only valued for a specific attribute. Every director, regardless of age or experience level,
should be valued for their ability to offer broad business insights as well as
specific expertise. Accordingly, it is important
not to let conscious or unconscious biases color one’s perceptions. Directors
should be open to understanding each other’s experiences, skills and perspectives,
so they truly allow each person to provide their own unique value.
In terms of generational differences, this need for unbiased
openness goes both ways: one shouldn’t assume that an older person lacks
certain capabilities just as one shouldn’t assume that a younger person possesses
them. A classic example of this bias is the pervasive stereotype that older
people don’t understand technology while younger people inherently do.
Be Intentional About Realizing
With boardroom diversity expanding today in all of its forms, performance and value of such diversity are increasingly about the “and”: It’s the skill set and the cultural fit. New members may need different ways of becoming effectively integrated onto the board than their more-tenured counterparts. As more boards intentionally pursue generational diversity for the value it might deliver, they should be equally intentional in creating an inclusive culture that allows this potential to be realized.
Deborah DeHaas is a vice chair and national managing partner, Center for Board Effectiveness, Deloitte LLP.
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