By Fred Crawford, Managing Director, Senior Vice Chair, New York | AlixPartners
I was sitting as an invited guest recently at a board meeting of a multibillion-dollar company, as AlixPartners had been retained to assist them on an important issue. As I was listening and looking around at the board members, I could see the company had done a very good job of building a diverse membership. With regards to ethnicity, gender, and age, the board was quite balanced.
Yet, as I continued to listen I had a suspicion, which I was able to confirm with a quick Google search after the meeting. While the board was indeed diverse, the group’s educational and experience base was highly concentrated in a few areas, specifically operations/engineering and sales/branding. The board did include the CFO, so there was some finance expertise, but the backgrounds of this seemingly diverse group actually were not diverse at all. And the conversation that led me to my Google Search reflected that lack of diversity:
In their discussion, the board showed very limited understanding of the use of social media, up-and-coming brand influencers, and how to reach the elusive but increasingly powerful younger demographic. The conversation kept coming back to relatively traditional topics and tactics, with very little (if any) time spent on emerging approaches.
What does it mean to be diverse in thought? Consider the quality of thinking if a board had expertise across a mix of disciplines: strategy, innovation, creativity, customer and supply chain, revenue growth, brand building, risk management, strategic talent management, operations, cost management, technology, administration, governance, human resources, communication, and finance. This could provide the richness and holistic insight required for better decision-making and execution.
We see this lack of diversity of thought quite often and notably in “Born Digital” companies — businesses built on digitally-enabled platforms as opposed to those shifting from post-industrial business models. As these incredibly talented and innovative companies grow at hyper-speed, they often have leadership well-steeped in technology and finance, with a real talent and passion for growth. However, at the same time they often are lacking — both at the board and executive level — in the areas that are required as they scale: human capital management, operations, customer service, supply chain, and governance. There are many high-profile examples where this lack of balance has led these companies into expensive missteps, costing both time and money.
At the board level, these Born Digital companies also often lack diversity in the types of intelligence they include. For example, the theory of multiple intelligences by developmental psychologist Howard Gardner posits that there are nine types of intelligence: naturalist, musical, logical-mathematical, existential, interpersonal, bodily-kinesthetic, linguistic, intra-personal, and spatial. Meanwhile, psychologist Robert Sternberg’s triarchic theory sorts intelligence into three domains: analytical, creative, and practical. Ensuring a balanced mixture of intelligence on a leadership team or board is important to make sure ideas, opportunities, issues, and concepts are examined in holistic and multi-dimensional ways.
While a lack of diversity of thought is a problem for many Born Digital companies, it certainly is not their challenge alone. Companies which have been around since before the digital era, which we call “Born Industrial,” face the same challenges, though roughly in reverse. Entrenched in the way things have always been, they often are slow to react to technological innovations or new business models because their leadership and board lack either the experience or mindset to see shifts occurring and act quickly. The notion of creative destruction and the need to shift resources swiftly and aggressively is at best challenging, or worse, impossible without the diversity of thought and experience required to drive the change. Building new offers and revenue models while shrinking tried and true existing ones requires a perspective that often is missing or too small to be heard.
Why does this happen? Human nature. We like to be around people that are like us. You will hear people say things like, “I like her. We speak the same language,” or “He and I get along great. We see things eye-to-eye.” While that may be comfortable, it can also be dangerous. This is the third and often less-obvious dimension to true diversity of thought: the personality component. In addition to having varied backgrounds and types of intelligence, boards must also be open to a blend of personalities, balancing a variety of different mindsets. In addition – and this is critical — boards then need to ensure those voices are actually heard. As we have seen time and again, boards will not benefit from any diversity if members are marginalized during meaningful discussions, their points of view invited, but not taken seriously enough.
When looking at some major disruptions, one must wonder whether there were enough voices, or loud enough voices, at senior enough levels in these companies to evaluate the risk and rewards of the courses they took.
Think about this: Amazon was founded in 1994. How many powerful and thriving Born Industrial retailers were unable to recognize and adjust to this opportunity/threat? Or what about Born Digital Facebook, which has lost 30% of its market cap over the last six months, and finds itself under intensifying regulatory scrutiny while teenagers increasingly turn away from the platform? Would better diversity of thought have helped to avoid or swiftly overcome these challenges?
All leaders are asked to guide their organizations with passion, vision, character, values, and insight. Yet we know that none of us have all the requisite skills and experiences to make all of the right choices all of the time in a world that is moving faster, changing quicker, and fragmenting more rapidly than ever before. We can’t always make perfect choices, but by building a board and senior leadership team that is truly diverse…in both who they are and how they think, how they process information and in what experiences and insights they bring, it will help an organization take advantage of opportunities, avoid costly missteps, thrive, and perpetuate.
This article originally appeared on ChiefExecutive.net.
Compliments of AlixPartners, a member of the EACCNY