The Executive
Leadership Council

Building Shareholder Value Through Diversity

By Judith L. Turnock

The diversity and inclusion landscape in corporate America is dramatically different today than it was at the first Executive Leadership Council (ELC) meeting 25 years ago. What used to be “required by law” or “the right thing to do” is now recognized as providing a clear business advantage. The most successful companies know that a workplace that values diversity and inclusion unleashes its employees’ creativity and maximum performance, and then harnesses those qualities to improve the bottom line. The result is increased shareholder return—inarguably the number one goal of every business.

Celebrating 25 Years of Service
The ELC, which began in 1986 with a mere 19 members who were senior executives at major corporations, has grown dramatically. It’s therefore a bellwether for corporate America; representation of women and people of color at all levels is now more common. Had the pool of talent not been so expansive and the skill level so robust, corporate America would never have heeded the message of The ELC and other organizations supporting corporate diversity efforts, such as Catalyst, the Hispanic Association on Corporate Responsibility (HACR), and Leadership Education for Asian Pacifics, Inc. (LEAP). “There has been much progress, thanks to our many visionary partner corporations,” declares ELC President and CEO Arnold W. Donald, a former Monsanto senior executive, “and all of America has benefited.”

Thus there is much to celebrate as The ELC reaches its quarter-century milestone. At the same time, there is more work to be done. “Of the more than 25,000 top corporate jobs within two levels of the CEO, best guesstimates are that fewer than 800 are occupied by African Americans,” says Donald. Many more skilled and committed women and people of color are yet to be tapped for their real potential in the corporate workplace. Ignoring that potential is like leaving money on the table.

Evolving to Meet Changing Needs and Expectations
As today’s global market changes at lightning speed, so do companies’ needs and expectations. “The business environment is more competitive, companies are expanding cautiously, and they are expecting more from their employees,” observes ELC Board Chair Jessica Isaacs, head of International Small and Medium Enterprises at Marsh, the insurance brokerage unit of Marsh & McClennan Companies.

The needs and expectations of younger generations are also changing. Up until ten years ago, a common goal of professionals was to achieve a high-level corporate position. Today, young people are more educated and more traveled, and they have alternative role models, like some of the business moguls who began in the music industry. “They’re therefore more about entrepreneurship and owning something,” says Isaacs.

New concerns of those aspiring to corporate work are the culture of the company, how a company makes its products, and whether a company will allow its employees to realize their potential. “If you cannot provide that workplace,” warns Otha “Skip” Spriggs, an ELC member and senior vice president of human resources at Boston Scientific, “you will not be able to attract or retain the best talent.”

The ELC has its eye trained squarely on the future of corporate America. “We’re not about what hasn’t been accomplished. The real focus is what can be done and who’s willing to do it, and we’re ready,” predicts The ELC’s CEO Donald. With ELC members’ knowledge of the support corporations want and need, as well as what works and what doesn’t, they are positioned to support corporate America in efforts to accelerate progress.

Driving Lasting Change From the C-Suite

Lasting change in a corporate culture is driven from the top, so diversity and inclusion at the board and C-suite levels requires, in Donald’s words, “quantum leaps.” In the C-suite, the message is crafted in words and internal practices and processes, as well as more subtly through modeled behavior. This is where ELC members reside, and where they can most powerfully leverage their collective strengths.

A growing number of CEOs who embrace diversity and inclusion gather annually at The ELC’s CEO Summit, which ELC Board Chair Isaacs calls “our signature program.” The strongest message is the realization that creating an inclusive work environment requires intentional and deliberate actions coupled with a sustained, long-term commitment; it doesn’t happen automatically or quickly. These CEOs’ perseverance proves the value they have found in the inclusiveness journey and their confidence in The ELC’s continued support. “I’m more and more impressed with the program and the attendance,” says Isaacs. “The group used to be predominantly business heads, but now there are more and more enterprise-wide CEOs. The depth of the commitment is increasingly promising.”

Corporate efforts for excellence in the C-suite depend on internal talent management for potential C-suite level executives. Talent management is therefore a priority issue for every corporation and an area of ELC expertise. Here we look at two aspects of talent management for those at the highest levels where The ELC brings particular expertise: personal and professional development, and global assignments.

Developing True Leadership

The ELC’s Institute for Leadership Development & Research is a unique opportunity for personal and professional development. Senior-level managers and newly minted executives attend sessions during a weeklong seminar taught by ELC members and academic experts that prepare them for the soft skills—what Orlando Ashford, chief human resources and communications officer at Marsh & McClennan Companies, and an ELC Board member, describes as “the fit, the comfort, the cultural connection, the collaborative ability,” that are essential to success at the top levels.

“A focus on diversity allows us to…assemble a workforce that is creative, dynamic, open to new ideas
and restless with the status quo. A workforce like that is bound to be more innovative, to be more attuned
to driving real value for our customers, and ultimately to produce more value to our shareholders.”

Ursula Burns, Chairman and Chief Executive Officer, Xerox Corporation, and ELC Member

Another opportunity, designed specifically for mid-level women of color, is Spelman College LEADS—Center for Leadership and Civic Engagement, whose founding sponsor is JPMorgan Chase (JPMC). Kimberly B. Davis, managing director, Global Philanthropy at JPMC, president of the JPMC Foundation, and an ELC Board member, is the Center’s cofounder, along with Dr. Beverly Daniel Tatum, Spelman College’s president. Seven years ago Davis identified women of color as “an underutilized asset,” and the Center opened with curriculum offerings in both scholarly work and personal and professional development, including leadership skills like relationship building. “The Center is thriving,” reports Davis.

Tapping Into Cultural Competence
Global assignments—more and more essential to those who aspire to the C-suite—can be what ELC Board Chair Isaacs calls “game changers.” The value of global assignments is easy to understand, says Michael C. Hyter, Executive Leadership Foundation vice chair, a former senior executive at Dayton Hudson, and president and managing partner of Global Novations, LLC, a global consultancy, because “true potential is leveraged when one is learning new jobs and skills; and that learning is intensified when one is immersed in a new culture.”

As global business continues to thrive in the future, exposure to different cultures, operating models, relationships and ways of doing business will be increasingly essential to corporate success. “If you don’t know global and don’t understand the interactions of global markets, you can easily make bad decisions,” warns Rayford Wilkins, CEO, Diversified Businesses, AT&T, and an ELC member.

African Americans are especially well suited for such assignments because “they already live a bicultural experience in America,” explains David Thomas, Naylor Fitzhugh Professor of Business Administration at Harvard Business School, and, as of August 1, dean of Georgetown Business School, who has studied corporate diversity for two decades. “They learn very early to read a new environment and succeed there,” he says. Or, as, AT&T’s Wilkins sees it, “African Americans have the U.S. as a great training ground.”

The Key to Change: Sponsorship From the Top

Structured training and experience are of little value to diverse people with high potential, however, unless there are role models on the board and in the C-suite, and affirmative sponsorship of their inclusion by the executive team.

“People understand when their input is truly welcome based upon its quality and when it is not,” says Ira D. Hall, board member, Praxair, Inc. and Publishers Clearing House, and a former ELC Board chair. “When the board and senior executive team open the door to high-quality input, with no artificial restrictions, and everyone in the organization knows he or she is welcome based upon excellence, it’s easy to attract and retain the best thinking of everyone at every level.”

Achieving Board Diversity: A Concerted Campaign
Nowhere is the opportunity for change greater than among corporate directors. The playing field is defined: The total number of board seats for the top 500 companies is just over 5,460, so two or three additional seats for diverse representation on each board would dramatically alter the landscape. “We encourage CEOs and board-nominating committees to look one or two levels below the CEO,” says Patrick Prout, president and CEO of The Prout Group, an executive search firm, and an ELC member. “There is a large pool of diverse, seasoned executives who have run large divisions and bring both leadership and functional experience to the table.”

The impact of a commitment at the board level reaches every corner of an organization. Therefore, The ELC, Catalyst, HACR and LEAP are working jointly to encourage greater board diversity through the Alliance for Board Diversity (ABD), a partnership among them begun in 2004.

“The idea is that together we can leverage the experience and knowledge of all women and minorities,” reports Carlos F. Orta, president and CEO of HACR, “and achieve a far greater impact than any of us could alone.” Beyond the impact, combining forces is walking the diversity talk. “Board seats are not an either/or proposition,” reasons The ELC’s Donald. “We all need to be there. There are plenty of seats to go around, and we want everyone at the table.”

Despite the disappointing results of the recently issued ABD 2010 census, Missing Pieces: Women and Minorities on Fortune 500 Boards, which found that the already underrepresented groups suffered a decline, the value proposition remains. “Catalyst research revealed that more-diverse boards, on average, are linked with better financial performance,” points out Ilene H. Lang, chair of ABD and president and CEO of Catalyst. It is a missed opportunity to overlook the growing pool of superbly qualified women and people of color. Adds J.D. Hokoyama, president and CEO of LEAP, “We cannot fall into the trap of settling for less when there are so many viable candidates.”

Earlier this year The ELC launched its corporate board initiative (CBI) with its alliance partner Heidrick & Struggles (H&S) and corporate sponsor Kraft Foods. Billy Dexter, ELC member and managing director at H&S, says H&S is committed to expanding the pool of diverse talent for board governance, and The ELC has a deep pool of diverse leadership talent. “The CBI is focused on awareness of board service and the benefits and process for selection: how to prepare for board service and how to enhance your board profile. This will be accomplished by skill assessments, training seminars, and networking receptions to introduce ELC members to corporate clients looking for new directors,” says Dexter.

The Challenges of Managing Diversity and Inclusion

It is important to acknowledge that the promised benefits of diversity do not happen without a sustained commitment. “It’s easier to manage homogeneous teams,” admits Marsh & McLennan’s Ashford, “but the extra effort is worth it. Failing to leverage different backgrounds, experiences and approaches basically means you choose to limit your upside—and why would any business leader want to limit the upside?” Phillip Miller, senior vice president and group head at MasterCard Worldwide, and an ELC member, points out that “boards deal with complexities all the time; however, there is an opportunity cost to having a diverse board, as better decisions are reached when conflicting opinions are considered and resolved.”

Most corporate leaders readily say they believe diversity and inclusion is both a business advantage and necessary preparation for the projected U.S. workforce demographics. What remains is the will and determination to follow through. The change process will probably not be smooth; it’s not easy to alter behavior patterns and thought processes that have been in place for decades, even centuries—to change what Cedric Coco, senior vice president, Learning and Organizational Effectiveness, at Lowe’s, and an ELC Board member, calls “the cadence of an organization.” But as competition intensifies, the lost potential is simply too great to ignore.

The Power of Inclusion

The ELC’s Donald is one of many senior executives who have realized the promise of inclusive work teams on the front lines of corporate America: “Some think diversity and inclusion are just theoretical advantages. But those who have experienced them in real time, in the real world, know it’s the only way to go. It works.”