Moving Beyond the #BLM Statement with Board Diversity — The Why

This Moving Beyond the #BLM Statement with Board Diversity blog is a series of three: Part 1 — The Context, Part 2 — The Why, Part 3 — The How

The Moving Beyond the #BLM Statement with Board Diversity: Part 1 — The Context of this blog series provided examples of organizations with strong complementing responses, and shared common obstacles organizations face with their diversity, equity and inclusion strategies.

Part 2 — The Why

Whether your organization has a strong diversity, equity and inclusion plan or your organization is just starting to build one, board diversity must be a key part of your plan. With the momentum of the Black Lives Matter movement and the new AB 979 California law (requiring public companies in CA to have at least one member from an underrepresented community on its board of directors by the end of the 2021 and upwards of three members from an underrepresented community on its board of directors by the end of the 2022 calendar year), there is finally a sense of urgency to racially/ethnically diversify boards. Many organizations are dedicated to increasing the representation of racially and ethnically diverse directors on boards such as the Board Diversity Action Alliance and the Thirty Percent Coalition. Yet traction in racially or ethnically diversifying boards has slowly progressed in the for-profit and nonprofit sectors. Approximately 84 percent of board members are white in Fortune 500 companies and approximately 84 percent of board members are white in nonprofits, while the United States population is at 40 percent nonwhite — and this number continues to grow annually (Alliance for Board Diversity, BoardSource, US Census Bureau) — see Figures 1, 2 and 3. Many boards have started efforts to diversify, yet many of these attempts have failed or been poorly executed. To onboard one racially or ethnically diverse person, regardless of his or her skill and experience, and think “the job” is done is to miss the point entirely.

Figure 1: Nonprofit board diversity trends. Created with data from BoardSource’s Leading with Intent studies conducted in 1994, 2007, 2010, 2012, and 2017.

Figure 2: Fortune 500 Companies’ Board Diversity 2018. Created with data from Alliance for Board Diversity and Deloitte’s study conducted in 2018

Figure 3: United States population projections. Created with data from 2017 National Population Projections, US Census Bureau.

If board diversity is executed properly, the benefits are clear. Recent academic studies have found diverse boards bring in new perspectives, unique ideas to tackle the mission and goals, and a reduction in the groupthink mentality.

Key Board Diversity Benefits

Excerpts from Boost your Nonprofit Board: A Diversification Guide:

· Improved Performance. A McKinsey study found organizations in the “top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.” Many other studies have indicated that more board diversity leads to more-diverse opinions, which improves the performance of organizations and leads to quicker responses to the population being served. Breadth of perspective is a leading benefit of diversifying boards, and studies indicate the mix of life experiences and backgrounds guides better decision-making and negotiations. Boards with more ethnic/racial diversity have increased accountability, including practices such as having an outside audit, a separate audit committee, and conflict of interest and whistleblower policies.

· Marketing and Reputation. In the 2017 Leading with Intent survey, 80 percent of nonprofit executives reported that diversity, equity and inclusion were important, or very important, in enhancing the organization’s standing with the general public and improving its reputation. CEOs have reported that board diversity is important in developing creative new solutions to problems, understanding the organization’s clients or customers, and planning efficiently. Personal connection and being able to relate to the organization’s clients or customers are major bonuses for boards.

· Goal Achievement. More-diverse organizations have more success with recruiting top talent, employee satisfaction, and improving their client orientation. Lack of board diversity creates blind spots, and it may result in ineffectively addressing the community’s problems or the customer’s needs. A diverse board of directors will stay updated on policy changes, cultural changes, and economic factors impacting the served community.

· Fundraising Power (for nonprofits). A more heterogeneous board helps the nonprofit’s credibility, leading to an increase in fundraising power. Grant makers pay attention to diversity in boards; hence it’s a competitive edge with foundations and the US government. A positive correlation with board diversity and fundraising capabilities — such as collecting more direct donations, indirect donations, and government grants — has been found.

· Creating a Diverse Culture from the Top. There are parallels between the percentage of BIPOC (Black, Indigenous and people of color) board members and the percentage of BIPOC employees and volunteers; this is the trickle-down effect. A diverse board will filter down to the rest of the organization and help to positively modify the overall culture of the organization.

· Moral Impetus. Although America prides itself on being a country where success is fully based on merit, the structural racism embedded into America’s systems and the implicit biases embedded into America’s people provide privileges to some and add barriers to others. The simple fact is that equality and equity are two very different things. To ensure the American dream applies to all, we have to level the playing field.

There are also challenges to diversifying boards. Most of the challenges stem from how board diversity was implemented and approached at the given organization. These challenges often deter boards from realizing the benefits of board diversity.

Key Board Diversity Challenges

Excerpts from Boost your Nonprofit Board: A Diversification Guide:

· Lack of Commitment. Bottom line, if your board does not agree that board diversity will be beneficial for your organization, then your likelihood for success is low. Invest the time to gain alignment across the board on why diversifying will help your organization meet your goals.

· Recruiting Practices. White-dominated boards have (largely unfounded) concerns and misperceptions, that if they target minorities to diversify their boards, they may not be selecting the most qualified candidate and/or may drive out experienced board members to hit a quota. Many boards are recruiting diverse board members solely based on race and/or ethnicity; instead, boards must recruit diverse members based on their skill set and experience. There are structural processes and implicit biases perpetuating predominately white boards even when boards make a concerted effort to recruit nonwhite members. Many boards suffer from this “network recycling effect” (i.e., recruiting out of limited social and business networks of existing board members).

· Tokenism. Tokenism is the practice of making a symbolic or dutiful effort to recruit a small number of minorities to meet expectations or improve public image. Many boards view diversity narrowly, as a requirement that must be met or as a checklist task. They are not expanding their own views as to how the new diversity can contribute to the long-term development of the organization. Often the percentage of minorities is too low to reap the benefits of having a diverse board. In many situations, the BIPOC (Black, Indigenous and people of color) board members are not assigned roles and responsibilities on the board (e.g. Finance Committee Chair). Board dynamics or attitudes are frequently (usually unknowingly) unwelcoming to BIPOC board members, and this is exacerbated if minorities are chosen only to hit a diversity composition goal.

· Issues with Inclusion and Equity. Creating an inclusive and equitable culture will greatly lessen many common issues associated with diversifying boards. Many organizations confuse diversity with inclusion, which can lead to a number of reported issues with attempting to diversify a board. Boards must also focus on inclusion to ensure the BIPOC board members are contributing fully and bringing their full selves to the board room to see results.

How to move forward with board diversity?

If your organization is ready to tackle board diversity, the next post: Moving Beyond the #BLM Statement with Board Diversity: Part 3 — The How will walk your organization through the steps to successfully execute and sustain your board diversity efforts.