Corporate Boards 104: Homogeneous Corporate Boards
So far, I have discussed the importance diversity has on corporate boards and the benefits diversity brings to an organization. Fortunately, today, many organizations are committed to supporting workplace diversity and seeing how advancing women in leadership positions is smart business.
While gender diversity is a good development in the workplace, it can increase conflict within the organization. After all, when you have people of different backgrounds, experiences, and perspectives working together, there is bound to be some measure of conflict. However, conflict does not need to have a negative connotation to it. Rather, it can be the catalyst to robust decision-making and increased accuracy in making those decisions. Plus, diversity can eliminate groupthink, which can eradicate flawed decision-making and reduce the number of mistakes board members and other executives make.
What is groupthink, and why can it be toxic to an organization? Groupthink is the tendency of groups to make decisions that preserve the status quo rather than take dissenting opinions into account. In other words, groupthink is when a team or organization becomes so similar in their outlook that they lose the ability to be creative in their decision making.
Research conducted by MIT Sloan School professor Evan Apfelbaum has found that when teams lack diversity, they will be more susceptible to making flawed decisions. This lack of diversity can stifle innovation and make employees feel pressured to conform – which can be toxic to teams and organizations.
While groupthink findings sound like a simple concept and one that can easily be avoided, Joe Gerstandt states that no one intends to participate in groupthink. Gerstandt, a consultant who helps organizations understand diversity and inclusion, points out that groupthink occurs because people are uncomfortable with conflict and differing opinions.
When groupthink occurs, the benefits of diversity can be lost. "Diversity means difference," Gerstandt said, “and difference [can] show up as disagreement," which he calls "the engine that drives a robust decision-making process."
Gerstandt believes groupthink is the default state for most teams, but it can be overcome by striving for inclusion, not assimilation. Groupthink can seriously affect corporate board decisions, which is why homogeneous corporate boards can be detrimental to their organizations. By including gender diversity on corporate boards, women bring different perspectives to the difficult issues facing their corporations.
Also, in a Catalyst study on the decision-making behaviors of board directors, “deep-level diversity” (i.e., differences in background, personality, and values) contributed to a higher degree of creativity.
Insigniam Quarterly provides an example of how a diverse corporate board may have prevented severe repercussions on the financial health of its parent company:
Jane Chwick joined the board of directors in the finance committee at Voya Financial, an $11 billion investment and retirement firm. Chwick had 30 years’ experience at Goldman Sachs, but the majority of her experience was based on technology, not finance. She soon discovered she had among the strongest financial backgrounds of anyone on the committee and realized that for the board to be successful in making decisions for the company, they needed to add board members who had a strong financial experience. She brought her concern to the Voya CEO, and he immediately added two board members with deep financial experience to the board.
This example points out how the Voya Financial CEO acknowledged the shortcomings on his corporate board and potentially saved his company from costly financial problems. By doing so, he also nurtured an environment where criticism is not just heard but valued and acted on.
However, it is important to note that just because an organization has a diverse corporate board, it does not guarantee that its members will fall prey to group thinking. Its members need to be empowered to speak up and take action even when it may be difficult to do so. This is exactly what Chwick did when she realized the Voya Financial board was missing members who had professional experience in a key area.
In today’s business climate, more females than ever are in leadership positions in the workplace. This trend certainly bodes well for business and the financial climate of our nation, but what about the representation of women on corporate boards?
The mission of 2020 Women on Boards is to increase the percentage of women on corporate boards to 20% by 2020. So, how far are we from that goal? The next installment of Corporate Boards 101 will look at the progress of gender diversification of corporate boards.
Christine Krause is a marketing team member for the 2020 Women on Boards 8th Annual Conversation on Board Diversity – Chicago. This series, Corporate Boards 101, will highlight her experience and learnings as a newcomer to the important work of board diversity.
