This is the first in a series of articles focusing on the most critical components of effective executive diversity councils. The series will culminate with best practices, feedback and insights from companies with the most effective diversity councils.
By Shane Nelson
The purpose of an executive diversity council is to set and govern an organization’s D&I strategy. Part of that, and the most important action the council can take, is to hold stakeholders accountable for results. If your company has a D&I strategy but doesn’t have an executive diversity council (referred to as councils hereafter), odds are that strategy isn’t being enforced.
Data from DiversityInc’s Top 50 survey shows that most companies get this. Ninety-four percent of the DiversityInc Top 50 and 87 percent of all participants have councils. This was the same for the Top 50 four years ago, but for all companies, only 77 percent had councils. If your company doesn’t have a council, it is behind and needs to catch up quickly — please read How to Start an Executive Diversity Council.
If most companies have councils, and they are used to govern D&I strategy, why are some companies performing better in D&I management than others? As it turns outs, there are two critical factors differentiating companies with better D&I management performance from the rest of the pack: accountability and talent development.
In our Top 50 survey, council accountability has a number of layers. This article will focus exclusively on one of those layers — leadership of the council. Sixty percent of all companies with councils have their CEO chairing the council, up from 47 percent four years ago. This matters for companies trying to increase racial and gender diversity in senior level ranks. The chart below shows that companies with CEOs leading the council increased representation of Blacks, Latinos and Asians in the CEO and direct reports level (level 1) by 17.5 percent over four years. For women, representation improved by 23 percent. In one level below CEO and direct reports (level 2), racial diversity improved by 23 percent over four years.
Having someone other than the CEO lead the council does not mean progress can’t be made in diversifying senior level ranks. However, data shows that companies who don’t have the CEO leading the council have been less successful in diversifying senior level ranks over the past four years. On average, those companies increased racial diversity in the CEO and direct reports level by just 4 percent over four years. Women representation improved by 20 percent. In one level below CEO and direct reports, racial diversity improved by 19 percent over four years for companies whose CEO was not leading the council. The chart below highlights that companies whose CEO leads the council are able to increase racial and gender diversity in the top levels at higher rates than those companies whose CEO does not lead the council.
To test this correlation, we looked to see if companies made progress in diversifying senior levels two years after their CEO started to lead the council. Company A (labor-intensive Top 50 company) did not have its CEO leading the council in 2011 but started to do so in 2012. At the time, less than a fifth of the company’s level 1 was comprised of women. Four years later, women represented a third of that level. The company had doubled the representation of women in that level. In level 2, the company increased Black, Latino and Asian representation by 28 percent and women by 12 percent.
Company B is a labor-intensive 25 Noteworthy Company that made it onto the Top 50. The company’s CEO started leading the council in 2012 and doubled the number of women in level 1 within three years. In level 2, the company increased representation Blacks, Latinos and Asians by 84 percent.
Company C is an engineering 25 Noteworthy Company that also made it onto the Top 50. The company’s CEO started leading the council in 2012, and women representation in level 1 increased by 75 percent over three years. In level 2, women representation increased by 54 percent.
In all three instances, the CEO took charge of the council and had a strong pulse on the opportunities to diversify the top levels. The CEO held him/herself accountable for getting the results the organization needed.
Upcoming Articles on Executive Diversity Councils:
• Tying Compensation to Council Goals Drives Results
• Rotational Positions on the Council for Resource Group Leaders is a Critical Talent Development Opportunity
• Why Your Executive Diversity Council Should be Diverse
• Best Practices From Companies With the Most Effective Executive Diversity Councils