State of the Union: Why Top Leadership Needs to Be On Board

January 21, 2015 5:59 pm

By Barbara Frankel

State of the Union: Why Top Leadership Needs to Be On BoardPresident Obama’s gutsy State of the Union speech spelled out exactly what he wants to do with the remainder of his term, including the economy, access to education, immigration, equal wages, veteran assistance and marriage equality. But he faces an uphill battle since he lacks buy-in and support from the Republican Congress.

Think of it in corporate terms. If your CEO “gets” how critical diversity and inclusion is to your business goals but his or her direct reports don’t, it is hard—but not impossible—to implement successful D&I initiatives across your business units. What is impossible is using D&I for business goals without the CEO’s support.

Two cases point that out. Microsoft is struggling mightily with its diversity numbers and its D&I policies, exacerbated by the very public blunder CEO Satya Nadella made on women and raises. And another company, which once was at the top of the DiversityInc Top 50, has fallen to the bottom of the list and may fall off entirely this year because of a CEO who gives lip service to D&I but has not visibly supported it or held executives accountable for results.

Based on Top 50 data and interviews with CEOs and senior leaders, here are best practices on CEO Diversity Leadership and Senior Leadership Support. For more on this topic, see Meeting in a Box: Senior Leadership Commitment. Also see our Web Seminar on Senior Leadership Commitment featuring PricewaterhouseCoopers and ADP (Nos. 5 and 24 in The DiversityInc Top 50 Companies for Diversity).

Best Practices: CEO Diversity Leadership

CEO Has D&I Quote on Website
2005 Top 50 16%
2014 Top 50 92%

The CEOs whose companies continually use D&I to advance their business goals (and whose stock prices reflect the impact of diversity) are very visible in their support. President Obama has for the most part been a visible proponent of diversity and inclusion. (Vice President Biden and LGBT advocates had to push him to be more public on opposing the Defense of Marriage Act.)

CEO Chairs Diversity Council
2005 Top 50 32%
2014 Top 50 54%

The CEO’s personal involvement in chairing the council and setting and monitoring diversity goals ties directly to the impact on the business.

Stephen R. Howe Jr., Americas Managing Partner at EY (No. 3 in the Top 50), never thought about not chairing the council. “I set the tone in our organization as the leader in the U.S. and the Americas. People are watching the message I’m sending. My job is to run the business. This is fundamental to our business,” he says.

He notes how increasingly important diversity and inclusion has become to EY’s business as a professional-services firm. “I tell my partners that it is not at all uncommon for me in a meeting with a client CEO to turn to this topic. That wasn’t true five years ago,” he says.

Best Practices: Senior Leadership Support

CEO & Senior Leaders Meet With ERGs
2005 Top 50 42%
2014 Top 50 90%

The support that CEOs and top executives show for employee resource groups is a major factor in the group’s success in recruitment, talent development, retention and business development. For example, Randall Stephenson, Chairman and CEO of AT&T (No. 10), attends and participates in the company’s annual ERG Summit. He pushed hard on resource-group growth last year and, as a result, membership was up by 39 percent.

Senior Leaders on Multicultural Nonprofit Boards
2005 Top 50 12%
2014 Top 50 76%

More and more, companies are finding that having their senior leaders take a visible role on the board of a multicultural nonprofit improves their recruitment and retention of employees from underrepresented groups, as well as their community connections. Marriott International (No. 16), illustrated this by showcasing its relationship with the National Black MBA Association.

Compensation Linked to Diversity Goals
2005 Top 50 38%
2014 Top 50 86%

Specifically tying executive compensation to diversity goals—either corporate or individual—correlates directly to improvements in diversity metrics, including representation, promotion rates, engagement scores, retention rates and supplier diversity. Sodexo (No. 2) ties up to 25 percent of executive bonuses to diversity goals. This is the only bonus paid regardless of the financial performance of the company.

The Payoffs of Inclusive Leadership

When both the CEO and the top team are on board, the results can be significant both in terms of improving metrics and solving crises (which would certainly help President Obama).

For example, Ameren CEO Warner Baxter told DiversityInc’s audience at our fall event of the efforts he and his top team have put together to open a dialogue and support the residents of Ferguson, Mo.—Ameren services the area—after the death of Michael Brown.

And Chris Brassell, Director, National Office of Diversity, PricewaterhouseCoopers, tells us how the company’s White Men & Diversity Candid Dialogues, which involve its most senior executives, help people understand different points of views. “It’s kind of socializing outside your tribe,” he says. “If you don’t, you are ultimately going to get info that only validates your pre-existing points of view.”

That’s a lesson that would benefit Congress.