Posts

Board Diversity Impacts ROI

, , , ,

It’s hardFoliage as Shapes - IMG_0052 s.c to find an organization today that’s not focused on, or at least giving lip service to, diversity. But have you ever considered the cost to your organization of not having a diverse leadership team? When Catalyst first came out with their study about the ROI for investors of companies with more diverse boards, many were surprised. But the numbers were clear: Return on Equity, Return on Sales and Return on Invested Capital were all significantly higher (53%, 42% and 66% respectively) for companies with more women on their boards.

The same is true for nonprofit boards.  Boards lacking diversity can make poor financial decisions, such as investing the bulk of their endowment with an investment manager  “everyone knows.” Boards lacking diversity can miss big opportunities to reach new communities and new donors. They can miss out on creating new partnerships.

So how can you create a more diverse board?

First, let’s define diversity. When I meet with boards on this topic, everyone’s first instinct is to think ethnicity and gender. These are important. But just as vital to decision-making are having people of diverse ages, life experiences, socio-economic backgrounds, family structures, and more.

Range of Ages. The most common lack of diversity I see on boards is related to age. And the most common form of ageism I see is against younger people (which on boards tends to mean under- 35). Yet the views of the 18-35 set, and their facility with the internet and social media tools, makes them especially valuable on boards.

Varied Life Experiences. Another area where boards often lack diversity is in life experiences. That’s because so many people are recruited to boards by friends, business associates or college/grad school classmates. So if you have one corporate lawyer on your board, you’re likely to have two or more. That’s not to say anything against lawyers, but there is also diversity among types of legal expertise and it could benefit your board to have more than one kind. Life experiences also include living overseas, blended families, military families, LGBT, and religious background.

Personal Attributes. A third area for boards to focus on when attaining diversity is a mix of personal styles and personality attributes. Even if you’re board is every color of the rainbow, if every person on it is a forceful leader, you’re going to have trouble filling your committees. By the same token, if everyone is a quiet, behind-the-scenes type of operator, you’ll have trouble finding committee chairs every year. You need a mix of several personality types to make a board fully functional.

Varied Connections. Finally, board diversity requires diverse community connections. One of the most overlooked areas for recruiting board members is among the clergy. Rabbis, priests, and ministers tend to know a lot of people in their communities, as well as other organizations that are making a difference there. That makes them great “connectors” to have on your board, irrespective of whether your organization has a religious mission. Other great connectors are people who volunteer in communities in which your organization wants to reach. And also don’t overlook individuals who serve on national boards, where they make contacts all across the country.

Tapping diverse talents always leads to a stronger board. And a stronger board helps you avoid costly mistakes and deliver on your bottom line: the mission.

Amy DeLouise is a video producer/director and consultant who works primarily with nonprofits and their leadership teams.

The UVA Battle and the Struggle Between Nonprofit and Corporate Leadership Models

, , , , , ,

Concentric circles of leadershipThe Sullivan vs. Dragas battle at UVA is a classic case of nonprofit versus corporate leadership styles. UVA president Teresa Sullivan’s approach–getting to know the university’s key constituencies–is best suited to nonprofits, in which shouting “Follow Me!” rarely gets you more than a sore throat. But Helen Dragas, Chair of UVA’s Board of Visitors, is known for her no-nonsense business style. She expected the newly minted (18 months IS recent in NST–Nonprofit Standard Time) university president  to “stop listening and lead.” (If you haven’t been following, the Chronicle of Higher Ed helpfully summarizes the battle here.) Particularly in a university setting, where you have power centers including tenured faculty who frankly don’t have to follow anyone thank you very much, as well as a constant stream of new students and important donors, Sullivan’s style of taking the time to “listen and learn” before launching major change initiatives will likely win the day.

This battle comes at an interesting time. As nonprofits have been moving steadily to adopt a “more corporate” model of governance, corporations have been embracing social sector models of getting things done. (And hey, after the Wall Street meltdown, my money is on the nonprofit sector so to speak.) In her recent letter to shareholders, Calvert Investments CEO Barbara Krumsiek (disclaimer–Barbara and I know one another through a nonprofit board) noted the increase of sustainability proposals at shareholder meetings, and the implementation by more than 400 business sector CEOs of the United Nation’s Women’s Empowerment Principles, which were adapted from Calvert’s own Women’s Principles in 2010. In their new white paper subtitled “Is Your Board Prepared?”, Ernst & Young point out that social and environmental issues accounted for 40% of shareholder proposals on corporate proxy ballots last year–up one-third from 2010.

That trend away from business models to social sector models is addressed by Jim Collins in his recent monograph “Good to Great in the Social Sectors,” a follow-up to his famed book on high-functioning businesses. In the new book he questions the implementation of business practices in the social sector, saying”we must reject the idea…thgat the primary path to greatness in the social sectors is to become ‘more like a business.'”  In fact, the metrics for success in a mission-based operation are very different than those in the for-profit. Delivery on the mission is primary. Lowering cost-per-delivery, while essential to good accounting, is not a measurement of success. Neither is efficiency in certain areas. Sometimes nonprofits need to spend a lot of time listening to their “customers” in order to deliver better services, and this listening is often done by social workers or nurses or pastors–professional listeners, but not folks in a marketing setting. The way they may evolve a solution to a particular customer problem may not be the most cost-efficient delivery of service, but it might create the best outcomes in the community served.

The same can be said of effective nonprofit leadership styles. Someone who understands how to harness the different concentric circles of supporters–from staff to donors to volunteers (and students and faculty, in the case of an educational institution) are going to be more successful in moving a strategic plan forward to get the mission accomplished.

So my bet is on Sullivan. What about yours?