Great Leaders Who Make the Mix Work

7/27/2019 Great Leaders Who Make the Mix Work

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Great Leaders Who Make the Mix Work

Business leaders send a powerful message when they demonstrate a commitment to diversityandinclusion that goes beyond rhetoric. But how does diversity make its way to the top of a CEOsagenda? To find out, we interviewed 24 CEOs from around the globe who ran companies and

corporate divisions that had earned reputations for embracing people from all kinds ofbackgrounds. These executives represented a wide range of industries and regions, as well asdifferent stages on the journey to creating an inclusive culture. Our goal was to understand notonly why they had made diversity a strategic priority but also how they executed on their goalsand what that meant to the organization and its practices.

How We Chose the CEOsThe CEOs we spoke with did not see diversity as a once-and-done initiative, nor did they hand offthe responsibility for it to others. Rather, each of the 24, in his or her own way, approachedinclusivity as a personal mission. When we asked these executives why advancing diversity intheir organizations was so important to them, the aggregate answer was twofold: They believed itwas a business imperative because their companies needed it to stay competitive, and theybelieved it was a moral imperative because of their personal experiences and values. As Mikael

Ohlsson of the Swedish home-products company IKEA put it, My leadership on diversity isvision-driven from a business point of view and value-driven at the foundation.

These CEOs spoke forcefully about diversity as an advantage. Paul Block of the U.S. sweetenermanufacturer Merisant pointed out, People with different lifestyles and different backgroundschallenge each other more. Diversity creates dissent, and you need that. Without it, youre notgoing to get any deep inquiry or breakthroughs. Or, as Jonathan Broomberg of the South Africaninsurer Discovery Health put it, diversity is a source of creativity and innovation.

A diverse workforce also prevents an organization from becoming too insular and out of touchwith its increasingly heterogeneous customer base. Many of the CEOs asserted that it is crucialfor a companys employees to reflect the people they serve. Brian Moynihan of Bank of Americasaw an important link to customer satisfaction: When internal diversity and inclusion scores are

strong, and employees feel valued, they will serve our customers better, and well be better off asan organization.

The Role of Personal ExperienceA CEOs commitment often arises from his or her own understanding of what it means to be anoutsider. Take Andrea Jung of the personal-care-products firm Avon. (Note that Jung, like anumber of other CEOs we talked with, has stepped down since our interview with her.) Describingher career, she said: I was often the only woman or Asian sitting around a table of seniorexecutives. I experienced plenty of meetings outside my organization with large groups ofexecutives where people assumed that I couldnt be the boss, even though I was. MasterCardsCEO, Ajay Bangaa Sikh from India who was hassled in the United States after 9/11sharedsomething similar: My passion for diversity comes from the fact that I myself am diverse. Therehave been a hundred times when I have felt different from other people in the room or in the

business. I have a turban and a full beard, and I run a global companythats not common.

Carlos Ghosn of Nissan Motor Company told us how bias had affected his own family. Mymother was one of eight children, he said. She used to be a very brilliant student, and when thetime came to go to college, she wanted to become a doctor. Unfortunately, her mother had toexplain to her that there was not enough money in the family, and that the money for college wasgoing to the boys and the girls would instead have to marry. When I was a kid and my motherwas telling me this storywithout any bitterness, by the way, just matter-of-factI was outragedbecause it was my mother. After hearing that story, I said I would never do anything to hurtsomeone based on segregation.


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To Ghosn, gender bias is a personal affront. When I see that women do not have the sameopportunities as men, it touches me in a personal way, he said. I think its some kind of refusalrelated to my sisters or to my daughters.

Even white male CEOs had stories to share. Kentucky native Jim Rogers of the electric-utility

holding company Duke Energy felt like an outsider at the start of his career. When I went toWashington to be a lawyer, I felt like I had to work harder, be better, and prove myself because Ihad a southern accent and came from a rural state, he said. The self-awareness, insight, andempathy that Rogers and other chief executives acquired from personal experience have clearlyshaped their attitudes toward diversity and inclusion and informed their priorities as leaders.

Persistent Institutional BarriersThe CEOs were generally disappointed with the lack of progress on diversity in the C-suite. Whileseveral women have risen through the ranks to become leaders of multibillion-dollar corporations,the statistics are grim overall. Only 4% of companies on the 2013 Fortune 500 list are led byfemale CEOs. As Banga acknowledged, Thats more than what it used to be 20 years ago, butits nowhere near where it should be. The disparity also persists in other senior leadershippositions and on boards. Ken Frazier of Merck offered a harsher assessment: I think that the

progress of women in the last two decades has been so limited, so slow, so inadequate, that itwould defy even the most skeptical people from 20 years ago.

We asked the CEOs what they perceived to be the greatest obstacles to womens advancementin their own companies and industries. Although theres no one truth about what holds womenback, the leaders we spoke with offered candid views based on years of observation.

If theres a single barrier that affects all women, its exclusion from networks and conversationsthat open doors to further development and promotion, according to seven of the CEOs. WoodsStaton of Arcos Dorados, the largest operator of McDonalds restaurants in Latin America, definedthe offending mechanism as social cliquishness, a pattern of interaction in which men seek outthe company of other men and ignore women. The men come out of a meeting, hang out witheach other, and then go out at night for drinks, Staton explained. Its subtle discrimination, and

its difficult to work around. Barry Salzberg of the professional services firm Deloitte describedthis pattern as a tangible, negative consequence of the old boys network.

Frazier went so far as to say, Im an African-American, and Ive worked in the business world allmy life, and I believe very strongly that whatever barriers race presents in the workforce, theypale in comparison to the barriers that women face when creating the close mentoringrelationships that are necessary to be promoted. We find that this kind of discrimination is oftenunintended, unconscious, and embedded in a companys culture.

The CEOs also reported that the contributions of women are often underappreciated. As anexample, Jim Turley of Ernst & Young described an incident when he himself was called out: Ilike to facilitate our board discussions by getting right into the more contentious points, and wewere having a discussion around a particular topic. Three women on the board made individual

comments that were similar in direction, which I didnt respond to. Not long after they spoke, afourth person, who happened to be a man, made a comment in line with what the women hadbeen saying, and I picked up on his comment. I said, I think Jeffs got it right, not even aware ofwhat I had just done. To their great credit, the women didnt embarrass me publicly. They pulledme to the side, and they said, Jim, we know you didnt mean for this to be the way it wasreceived, but this is what happened. They played it back to me, and they said that thats whathappens to women throughout their careers. It was a learning moment for me.

Clearly, even leaders passionate about building inclusive cultures can inadvertently allow


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collaborative, and more often than not I have found that leader to be a woman, said Halvorson.

What Is an Inclusive Culture?Resoundingly, the CEOs agreed on what an inclusive culture meant for their organizations. Theydefined it as one in which employees can contribute to the success of the company as theirauthentic selves, while the organization respects and leverages their talents and gives them a

sense of connectedness. In an inclusive culture employees know that, irrespective of gender,race, creed, sexual orientation, and physical ability, you can fulfill your personal objectives byaligning them with the companys, have a rich career, and be valued as an individual. You arevalued for how you contribute to the business, said David Thodey of Telstra, the Australiantelecommunications firm. Brad Wilson of Blue Cross and Blue Shield of North Carolina describedan inclusive workplace as one where all who come with the professional skills sufficient toperform the requirements of the job feel welcome, supported, and rewarded, and are inspired tosucceed based on their ability. Thats similar to the point that John Rowe of Exelon, a U.S.energy producer and distributor, made when he noted that a culture of mutual respect helps hiscompany address the complexities of its business. A big organization needs only a few generalsand a lot of sergeants, he said. The sergeants deserve respect too.

Some CEOs observed that the proof is not only in how individual employees feel about

opportunities for growth but also in how teams operate and decisions are made. In an inclusiveculture, we create and support heterogeneous teams, said Chavel. They may take longer tomake decisions than homogeneous teams, but its worth the investment because their decisionswill be better informed. To these CEOs, inclusiveness is not merely a matter of the compositionof the organization or of particular teams (though such metrics can be helpful); it also has to dowith how people relate to one another. Broad diversity is necessary, but if you just walk awayafter you have it, you may not get the outcomes you want, said Steve Voigt of King Arthur Flour,a company where women account for three of eight board members and three of six seniorexecutives. You really have to manage it, grow it, and educate around it.

Practices That Make the DifferenceTurley drew an important distinction: Diversity itself is about the mix of people you have, andcreating an inclusive culture is about making that mix work. We asked the CEOs which of theirorganizations practices had been most effective at harnessing diversity. Heres what they told us:1. Measure diversity and inclusion. The CEOs agreed that metrics are key because, as we know,what gets measured gets done. Bank of America, for example, puts questions about diversity andinclusiveness into its biannual employee engagement survey and compares the results for anyteam that gets at least seven responses against those of a normative group of companies.Weve also built a diversity-and-inclusion index that tells us if people here feel they are treatedfairly and to help us ensure that people of diverse backgrounds can succeed at Bank of America,said Moynihan. With this data, each team can have a dialogue to determine what were doingwell and what we can improve to make Bank of America a better place to work.

2. Hold managers accountable. Merck, Nissan, General Mills, Telstra, and ABB North America areamong the many organizations that make diversity and inclusion goals part of their managersperformance objectives. Each of my direct reports has things that theyre going to do personallyto help promote diversity, not things that they can assign to their team, explained Moynihan. Isay, What are you going to do to get involved? For example, they can mentor somebodyindividually or sponsor diversity events. AT&T takes a different approach. We benchmarkdiversity objectives at the senior levels of management, and we have regular meetings around mytable about how were advancing, said Stephenson. A portion of our officers compensation isbased on achieving those objectives. Many CEOs also reported that managers who embraceddiversity were more likely to be considered for promotion at their companies.

In some organizations a favorable attitude toward diversity even determines whether anemployee is viewed as a good fit for the organization. We really have challenges when the


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leadership group is not diverse and they dont get it. And so you have to educate themand ifthey still dont get it, I let them go, said Tim Solso of the engine manufacturer Cummins. Heelaborated: We hit a serious downturn in the second half of 2000 through the first half of 2003. Imean, we were on the brink as a company, but I didnt back off on diversity. One of the seniorofficers basically said to another officer, Why doesnt Solso get off this diversity stuff? We need tosave the company. I fired him. It was well known why he was fired. After that, people either got itor didnt talk that way anymore.

3. Support flexible work arrangements. Many of the CEOs reported that their organizationsoffered benefits that helped employees balance their professional and personal commitmentssuch as flexible hours, on-site child care, and onboarding support after a leave of absence. KenPowell of the U.S. food processor General Mills explained his companys efforts this way: Ivehad officers at General Mills say to me, I realize that Im one of several people who could be thebrand manager for Cheerios, but Im the only person who can be the mother to my children.While some of those women make the decision to leave the companysometimes permanentlyweve learned that we can retain many of them by providing greater flexibility during thosehectic childbearing years.

At Sodexo North America, Chavel and his leadership team have made work/life balance a

personal matter. Although the job is 24/7, I try to send the message that Im open and receptiveto any kind of flexible arrangement, Chavel said. For example, I will end a meeting early to getto one of my sons athletic events or travel somewhere for a family commitment.

4. Recruit and promote from diverse pools of candidates. Workforce diversity begins with thesearch for talent. At General Mills, Powells leadership team tracks metrics during and after thehiring process. From the beginning, were looking at the composition of the pool of candidatesthat we interview on campus, because thats an important early indicator, Powell told us. Thenwe look at the composition of the group of people we hire in any given year. We track theretention rate for different groups, such as women or African-Americans. Even interns. At whatrate are they leaving? At what rate are they getting promoted? What percentage advances toeach level in the company? Our metrics help us diagnose and understand whats going onenabling us to develop action plans to address any issues we see. Its important, and thats why Ireview those metrics myself on a quarterly basis.

Ghosn has taken a different approach at Nissan in Japan, where women are strikinglyunderrepresented in management ranks. Weve implemented quotas in hiring, particularly in thepopulations where there are fewer womenlike engineeringand we make sure that in thesuccession plans of the company we always have a specific number of female candidates, heexplained. This forces management to identify women in their own ranks or to hire more women.So when it comes time for promotions, we have a diverse group of candidates from which we canchoose. I believe quotas are a great way of advancing diversity, particularly when you have a longway to go and you dont want to wait forever. After a company attains a certain level of diversity, Ithink quotas lose their effectiveness. But when youre moving from 1% female managers to 5%, ifyou dont enforce a quota, its going to take forever to reach that number.

Owing in part to this strategy, the representation of women in Nissans management hasincreased three times as fast as the average rate in Japan over the past decade.

5. Provide leadership education. Another key practice is providing leadership developmentopportunities for women at the lower levels of the organization, which tend to be more diverse.Broomberg described Discovery Healths CEO Program like this: Its a brilliant two-year programwhich involves candidates in intensive internal and external training, significant exposure tosenior executives, and travel to the U.S. to do a course at Duke. It includes external candidatesand young candidates from previously disadvantaged backgrounds already in the company. Its abig financial investment for us, but weve been able to add quite a lot of muscle to our recruitment


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capacity and also invest significantly in the more rapid advancement of existing internalcandidates.

And Johnson & Johnsons Bill Weldon noted that diversity training cannot be hived off from therest of the operation. It has to be woven into the culture. About 10 years ago one of the womensleadership initiative programs was being held across the street, and I asked the people running it

if I could go to the program, he recalled. They said no. I asked why not, and they said I couldntgo because I was a man. My response was that that may be the problemyou have to broaden itbeyond women. We evolve and learn and grow to make sure were capturing not just the peopleinvolved but the views of the whole community.

Needless to say, companies should also offer their high-potential employees opportunities forexternal education and development. But according to Harvard Business School, only 23% ofparticipants in executive education programs on the Boston campus in 2012 were women.Companies also need to invest in women-only leadership development programs and ineducating both men and women about subtle gender biases and how they manifest themselves infirms.

6. Sponsor employee resource groups and mentoring programs. Several of the CEOs companies

offered less structured professional development opportunities to various subgroups ofemployees. One approach is employee resource groups, or networks of employees who share anaffiliation (such as women, ethnic minorities, or young professionals). Angela Braly of the U.S.managed-care firm WellPoint underlined the importance of leveraging such groups in substantiveways. I visit each group twice a year and give them real assignments, she said. I am very clearabout my expectation that they will have a real impact on the business.

Companies must also invest in these groups, according to Banga. Here at MasterCard we havemany business resource groups, or BRGs, he said. We have womens leadership networks, aYoPro group for young professionals, a group for employees of African descent, a pridecommunity, a Latino community, and an East community for Asian employees. Each BRG has abusiness sponsor, whos normally a direct report of mine. We do a ton of things with them, fromemployee-networking events to multicultural summits to a womens forum for which we get

outside speakers as well as panels comprised of me and members of my board.

7. Offer quality role models. Its no surprise that diversity at the top promotes diversity throughoutan organization. A varied array of leaders signals an organizational commitment to diversity andalso provides emerging leaders with role models they can identify with. Several of the CEOs,including those from Kaiser Permanente, Sodexo North America, King Arthur Flour, Duke Energy,and Cummins, said that putting women in leadership roles was key to attracting, retaining, anddeveloping other female talent. Rogers described how Duke did this: This historically has been amans industry. So, early on, we worked to move a woman into a plant manager position. That setan example. You have to be intentional and make sure you populate your organization withleaders who represent diversity. That creates an environment that allows those with diversebackgrounds to say, If they can, I can. That is a very important feeling that needs to beembedded in the people in the company.

As for individualized employee development, many CEOs cited the importance of mentorship andsponsorship opportunities. Ohlsson explained IKEAs unique approach to mentorship this way:We have a grandfathering/grandmothering principle at IKEAthat is to say that a hiring boss hasto have another manager say yes to a candidate before that person can be hired. Two peoplethen share the responsibility for the development of that individual. Such double sponsorshipincreases the likelihood that talented employees of any background will feel supported and staywith the company.


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But Halvorson warned against tokenismthe practice of putting people into jobs because of theirclassification, not their ability. If you put someone in place who fits a certain category but doesnthave the skill set needed to do the job, then you basically set the whole agenda backsignificantly, he said. My sense is to hire stars, and the constellation is far more effective if its adiverse constellation.

8. Make the chief diversity officer position count. As this relatively new role proliferates acrossindustries, CEOs must decide how to maximize its effectiveness. At the time of his interview,Enrique Santacana of ABB North America had just received approval from the firms North

America Executive Committee to create a chief diversity and inclusion officer position, reportingdirectly to him. We want to make sure that people understand that it has full support from the top,and its not just a communications message that goes out there with no follow-up, he explained.It institutionalizes the process and the intent, and it establishes a formal means by which we willdevelop programs as well as metrics, so that we can track our progress.

Lead by ExampleOnce the vision of an inclusive culture has been articulated and best practices have been put inplace, what is the CEOs daily contribution to seeing that the vision becomes a reality? Nearly halfthe CEOs said their most important role was to set the tone for the organizations culture by

demonstrating a commitment to inclusion.

Perhaps the most meaningful way to do that is by dedicating time to work personally on diversityand inclusion initiatives. A quarter of the CEOs we interviewed mentioned direct involvement withdiversity programs, such as meeting regularly with employee resource groups and diversitycouncils. Banga, Moynihan, and Thodey even chair diversity and inclusion councils themselves.By pointing the way, CEOs will help their organizations attract and develop the best, most diversetalent, giving them the edge they need to succeed.

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Great Leaders Who Make the Mix Work