Diversity and inclusion are not one and the same. Deloitte’s Mike Fucci and Terri Cooper discuss how the concepts differ and what boards can do to foster inclusivity.
For years, corporate and nonprofit boards have worked to increase diversity in their own ranks. Research shows the benefits of diversity, and shareholders, employees, customers and business partners are increasingly pushing for their organizational leadership to better represent the demographics of the general U.S. population. In response, the percentage of women on Fortune 500 boards rose to 22.5 percent in 2018, up from 15.7 percent at the start of the decade. Minorities on Fortune 500 boards increased from 12.8 percent in 2010 to 16.1 percent in 2018.
This is a welcomed start to still a long journey to increase diversity on boards, but it’s only one part of the equation. Focusing on diversity without also focusing on inclusion is not a winning strategy. While inextricably linked, diversity and inclusion are not one and the same. And in the most inclusive organizations, inclusion is seen as critical to business strategy. Chief diversity, inclusion or human resources officers often recognize this, but the conversation around the board’s influence over inclusion is often scarce.
Our research found that a board’s influence on an inclusive culture can be substantial, not only to create a diverse workforce, but also to generate financial results. So it is time for boards to recognize their role and responsibility in influencing inclusion for the sake of their own organizations and other various stakeholders.
Understanding Diversity and Inclusion
Boards should first understand the difference between diversity and inclusion. Diversity denotes a wide range of characteristics, seen and unseen, which people were born with or have acquired. Inclusion refers to fostering a culture where all members of an organization feel welcomed and have equitable opportunities to connect, belong and grow — to contribute to the organization, advance their skill sets and careers and feel comfortable and confident being who they are.
The main difference between the two is that diversity is about traits, while inclusion is about behavior and how people feel. Inclusion can be “governed.” For boards, promoting diversity is itself an inclusive practice, but boards should further ingrain inclusive practices into their five key areas of board oversight.
Creating Inclusive Cultures with Board Oversight
Past research shows that boards traditionally own responsibility in five key areas: strategy, governance, talent, integrity and performance.
As these responsibilities evolve to account for changes in regulations, the business environment and society in general, the role boards play in influencing inclusion within each of these five areas is becoming even more important.
Building an inclusive culture does not happen overnight. Boards can expedite progress by helping management define a common vision for what inclusion means and embed that vision directly into the business strategy. In defining the vision for inclusion, the board and management should consider how individual, organizational and societal biases may interfere with reaching inclusion goals.
Additionally, the definition of inclusion should tie into the organization’s objectives, vision, mission and strategy, perhaps using language directly from the organization’s mission statement. The tighter the alignment, the more deeply the inclusion message will likely resonate with board members, executives and the broader workforce – and the more likely it will be to elicit behavior changes that contribute to a more inclusive culture.
It is incumbent upon boards to govern and operate with an inclusion lens — particularly as they preside over shifts in strategy, advise on major investments and monitor risks. Boards that demonstrate inclusive governance practices integrate inclusive thinking in all board proceedings and understand how their actions and decisions may lead to inclusion-related implications.
Similarly, inclusive board committees consider inclusion as a key element when crafting and executing their separate charters, perhaps going so far as to explicitly detail expectations for operating in an inclusive manner. As a first step in holding itself accountable for inclusive governance practices, boards may even consider establishing a committee – temporary or permanent – focused specifically on inclusion.
Boards can best advance the inclusion agenda by selecting for inclusive leadership traits among their own members, as well as by holding management accountable for developing the organization’s talent into inclusive leaders.
To promote a pipeline of inclusive leaders, companies can utilize the six signature traits – commitment, courage, cognizance, curiosity, cultural intelligence and collaboration – as formal competencies for senior leaders by embedding them into the organization’s performance management, professional development and succession planning processes.
Boards have a role in challenging management to cultivate inclusive leadership skills throughout the enterprise by championing and driving inclusive behaviors and practices. Collective accountability from all employees for fostering an inclusive culture is key to a successful and sustainable long-term inclusion strategy.
By setting the tone for inclusion, a board has an opportunity to hold itself accountable for maintaining the integrity of its inclusion vision and to improve public perception of the organization and its brand.
Board members can advance inclusion by leveraging their unique social and political capital to be a champion. They can promote their commitment to inclusion in communications to shareholders, in public appearances, in interviews and conference presentations and informally in networking and professional conversations.
Elsewhere, the board can guide management to consider how the organization itself talks about or represents inclusion in communications — white papers, press releases, marketing materials — and what the organization’s people say in the media. Finally, the board can encourage management to consider the integrity of the prospective partner’s inclusion vision when entering into alliances with other organizations or contracts with supply chain partners.
Building and maintaining an inclusive culture is challenging since it requires the board to hold the entire organization accountable. The board should consider monitoring diversity and inclusion metrics at a high level while requesting that management collect and analyze the relevant data.
At the most senior levels, boards should consider linking some percentage of performance-based compensation to meeting inclusion objectives. For the rest of the workforce, boards may also encourage management to develop ways to hold all employees accountable for inclusive behaviors. Boards should also evaluate their own performance with annual board self-assessments or, if a board decides to form an inclusion-specific board committee, through the inclusion committee members’ due diligence.
What Boards Can Do Now
There is no one-size-fits-all solution for how boards create inclusive cultures. Each organization should adapt its inclusion governance approach to reflect its own characteristics: its size and geographic reach, the complexity of its organizational structure and more.
Nonetheless, taking steps to cultivate inclusion in the board’s five key areas of responsibility can help lay a path for boards to:
- Articulate the current state of the board’s approach to inclusion governance,
- Assess that approach against leading practices,
- Identify what can be done to achieve inclusive governance goals and
- Implement the changes necessary to accomplish those goals.
By setting an example of inclusion in the boardroom, by advocating for an inclusive culture both internally and externally and by holding management accountable for taking concrete measures to embed a culture of inclusion throughout the enterprise, boards can move a needle that’s been advancing far too slowly for far too long.