Many companies have committed to diversifying their leadership teams and board members, but diversification will only happen if they act proactively. Understandably, these same companies are suspending executive searches and succession planning programs because of pandemic-related economic uncertainty. The companies that continue to focus on succession planning will be in a better position to fulfill their stated commitments, while potentially improving their bottom lines.
Diversity Delivers Undeniable Results
By increasing the representation of diverse leaders, companies can benefit the communities they represent, as well as themselves. Research conducted by McKinsey & Company recognizes the important relationship between company performance and diversity, whether related to gender, race, or ethnicity. In its “Why Diversity Matters” report, McKinsey states that:
- Companies in the top 25 percent for racial and ethnic diversity are 35 percent more likely to have financial returns above national industry medians.1
- For every 10 percent increase in racial and ethnic diversity on the senior-executive team, EBIT rises 0.8 percent for companies in the U.S.1
Why Diverse Succession Planning Can Be Hard
Rather than proactively vetting external senior-leadership candidates as part of a structured succession planning process, most companies wait until after an active opening exists before starting their executive search.
Unfortunately, there are fewer diverse candidates in the market, which makes these executives harder to identify and recruit. The longer a position remains unfilled, the more expensive the search becomes, and the more pressure there is to find a candidate, regardless of diversity. Time is the enemy of diversity, as any recruiter knows, and diversity aspirations often take a backseat when companies are faced with a prolonged vacancy in their executive leadership.
Because many firms have imposed hiring freezes until the economy is more stable, they will be less likely to achieve their diversity goals without strategic succession planning. Despite the economic climate, succession planning must continue.
Building a Robust Succession Plan for Diverse Candidates
One solution to finding diverse candidates is to create a proactive, ongoing external succession program that anticipates future needs and emphasizes diversity of all kinds, such as our Leadership Pipeline Program (LPP). The result would be a pool of pre-vetted candidates that the company has established a relationship with and could engage in the future on open positions.
Through our program, leadership members meet and build relationships with well-qualified, diverse candidates before an opening exists. The program is intended to enable strategic networking with potential candidates over a 7-to-24-month timeframe. During this timeframe, we and our clients are able to nurture the qualified candidates with disciplined follow-up tracking and engagement on a scheduled quarterly basis. In our experience, not all candidates, diverse or otherwise, will meet every requirement for a company, for a variety of reasons. This longer vetting period allows companies to think outside of the box and strategically consider where these strong, diverse candidates can add value and be successful in their environments. While the pandemic might limit in-person contact, strategic networking through video conferences has proven quite successful.
Reap the Benefits
A quick scan of well-known U.S. company websites shows their “commitment” to diversity. But to change the complexion of leadership teams and boards, companies will have to begin acting now, and consistently. Now is the time to engage in succession planning—do not back away from it. The potential impact could be significant, and forward-thinking companies will reap the benefits.
To learn more about how you can initiate a robust succession planning program, reach out to me at 215.587.2750 or firstname.lastname@example.org.