By Michael Morales, White House Fellow, U.S. Small Business Administration
Diversity of thought and experience on corporate leadership teams boost company innovation, resiliency and growth. Gender and racially diverse individuals, for example, bring a variety of thought to their workplaces by virtue of their backgrounds and experiences.
A 2015 McKinsey study of 366 public companies in the Unites States, United Kingdom, Canada and Latin America, titled “Diversity Matters,” found that “diversity is a competitive differentiator that shifts market share towards more diverse companies.” It determined that companies in the top quartile of gender and racial diversity were 15 percent and 35 percent (respectively) more likely to have financial returns above the national industry median.
Unfortunately, despite this strong correlation between diversity and performance, today’s corporate boardrooms do not reflect the diversity of our population. McKinsey’s study concluded that women account for just 16 percent of executive team members in the United States and that 97 percent of American companies have senior leadership teams that fail to reflect the demographic composition of the country’s labor force and population.
Many organizations and experts passionate about addressing this issue have concluded this is a demand rather than a supply problem. I agree. My own work in this space has exposed me to a deep pool of diverse talent and domain expertise ready and eager to contribute their ideas and experiences to corporate boards across the country.
On the demand side, however, the fact is that public companies, particularly those in the Fortune 1000 cohort, do not have high boardroom turnover and are unlikely to add board seats simply to diversify their executive teams. In addition, boardroom recruitment is largely a word-of-mouth exercise demonstrating that who knows you often matters as much as what you know.
To address the demand issue, while continuing to develop and grow the supply side of the diverse talent equation, the U.S. Small Business Administration (SBA) developed a new initiative: the Open Network for Board Diversity (ONBOARD). We approached LinkedIn as a partner in this important initiative, not only because LinkedIn has the ideal platform for the type of group we are trying to nurture, but because they too are serious about addressing the lack of diversity and inclusion in the labor force. We also sought a group of diverse organizations passionate about board diversity as charter organizations and recognized these partners at our ONBOARD launch event at the Library of Congress on Oct. 13, 2016.
ONBOARD addresses the demand side of board diversity through its Small Business Investment Company (SBIC) Program. As one of the largest fund-of-funds in the country, the SBIC program seeks to partners with venture capitalists, private equity funds and other vehicles that invest in America’s high growth small business. Since the program’s inception in 1958, it has deployed more than $84 billion of capital in over 174,000 small business investments. Last year, the SBIC program provided $6 billion in financing to 1,200 small businesses. Some of America’s most iconic brands, such as Apple, Intel, FedEx, Tesla, Whole Foods, and Pandora received SBIC funding.
SBICs, and the companies in which they invest, are fertile ground to increase boardroom diversity. Why? SBIC portfolio companies are among our most innovative, rapidly growing and adapting, but in some cases are just creating their corporate or advisory board or have boards where everyone has the same last name. The ONBOARD group on LinkedIn is an ideal place for these companies to find diverse talent and domain expertise vital to their company’s continued growth. The members of our partner organizations are the very talent that these companies need.
As the ONBOARD group grows (we are almost at 700 members to date), we will continue to advertise this talented group with our SBICs. So far, the feedback from SBICs has been overwhelmingly positive.
Furthermore, the valuable content, webinars and events accessible to ONBOARD members makes the group a vital resource for those either looking for greater board opportunities, or who are eager to contribute their expertise to a board for the first time. We are in the midst of a three-part webinar series entitled “Be Board Ready,” the first of which focused on creating your own board value proposition. We encourage you to the join the ONBOARD group (click HERE). We welcome your ideas on how to make this important initiative into something revolutionary.