Tom Manning is a corporate advisor, educator and board director of Dun & Bradstreet, CommScope and Clear Media Limited. Based in Hong Kong for 17 years, he served as the CEO of Cerberus Asia, Capgemini Asia, and Ernst & Young Global Consulting Asia, and as a partner with Bain & Company. During the past decade, Manning served as an independent director of several of China’s largest listed companies, including the Bank of Communications, Gome Electrical Appliances, AsiaInfo-Linkage Holdings, and iSoftStone; earlier in his career, he was with McKinsey & Company. He speaks Mandarin and teaches corporate governance at the University of Chicago Law School.
Christopher P. Skroupa: Diversity on corporate boards is often framed in terms of gender—but is that the right way to look at the issue?
Tom Manning: Gender diversity on boards is extremely important and has been underemphasized until just recently. Of course, it is not the only type of diversity important to boards. The best-performing boards find it valuable to pursue a broad definition of diversity that entails ethnicity, geographic familiarity, cultural understanding, functional capability and thinking style in addition to gender.
Re-balancing gender on boards deserves special attention, however, because it is both essential and often the first step in moving beyond a board steeped in sameness. Female directors, in addition to bringing their own experience to the board, also offer contributions other board members welcome as fresh, informative and insightful. This is easily proven in companies that focus on female customers, but it is not limited to such companies in the least. The addition of female directors to a board is not simply about aligning board composition to customer composition. The real point is that gender-balanced boards make for better decision-making regardless of the industry, product or customer base.
Surprisingly, while most Fortune 500 companies operate internationally, few of their board directors are foreign-born or have much, if any, overseas work experience. This is increasingly becoming a weakness because more companies are investing in countries like China, Brazil and India where boards must feel comfortable committing a growing portion of the company’s resources. Even companies that have a strong international management team need boards that are knowledgeable about geographies and cultures critical to the company’s future growth–perhaps even more so, if the board wants to fully capitalize on the potential of the management team for shareholders.
Beyond geography and culture, most boards are also serious about diversifying their skills into new areas such as cyber security and digital strategy, which are two of the greatest needs in a modern corporate environment. Additionally, as boards expand their roles to include more input into corporate strategy and resource allocation, they are realizing that a wide range of thinking styles on the board—including deductive-thinkers, intuitive thinkers, visionaries and pragmatists—can dramatically raise the board’s impact.
Skroupa: How can diversity at the board level provide a competitive advantage?
Manning: Scientists like Edward O. Wilson of Harvard University have long contended that diversity ensures survival among species in nature. It is hardly any different in business. Companies and their boards need diversity of many kinds to ensure that they do not become excessively dependent on one product, one business model or one strategy at the expense of potentially superior alternatives. By populating boards with a wide array of contributors who look, listen and learn differently, boards can minimize “group-think” and cultivate more critical thinking and even more experimentation.
There is no doubt that a diverse board offers advantages over one comprised of directors with similar backgrounds, information sources and ways of thinking. In the eyes of directors who have witnessed both forms, the diverse board generally does a much better job at challenging assumptions, monitoring market developments and interpreting trends.
This spells a measurable difference vis-à-vis competition. First, the diverse board helps its management team make more specific and more accurate resource allocation decisions. It perceives risk and opportunity more accurately, and thus can help the company reduce the risk of catastrophic loss and the risk of chronic underinvestment. It also emphasizes a multi-faceted approach to setting assumptions, building scenarios and considering alternative actions. The result: expanded solution sets and robust discussion among managers and directors which can lead to deeper understanding of the company’s intentions and capabilities.
Skroupa: How does the board’s philosophy on this topic affect the entire corporation?
Manning: We know that the board is highly visible and can set the tone for the company. By emphasizing greater diversity in order to become a higher-performing board, the board is implying that the entire organization could benefit from doing the same. Boards that adopt diversity in the widest manner possible are communicating the importance of diversity and its relevance to success. Given that companies are far more diverse than their boards in general, this development will be greeted with enthusiasm by most organizations–although some skepticism may persist. The fastest way to overcome the concern of skeptics is to demonstrate the new diversity with actions rather than just words. Featuring new directors with new skills at company events can change minds quickly. Hosting meetings that bring different thinking styles into one discussion can show the power of mashing up different skills and backgrounds.
Skroupa: How can boards broaden their thinking?
Manning: Directors should talk with other boards that are already diverse—ask about their experiences across the spectrum of diversity. What has characterized their success to date? What have they decided to emphasize? How did they adopt diversity? In what sequence? What appears to be requiring more patience, more time?
Adding an advisory board as a testing ground for each of the types of diversity that might eventually be appropriate for the board is an effective technique. For example, a company can invite future board candidates to join an advisory board to begin contributing to corporate thinking without the pressure of board roles and duties. Candidates with different skill sets, styles and cultural backgrounds can participate, and the candidates and the company can size up one another in a reasonably low-risk manner.
Skroupa: Are there any examples that stand out?
Manning: MasterCard is one of nation’s most diverse boards and offers a very good example for companies considering ways to strengthen their profile. Although Americans dominate the board, there is a strong multi-ethnic presence that offers Indian, European and Chinese perspectives.
General Motors offers yet another variation of a successful model. It is notable for its balanced 50-50 male-female composition and its female CEO, and the company is striving to become the most diverse large company in America on many levels, including the board level.
Christopher P. Skroupa is the founder and CEO of Skytop Strategies, a global organizer of conferences.