Here's something business can learn from government
Friday, July 10, 2020
Crain's Chicago Business
by A.D. Quig
Here's something business can learn from government
The public sector beats corporations on diversity.
It's often said that government should run more like a business. But business could take lessons from government in one area that's getting a lot of attention these days: diverse leadership.
Despite years of corporate diversity initiatives, boardrooms and C-suites remain heavily white and male. Yet government bodies as large or larger than many companies seem to have no trouble finding diverse candidates for top positions.
An expanding national conversation over racial inequities in society and the economy has cast a harsh light on the monochromatic, largely male corporate world. Gov. J.B. Pritzker ordered public companies in Illinois to disclose gender and ethnicity data to the state and outline how board picks are made by January 2021. Early filers—there are less than a dozen—show there's plenty of room to grow: 21 percent of board seats were held by women, and about 13 percent by nonwhite people.
None of the 11 early filers—which include corporate giants Caterpillar and Conagra—have more than one African American on boards with as many as 14 members. There are only two Hispanic directors in the entire group—at Northfield-based chemical manufacturer Stepan and Deerfield-based Caterpillar.
There's far more diversity among department heads in Chicago, Cook County and Illinois government. Added together, those appointments are almost perfectly split on gender lines. Just under 50 percent of department heads are white, roughly 12 percent are Asian or Middle Eastern, about 28 percent are Black and 10 percent are Latino.
More than half of Chicago Mayor Lori Lightfoot's department heads are female. Of her 20-member senior staff, five are Black, three are Latino and four are Asian. Her picks for boards and commissions are 27 percent Black, 27 percent Latino and 4 percent Asian, her staff says.
There's only one white male among Cook County Board President Toni Preckwinkle's six bureau chiefs. Between those chiefs and their second in command, leadership is 72 percent non-white and nearly two thirds female, her staff says.
Pritzker, a former businessman, has picks that skew more male (about 60/40) and white (roughly 55/45), but still make for a more diverse group than the leadership of many Illinois companies. According to a February Daily Line analysis of 385 overall appointments to various state jobs and boards, 43 percent were female and 42 percent were nonwhite.
Of course, the upper ranks of government and business look different "partly because government is subject to the influence of the people in the way private-sector companies are not," Preckwinkle says. Officials and voters can elect and push for leaders that look like them. "I can't afford not to be committed to diversity and inclusion. White people in leadership have to have the same view."
Corporate boards are "evolutionary, not revolutionary," says executive recruiter Peter Crist of Crist Kolder Associates. Government leaders can be swapped out en masse with an election. It might take years for some boards to turn over, slowing progress toward gender and ethnic parity.
Plenty of aldermen and commissioners have publicly griped about diversity in contracting and leadership positions in the city, too, and those gripes can lead to "no" votes on leaders' initiatives. In short: Diversity is good politics.
It's also good business. A McKinsey study in May of 1,000 large companies in 15 countries pointed out that "diverse and inclusive companies are likely to make better, bolder decisions—a critical capability" in the COVID-19 crisis—and that the most diverse teams outperform their less diverse competitors.
"Companies in the top quartile of gender diversity on executive teams were 25 percent more likely to experience above-average profitability than peer companies in the fourth quartile," the study said, and culturally and ethnically diverse companies "in the top quartile outperformed those in the fourth by 36 percent in terms of profitability in 2019."
In board searches, Crist says he's seen "this pendulum swing many years ago where the requests to us started moving away from CEOs and CFOs and into women and minorities." Today, his firm has a dozen open projects with the same request: "They basically say, don't show us any white guys." The shift toward board diversity is much quicker in consumer-facing industries, less so in nonretail spaces like manufacturing, he says.
What does government do differently? For one, it puts a commitment to diversity front and center. Among Lightfoot's top values: equity, diversity and inclusion, chief of staff Maurice Classen says. "Part of that comes from her own personal background of being left out of conversations and fighting her way into boardrooms."
Pritzker says he had no quota in mind but had no problem finding qualified diverse candidates to fill department head and senior staff positions. His immediate orbit includes a Black female lieutenant governor, Juliana Stratton, female general counsel and chief of staff, and four deputy governors (three of color, one female). Pritzker says unconscious bias—including things like favoring candidates who share an alma mater—is one of the biggest problems blinding corporate leaders. "I had to learn those things during the course of my lifetime and I've had to teach it to other people. We're not going to see change unless there's intentionality."
Having a diverse staff not only brings in a range of voices to help inform decision-making, but broadens networks of potential applicants to fill other roles.
It's easier to attract talent with a diverse workforce, an African American board president and chief of staff, says Preckwinkle's right-hand woman, Lanetta Haynes Turner. The county specifically targets ethnic- and gender-affiliated groups for job applicants and relies on its diverse staffers to share jobs with their own networks. "All of those things take a little more time, but it shapes your recruitment pool of ideal candidates you have coming in."
Recruiting practices play a big role in shaping the composition of a workforce. Companies often screen job applicants through rigid hiring criteria requiring extensive qualifications and specific previous experience, which can knock capable minority candidates out of the running before the first interview.
"Deconstruct your notion of what it means to be qualified and ready to go," says Candace Moore, Lightfoot's chief equity officer. "I challenge people to go back to basics: What do you need to do this job well? What is your organization able to teach someone, versus raw talent and experiences you can couple with training, to produce the person to do whatever job you need to do? So often we rely on ready-to-go, which is often a person that walked the same path. It tends to be very nondiverse, racialized paths."
Take opportunities to de-bias interview strategies, too, Moore says: Use blind résumés and rubrics to evaluate candidates, have multiple people in different positions to evaluate, and learn how your organization can better support those new additions, especially when they're entering overwhelmingly white workplaces.
For board picks, that might mean choosing younger candidates who aren't yet CEOs or CFOs. Christie Hefner, the former Playboy CEO who has been an outspoken advocate for corporate gender inclusion, encourages boards to require search firms to come up with all-diverse slates and consider term-limiting seats to make more room. "If you don't turn over seats, even if you fill all of them with women and people of color, it'll be 2050 and we'll barely have moved the needle."