Only 1 percent of Fortune 500 CEOs are Black. Here's how companies can speed up the pace of change for rising Black executives.
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From the time when I was an active CEO at Aetna (2006 to 2010) the number of Black CEOs in corporate America has not moved in a meaningful way. That is disappointing, given the talent in the broader ecosystem. I see people every day who have the potential to learn what it takes to be a CEO. Many of them are in the C-suite or are fairly close to it, yet I just don't see people being tapped and being meaningfully developed for the opportunities that would get them to that next level.
I'm hesitant to try to generalize about the reasons, but I can speak to the examples I've seen. Often what happens is that many executives have spent their careers in circumstances where everyone around them is always certain and occasionally right. People speak with great authority and great confidence, and yet they often don't know what they're talking about in relation to a given decision. And executives who come from different backgrounds than most of the C-suite leaders you see today—whether they are women, immigrants or people of color—sometimes don't bring that same level of assertiveness to their roles. It took me a long time to reach the point where I would speak up if I was not 100 percent certain that what I was about to say was accurate.
People can be so focused on doing a fabulous job leading their division or group that they aren't devoting the same time to positioning themselves as other executives do. And quite honestly, they sometimes get out-maneuvered by people who spend more time having conversations in which they are pushing to be CEO. As I mentor executives, I will often ask them, "Have you had the conversation in which you've said you want to be the CEO at the company or at another organization? Have you asked what you need to do to make certain that you are the best candidate you can be?"
Often those conversations don't take place, partly because the company doesn't start them or individuals don't express their authentic aspirations about what they want to do. Another reason is that they don't have the same support networks as the people they are competing against for the top job. Those colleagues often have friends who went through MBA programs and who are CEOs or serve as board directors, and they can get counseling, coaching and mentoring from them.
Feeding the Talent Pipeline
I'm optimistic that we are going to see change over time. After all, I have had to be an optimist in order to accomplish what I've accomplished in my career. But organizations still aren't starting early enough to identify high-potential talent. And they don't think purposefully about career moves—what those executives need to do to demonstrate their skills in different assignments in order to punch that ticket and move on to the next assignment.
If an organization is thinking about who is going to be the next CEO and they are looking at what their candidate pool looks like in three or four years, it's too late. Organizations need to be extremely purposeful about making certain that there is a cohort of executives that include a broad, diverse group of people, and that those people are getting the experiences and exposure that make them candidates to lead substantial business units.
One of the disadvantages that Black executives, women and executives of color have is that their senior roles are often concentrated in staff functions. And so, there is hesitancy to give them the opportunity to move into positions to run business units. There is a presumption that if you are a good general counsel, CIO, chief strategy officer or chief human resources officer that you can't be effective running a P&L. The reality is that I meet many executives who can but do not get the opportunity.
While boards of directors are becoming more diverse, I worry there is not enough discussion about, or awareness of, boardroom hierarchy. The reality is that when a former CEO or current CEO speaks in the boardroom, their voice typically carries more weight than when a board member with a functional perspective speaks. And so, we clearly need more diversity on boards. For example, one Black CEO can have an enormous impact on the direction of the board, because they can be supportive of other diverse board members and can speak from the CEO perspective.
So, while we're making progress, there is a self-fulfilling problem. If most Black directors have led functions rather than businesses, then they won't bring the weight that an active board member who is a CEO or a former CEO would bring.
One answer is for diverse directors to combine their voices and recruit other directors to support the DEI initiatives and policies of the company. This combination of directors of color and women can be highly effective in educating other directors and keeping the board focused on talent management as a critical issue that supports execution of the company's strategy.
Speeding Up the Pace of Change
Looking ahead, the question is whether all the companies that promised to take a hard look at how they developed and promoted diverse talent will stay committed to making changes. Will those changes be sustained as companies deal with a recession?
I'm also watching carefully the publications that focus on board governance, and the degree to which those publications maintain the level of discussion about diversity issues. I'm noticing the topic is starting to wane. So, the question for boards is, do the directors think it's enough to get just an annual review and report on developing and promoting diverse talent? And when companies look to recruit external candidates to the C-suite, to what extent are they looking to see a demonstrated track record by the executive of building and leading diverse teams?
Companies should also make certain that everyone they interact with as an organization—every supplier, every vendor, every business relationship—has a workforce that, broadly speaking, is reflective of that company's customers. So when the investment bankers show up and they're all men, that's not a good sign. And if they show up and don't have any people of color on the team, that's also not a good sign. If that investment bank wants to hold onto that company's business, perhaps they should be given the message that they should rethink their staffing and their recruitment. They need to be reflective, broadly speaking, of the community they serve.
Those efforts take time. It takes longer to recruit a diverse team than a non-diverse team because you have to build relationships in advance and proactively seek out top talent. Many companies are trying to make an impact from a cold start by going to historically Black colleges and universities after neglecting them for years. If you're in California, for example, there is a significant Hispanic population at the state colleges and universities who are fully capable, committed and motivated, and will make good executives in the future.
There is more work that companies need to do, and if they're not making progress they're falling behind. The question is, will the current pace of change keep pace with the required pace of change? There are signs of progress, but there needs to be more progress with the Fortune 100, because those are the companies that shape the economy. They set the tone. They set the leadership. These are the companies where there has to be a greater focus to create more diversity, for women and people of color, at the top.
That will happen in part by the leadership teams making it clear that this is an expectation of all leaders in their organization. No company would hire a senior executive who was not financially literate, but many companies routinely hire executives who have miserable track records in recruiting, retaining and developing diverse high-performing teams.
Are boards addressing this issue in their talent and succession management processes? Progress will happen in part by embedding it as part of the incentive compensation structure and the values of the organization. Compensation, after all, is an important signal for alignment. And the issue should be given regular visibility in business reviews and to the board, so that people can provide updates on their progress and the challenge they are facing.
Diversity Brings a Broader Talent Pool
The other thing that companies have to address is this notion that increasing diversity creates disadvantages for others in an unfair way. To dissuade people of that belief, I draw on an historical example. There was a time when, to be a police officer in this country, you had to meet a certain height requirement. Over time, people conducted an analysis of the work of police officers and found that height had absolutely nothing to do with being an effective police officer.
But if you were over six feet tall and had been in the military, you had a pretty good shot of getting the job as a police officer when that height requirement was in place. But if you broaden the applicant pool by taking height requirement out of the conversation, then all of a sudden that same person's probability of winning goes down dramatically. So, when they don't get the job, their response is to complain they are not the right demographic, because a woman or someone of smaller stature got to the job. In reality, competition for those positions, without height restrictions, were now based on the real requirements for success, not the historical requirements for success. That fundamentally changes the competitive dynamic.
So, when you bring in women and people of color, it's more competitive and you're going to have different winners and different losers. That's a framework that organizations generally have not done a good job of explaining, because the requirements for so many of the positions in the company were legacy requirements unrelated to success. It's about companies taking a look at the real requirements for different jobs. Do they require the same set of competencies and experience that have been required historically, or is there a new set?
Chief human resources officers need to help their CEOs be the chief diversity officer of the company. As far as I'm concerned, it is a responsibility that chief executives should not delegate. It is the CEO's job to ensure that the organization has the talent necessary to align with the strategy. And sometimes those are calls only the CEO can make. Is it time to replace someone at a senior level who is not able to align with the new strategy? Are there voices missing around the table that could provide the CEO with different perspectives?
The CHRO can play a vital role in coaching and helping their CEO confront some really difficult issues. Good CEOs often have to fire people they've worked with for a long time, for example. The right CHRO is an additional guardrail. And part of the CHRO's role can be to make sure the CEO includes updates about diversity, equity and inclusion in the quarterly business reviews and board updates.
CHROs must play a key role in ensuring their CEO and board understand where they stand in creating a culture and workforce that are broadly reflective, from top to bottom, of society and the customers they serve. Diverse talent development will support successful execution of their business strategy and achieving profitable growth. They can be a leader or a laggard. The board can make certain they are setting the standard in their industry.
Mentoring Advice for Aspiring CEOs …
… And for First-Time Board Directors
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