A Robust & Diverse Leadership Pipeline Drives Strategic Goals

In the current environment of social and economic disruption, companies generally regard Diversity and Inclusion (D&I) initiatives as a timely and necessary response to correct for long-standing inequities and biases. However, the latest global research from McKinsey reports that while our country’s workforce continues to increase diversity representation at lower and mid-range levels, this does not tend to be the case at higher levels within the organization, where women and people of color are systematically screened out at senior leadership levels.

While most corporate leaders seem to appreciate the significant business arguments in favor of D&I initiatives, they often struggle with how to apply them within the context of their own firms.

In building the business case for D&I, it is instructive to review the available research that demonstrates a clear link between diverse leadership and financial success. For example, Catalyst research shows that companies with more women on the board statistically outperform their peers over a long period of time.  This finding holds for both financial measures analyzed: Return on Equity (ROE), which is 35 percent higher, and Total Return to Shareholders (TRS), which is 34 percent higher.

Beyond the financial metrics, recent research from Josh Bersin indicates that when companies commit to diverse talent practices, they are 3.8 times more likely to be able to coach people for improved performance, 3.6 times more able to deal with personnel performance problems, and 2.9 times more likely to identify and build successful leaders.

Forward-thinking organizations increasingly view D&I as a core business driver and an essential element of their growth strategy, and this research presents a compelling case that leadership diversity will promote financial success and long-term sustainability.  Unfortunately, women and minorities remain underrepresented on executive teams & boards on a global basis. A recommended place to start in addressing this intransigent challenge is the development of a robust and diverse leadership pipeline that can serve to populate an organization’s senior leadership roles.

How do we objectively identify & develop high potentials to build a diverse leadership pipeline?


Address Biases through Leadership Assessment Innovations

Your choice of assessment tools needs to consider potential biases that exist within your organizations. Long standing gender and ethnic biases often serve as very real barriers to advancement within organizations and can create a significant dilemma if you rely too heavily on a track record of success for evaluating candidate potential. These diverse groups often find themselves last in line to receive opportunities to develop those records of success. It has long been axiomatic in our field that past behavior is the best predictor of future behavior.  However, we need to seriously question whether that axiom still holds, particularly given the dynamic 21st century workplace and the fact that past experience may be unintentionally excluding certain groups who have not had the same access to opportunities as their majority cohorts. While you cannot completely ignore past performance in our assessment programs, at the very least you should be exploring alternative ways to predict future performance that are not so reliant on past behavior or potentially biased criteria.


Measure Future Capabilities to Unmask Potential & Override Biases

Focusing on the measurement of future capabilities helps to mitigate an over-reliance on past behavior when identifying high potentials.  In order to truly predict future behavior in a less biased way, you need to essentially create the future, drop your candidates into it and evaluate how they respond to future oriented leadership challenges. The future state of your organization can be envisioned by working with industry thought leaders and organizational strategists to build a virtual organization as it will exist 3-5 years out. This approach allows the assessment process to focus on the leadership demands required for future success and include attributes not specifically linked to past performance, such as growth mindset and learning agility.  In doing this, you can begin to partial out the effects of past performance evaluations. New technologies allow organizations to build contextually rich, multi-media simulations to measure an almost limitless array of attributes.  If done properly, the immersive quality of the multi-media simulations will also help the participants engage by creating a sense of urgency and psychological involvement in the assessment.


Evaluate Organizational Impact

Once you’ve laid the foundation for a fair, inclusive and future-focused set of criteria and contextually rich assessment program, it becomes important to understand and illustrate how your newly designed assessment program is impacting the bottom line of your organization in order to cement the business case for establishing a diverse leadership pipeline. Given the high stakes of any High Potential (HiPo) assessment program, organizational stakeholders will expect evidence that demonstrates that the program is meeting its design objectives and contributing in a measurable way to strategic success. To fully realize and effectively communicate the business value of your HiPo program, it is critical to tie the program’s solutions to valued organizational outcomes and build metrics that “speak the language” of the stakeholders and decision makers.  You need to be able to create a stream of evidence that reveals a causal link between your program and the desired organizational outcomes.  Your goal should be to position your HiPo program as a strategic tool for driving business success and achieving competitive advantage. This strategic use of these metrics ensures that the HiPo program is useful not only to those implementing and using the it, but to those responsible for the driving overall business strategy.

In addition to obvious moral and ethical obligations, studies clearly indicate that when companies commit to diverse leadership, they’re more financially successful and significantly outperform their peers. By establishing a clear link between a diverse leadership pipeline and these outcomes, you can help ensure the long-term sustainability of your  program, your organization and society at large.

Do you have a tough question you are wrestling with?

Please let us know, and we may include it in future installments of this series coming to your inbox soon. In the meantime, we invite you to watch a preview of a Virtual Simulation to Assess Senior Leaders, and to reach out to us to learn more about using technology to blend video, job-relevant stimuli, and virtual assessments to build a diverse pipeline of leaders that are ready for the future.