The diversity of perspective and experience that comes from having women on corporate boards and in senior management allows for more creativity, innovation, productivity and profitability than might otherwise be achieved. This is particularly crucial in a complex world, where skilled human capital and talent management is essential. Attracting, retaining, engaging, compensating, motivating and inspiring talented employees in a growth-starved world is a major challenge. It is also a major challenge for investors to gauge a company’s ability to do this effectively. This ability is a critical element of corporate excellence. Investors should pay a premium for this type of excellence.
I would suggest that there is a “critical mass” of diverse views that can enhance the “constructive tension” required for great decision-making at the top. In this very complex world I mentioned, one example of the very special skill required by leaders is the ability to facilitate collaboration. Women are uniquely capable and experienced on this front. The ability to work collaboratively and celebrate productive debate (while coming out of it unharmed) is an absolute necessity for the great leaders of the future. But, collaboration can be hard and it can be painful. It’s hard because the payoff isn’t immediate and enormous patience is required. It’s painful because the process, if not facilitated well, can be messy and loud.
Although investors may espouse the value of diversity in general, few executives have been able to truly articulate its economic imperative. The key to doing so is to ensure that the “evidence-based” examples of successes (or failures) of integrating diversity are made available. We need to use the same analytical processes that are used in establishing ROIs for any other business endeavor in a particular company or industry. Those processes are established by the existing, sometimes monolithic leaders and power structures. Those processes often don’t include the right metrics to measure great collaboration. So be it. We all need to speak the same language — usually the language of money — to move forward.
The particular challenge of proving the “business case” for diversity is also unique in that there are perceptions and biases that need to be fought. This is another painful and messy part. Empirical evidence, including that from Columbia Business School Professor Katherine Phillips, shows that diverse groups make more accurate and optimal decisions. However, they perceive themselves — and are perceived by those outside the group — as being less highly functioning and effective. They make better decisions but they are not judging themselves that way. They make better decisions, but they are not seen from the outside as having done so. That disconnect is incredibly challenging to combat. I would guess that this disconnect is due to the fact that diverse groups have to resolve more conflict to get to their decisions. There is more tension. That tension can be managed constructively through good collaboration. That tension can be can be hard and messy. It can hurt. But when that conflict is over, there’s a stronger outcome and stronger relationships. Diversity is painful, but it’s profitable.Erika Karp is the Founder & Chief Executive Officer of Cornerstone Capital Inc.