The board’s role in diversity and inclusion efforts: A view from Australia
Michelle Dunne, partner at Heidrick & Struggles, speaks with Jacqueline Chow, non-executive director for Coles Group in Australia, and David Gonski, chairman of Australia and New Zealand Banking Group (ANZ), about the board’s role in promoting diversity and inclusion (D&I) efforts within their companies. They discuss the importance of linking D&I initiatives to the company’s purpose and strategic agenda, measuring the contributions of D&I efforts to business success, and leaders acting as role models to promote and realize the benefits of D&I throughout their organizations.
Below are transcripts of the videos, which have been edited for clarity.
Leading diversity and inclusion efforts
Michelle Dunne: Recent research we’ve conducted shows that companies that link D&I efforts to business strategy and assess them for their contributions to financial performance far more often see their D&I efforts contribute to business success and have seen 62% higher revenue growth over five years than other companies. As a board and a board director, how do you ensure D&I objectives are filtering throughout the organization as part of your governance role?
Jacqueline Chow: I think with D&I objectives, it’s really important that they are linked to the company’s purpose; otherwise, they lack relevance, and they just become another set of objectives on top of the slew of objectives that we’re already monitoring for performance and long-term health at the board level. And they become a compliance matter. So if they are truly and genuinely tied to a company’s purpose, then it becomes critical for them to be enabled and to be achieved. And then, it’s part of a suite of other objectives that we are performance monitoring, that are part of our strategic agenda. It just becomes part of the same framework.
Michelle Dunne: Carrying out a leader-led strategy is important. Who owns the D&I agenda? Is it the board or the executive? And how can companies ensure that D&I is treated as a core strategic asset?
Jacqueline Chow: For D&I to be considered a core strategic asset, it really needs to be tied to the overarching purpose and strategic agenda of a company, and I think it needs to be led by the CEO and the executive team, but the expectation of this has to be set by the board. And so, we would set that through our line of inquiry as part of good governance and as part of measuring risk. So, for example, as part of good governance, we want to make sure there’s depth of succession. We want to make sure that our talent pool and the capability of the organization are match fit for today and for the future. Then, as part of that, diversity and inclusion is going to be critical. It’s just sort of common sense in our linear logic that would flow from that. So the board’s responsibility is to make sure that expectation is set under that agenda, but then it’s going to be the CEO and executive team who are making it happen. And why? It’s because they are the very people who are leading that talent, leading that workforce and capability.
Michelle Dunne: Can you point to any programs or initiatives that you have seen be successful?
Jacqueline Chow: We are very proud at Coles Group of a program we have on diversity and inclusion with our First Nations people. I have a belief that D&I needs to be tied to a company’s purpose, and Coles Group’s purpose is to sustainably fit all Australians to lead healthier and happier lives, but that first phrase is critical: sustainably for all Australians. And the Australian people we serve are our customers and our communities. In Australia, First Nations people make up 3% of the population. So, at the very least, if we’re representing and serving all of Australians and all communities, our workforce should represent and reflect that. And so we set a target, which we achieved in half the time. We now have 3% of our workforce who are indigenous Australian, and that is now more than 4,200 people. We are the largest private corporation and employer of our First Nations’ people, which we’re really proud of. Because we are really putting a concerted effort into our regional and rural communities, we want to set an even higher bar. So now, we’ve set that to be 5%, and to have 3% of our workforce of these indigenous workers be team leaders. So we’ve set such an important goal for us as part of our purpose. So it’s very relevant. We talk about it at every single board meeting, and we actively look at how we can role-model and strengthen the capability building in the pipeline.
Measuring the success of diversity and inclusion initiatives
Michelle Dunne: Our research suggests that assessing specific links to business strategies, financial success, and contributions to innovation are powerful perspectives. What are your thoughts on the most effective ways to measure D&I initiatives and their success? And can you comment on structuring nonfinancial metrics?
Jacqueline Chow: I have a preference to measure D&I using nonfinancial hard metrics because I think it removes the conjecture of subjectivity of whether we have achieved some progress or not toward the diverse and inclusive aims that we might have. I think that the inclusion part of D&I is less understood and less talked about, and I think the proof points of that is how people feel in an organization—if they really feel their voice is heard, if they really feel that true innovative ideas are being considered and assessed on their merits, and that there is not a natural tendency for dominant culture to emerge—that is harder to measure using hard metrics. So I think the complementarity of having the softer measures and the verbatims that you get through engagement surveys and having the hard measures to make sure that the progress is truly happening is appropriate.
David Gonski: I’m a great believer in measurement, and particularly as a board member, you’re not there on the shop floor, so to speak. So you need ways of measuring, and particularly in big companies. So when you start with the concept that we need to measure it, man’s mind starts to work much broader than just, for example, the traditional ways of measurement. I think linking to even original thoughts and new ideas that are being brought to the fore is a way of thinking. And I believe very strongly that we must broaden the base of measurement in order to actually get to the right answer.
Being a role model for diversity and inclusion
Michelle Dunne: As a leader, how do you role-model your belief in the benefits of diversity?
David Gonski: As a leader, one must not only talk; one has to walk the talk. And it’s not that difficult to do it. I mean, first, diversity is so obviously right—not just because it’s morally right but because it gets better decision making. The concept of a board, for example, made up of people exactly like me is too horrible to contemplate. It’s probably something that everybody within the board agrees on. But at the same time, we don’t drive the company to where the company can go and watch out for those things that could happen to it without questioning some of the things we’re doing. As a leader, one has to espouse the benefits of diversity, not the compulsion of “because it's right.” And the benefits are enormous, and, of course, it’s also right.
About the interviewer
Michelle Dunne (mdunne@heidrick.com) is a partner in Heidrick & Struggles’ Sydney office and a member of the Financial Services Practice.