Stocking Your Cabinet
Diversifying corporate boards and law firm management committees is essential to success in a fast-changing marketplace. But individual leaders and key executives often have their own personal groups of advisors to whom they turn for advice on key decisions. How can you make sure your sounding board isn’t just an echo chamber?
The first international law requiring public companies to meet a minimum threshold for gender diversity on their board was passed in 2003. The Norwegian requirement that at least 40% of board seats be held by women quickly set a European standard, with similar rules adopted in France, Spain and Italy. It took 15 years for a similar rule to take hold in the United States: In 2018 California required publicly traded corporations with principal executive offices in the state to have a minimum number of female directors (from one to three, depending on the total size of the board). Since then, though, at least a dozen more states have added or are considering laws to address board diversity. Much of this legislation goes beyond gender diversity to target adding members of racial minorities and other underrepresented groups to boards as well. Again, California has led the way, building on the 2018 law with an additional requirement that companies have at least one board member who self-identifies as
Black or African American; Hispanic; Latino; Asian; Pacific Islander; Native American; Native Hawaiian; Alaska Native; or gay, lesbian, bisexual or transgender.
This regulatory push is significant, of course, but perhaps the most notable force at work in driving increased attention to board diversity is coming not from lawmakers but from the market. Institutional investors — including Blackrock and State Street Capital — now are requiring U.S. companies to disclose diversity data before they’ll invest. Goldman Sachs says it will no longer take a company public in the U.S. and Europe if it lacks a director who is either female or diverse. The Nasdaq index is proposing new rules that would require that most companies listed on its U.S. exchange have at least one director who identifies as female and one who identifies as an underrepresented minority or LGBTQ. This is truly a sea change: Only a few years ago, an all-white, all-male board would have been seen as absolutely normal. Now it is a potential impediment to accessing capital.
Wall Street’s interest in board diversity is, of course, financial. A McKinsey study, released in May 2020, reports that companies in the top quartile of gender diversity on executive teams were 25% more likely to experience above-average profitability than peer companies in the fourth quartile. And, on racial diversity, companies in the top quartile outperformed those in the fourth by 36% in terms of profitability. In both areas, the consultants noted, “the higher the representation, the higher the likelihood of outperformance.” Moreover, another study, from Boston Consulting Group, highlights that this outperformance is likely to increase over time, since companies that reported above-average diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity — 45% of total revenue versus just 26%.
Law firm management committees, like the boards of privately held companies, aren’t subject to the same market pressures as those of publicly traded corporations. But they function in much the same way: monitoring the firm’s financial performance, directing policy and guiding strategy and long-term planning. Still, while it seems reasonable to expect a similar correlation between diversity and performance, without the external push to diversify, these de facto boards are notably resistant to change. According to data from the Minority Corporate Counsel Association, the representation of women on firm management committees has eked up by about 1% per year over the last 10 years, while the percentage of racial minorities has stayed virtually the same.
There’s a clear imperative coming from law firms’ corporate clients. As their strategic leadership becomes more diverse, they will seek to do business with professional services providers who share the same performance-boosting advantage. So, while it might yet be a few years off, we know that the same sea change being experienced by corporate boards today will come to law firm management committees eventually. The wave is already building.
How Do Individual Leaders Navigate Systemic Change?
This is a precarious moment for law firm leaders. Among the most senior generation, there is an understanding that the world in which they built their successful careers is now gone. And, for the generation just behind them, the new world, shaped by the tumult of pandemic and protest, is still being formed. How can leaders make good decisions when the strategies and best practices they’ve employed in the past no longer work and the future is so dramatically undefined? Leaders understand that successful response to change — that is, innovation — is the key to securing their firms’ futures. But innovation isn’t something most law firms, or even most lawyers, do particularly well.
This is where the power of the board — a course-charting group, rather than a single captain — comes in. And it’s why enterprises with diverse boards are so consistently outperforming more homogenously led companies in these uncertain times.
In his book Where Good Ideas Come From: The Natural History of Innovation, writer Steven Johnson examines the conditions that spark creativity and innovation. He describes how being immersed in an open network — the rich social and information environment born of interactions with different people and different ideas — sparks advances in art, technology and other fields. The corollary for effective, innovative law firm leadership is clear: Tapping into the wisdom of a diverse set of advisors, whose perspectives and strengths add to your own (rather than just echoing them), is a key strategy for success.
This is doubly so in a world where the decision-makers who will determine your firm’s fate are themselves becoming more diverse. Around 20% of the corporate general counsel who will hire and fire you are racial minorities, according to Minority Corporate Counsel Association data, and more than a third of them are women. The judges and juries who will decide your litigators’ cases are, in many areas, more diverse than that. And now, with the push to diversify business leadership at the board level, the dealmakers steering business toward M&A advisors and other top-tier transactional lawyers are starting to look slightly more like the broad populace and slightly less like, well, law firm partnerships.
New voices — from student activists to tech gurus to elected officials — are changing the conversation about how businesses, including law firms, should be run. For leaders, the first challenge of this moment is to listen to and learn from these voices. The second and even greater challenge is to decide whether and how you’re going to be influenced by them. Though the position you hold as a managing partner or practice chair might be an individual role, you are probably already aware that you can’t fully meet these challenges on your own. And whether you explicitly ask a consultant for advice or simply bounce ideas off a trusted colleague, you’re already engaged in some of the most important work of innovation: collaboratively deciding which new and different things to set aside and which to explore further. You have, in other words, probably already begun the work of building your own board of advisors.
To be clear, creating a personal “open network” that gives you access to a variety of ideas, perspectives and areas of expertise is not the same thing as reshaping your firm’s leadership structure. You might not be in a position, at this moment, to advocate for changes to the composition of the executive committee or the compensation committee. Your sphere of influence within the firm might not extend to partnership decisions or overall market strategy.
But, wherever you are in your leadership career, you can take action to improve the quality of your own decision-making by building up the formal and informal groups of experts to whom you turn for guidance. And this individual action on your part can, in turn, nurture the cultural change needed to help your firm innovate and succeed amid today’s great challenges.
Sister Circles and Teams of Rivals
Finding the right advisors can be challenging, especially since the upper echelons of the legal industry are so insular and homogenous. Your task in creating a board of advisors for yourself is to strike a balance between the people who best understand your world and with whom you can be fully candid and those outside your usual sphere who might have something important to teach you. Once you’ve identified your board members, you can think about which of them you might call upon in different circumstances.
Diversity — not just of race and gender, but of background, perspective and knowledge — is a key consideration in building a board that will help you innovate and navigate change. But, while we might understand intellectually that it’s necessary to broaden our circles in order to see new opportunities and possibilities, our instincts often lead us to do exactly the opposite, surrounding ourselves with people who look, sound and think just like we do. Leaders in new and challenging situations are especially susceptible to the limitations created by this unconscious bias: Feeling uncomfortable asking for help and not wanting to admit that we don’t know something or aren’t sure what to do in a particular situation, we tend to seek comfort in the familiar, reassuring ourselves that others have the same weaknesses. Instead of looking to advisors to be sounding boards for new thoughts, we create echo chambers.
Supportive circles have their place. Baltimore prosecutor Marilyn Mosby famously created a “Sisters Circle” of women of color leading criminal justice agencies to combat the isolation they feel in public roles where they are often targeted with racist and sexist attacks. If your work environment does not afford you regular contact with people who share your basic life experiences, then, by all means, you should seek connections like the Sisters’ Circle that can meet your need for understanding and empathy. Such supportive advisors play a vital role in offering practical “been-there, done that” advice and coping strategies for addressing daily challenges.
Advisory boards, though, are something else — and they are a necessary supplement to even the wisest circle of similarly situated peers if you need to expand your thinking to accommodate new and changing circumstances. Perhaps the best and most richly documented historical example of a well-assembled board of diverse-in-perspective advisors is the trio of cabinet secretaries who helped Abraham Lincoln preserve the Union through the Civil War period. As chronicled in Doris Kearns Goodwin’s Team of Rivals: The Political Genius of Abraham Lincoln, Lincoln appointed three of his opponents for the 1860 Republican nomination to his cabinet as secretaries of state, treasury and war. Had he not possessed the wisdom and confidence to select and work with the best people, Goodwin proposes, Lincoln could not have led the nation through one of its darkest periods.
The best, most effective advisory boards will borrow from that Lincolnian tradition and be built with a similar humility.
Who Should Be in Your Cabinet?
You might never actually convene a full meeting of your personal board of advisors. In fact, like Lincoln’s cabinet secretaries, they might not even want to be in the same room with each other. Still, like a presidential administration or prime minister’s cabinet, your board should be imagined as a unified entity in which each member has a specific part to play in strengthening the whole. Building and benefiting from a board of advisors is a multi-step process.
Begin by thinking of the various “departments” you need help running. Perhaps there’s a department of “managing people” and another of “managing finances.” You might need a secretary of “marketing the firm” and one of “maintaining strong client relationships.” Your cabinet could also include key advisors on areas such as “holding on to a decent quality of life even as you work hard” and “making sense of technology.” In addition, you might want to have ministries of “preserving integrity” and “serving the community.”
Beyond these key departments, you might also want to think about more specific areas where you could benefit from the expertise of others. If you’re going to be making decisions about your firm’s physical office, perhaps your board needs to include one or more advisors who are especially well versed in commercial real estate. If you’re leading the firm’s associate recruiting committee, you might want advisors who are particularly dialed in to the world of law schools and their Gen-Z inhabitants.
In beginning with the department structure of the cabinet first, before thinking about who you want sitting at the imaginary round table, you go a long way in de-personalizing your board from being “a group of people I like best” to “a group of people who’ll help me do things better.” Only once you’ve spent some time making a complete list of all the cabinet positions should you begin thinking about how to fill them.
Start with a “first pass” at staffing the various cabinet posts you’ve created. If you’re a LinkedIn user, this is a great time to scroll through your connections, as they’ll provide a visual reminder of the people in your extended network who you might not have seen in a while. Think about the very best candidates to handle each cabinet post’s specific portfolio, and list the first people who come to mind. In filling these board positions, you’re not looking for well-rounded leaders, you’re looking for sharp experts. If you don’t have a name to slot in for each position, just leave it blank.
Step away from your initial list for a little while and come back to it with fresh eyes a week or so after you put it together. Now it’s time to start refining it. Look at the individual names you’ve listed. Are they the very best choices to offer counsel and insights in the areas you’ve assigned to them? Cross off anyone from whom you would not truly value receiving advice.
Next, look at the group as a whole. Are they all lawyers? Do they share many of the same demographic characteristics with you and/or with each other? Did everyone attend one of the same eight colleges?
You should also consider the broad personality types across the group. Have you chosen a panel full of only the most relentless optimists or overstocked with pessimists or Cassandras? On balance, do their levels of risk tolerance seem fairly evenly mixed?
Because the role of your advisory board is to fill gaps in your knowledge and help you address the aspects of your role that are most challenging or come least naturally to you, it stands to reason that some or even most of your advisors should come from different backgrounds and perspectives than you do. And, it’s worth noting, since many of the challenges you’ll bring to your board are centered on strategies and plans for the uncertain future, the value of your advisors doesn’t come from their seniority or long experience but rather from their ability to keenly assess the way things are in this moment, their awareness of trends and leading indicators and their own deep skill sets. Is your board substantively diverse?
If, after this second consideration, you have unfilled board positions or you’ve realized that you need to add some new and different voices, you can launch a recruiting process. As before, begin with the particular subject expertise you’re looking for. Ask the people you know and trust for a specific referral: I’m looking to talk to another leader who has faced some challenges in managing a group of people who are widely geographically dispersed from one another. Do you know anyone who has been really successful at handling this?
Filling these open positions on your board of advisors is a long-term proposition. You might need to be introduced to and get to know several people over a long period before you could ever feel comfortable thinking of one of them as a go-to source of advice and counsel. In the meanwhile, even the search for an advisor can be an illuminating experience. It’s a chance to broaden your network with some new introductions and interesting conversations and, it should be said, an opportunity to deepen some existing connections by approaching them with humility, candor and self-awareness.
Getting the Most From Your Personal Board
How and when you turn to your board of advisors is, of course, up to you. Because you’ve conceived and constructed this all-star panel of experts, it’s yours to engage with as you see fit.
You can tell people with a personal note or a small, meaningful gift that you’ve come to think of them as your business development guru or your personal minister of finance and thank them for their expertise. You can formalize the role by setting up a regular schedule of walk-and-talk phone meetings or quarterly Zoom sessions. You can salute your advisors publicly in social media posts and, eventually, the acknowledgements of your best-selling memoir. You can convene conversations with all or some of your advisors, creating a group chat or an email thread on a particular topic to get their takes. You can send out regular thought-starter prompts to the group or individual members by sharing an article you found interesting or asking a question like, “what’s the most important thing happening in your world right now?” You can invite them all to a cocktail party or dinner.
Or, you can do none of these things. The advisory board can simply exist in your head as a construct for reminding yourself to check in with the best possible experts whenever you need to make a key decision or set a new goal.
Just as it has been your initiative to build this cabinet, it’s up to you to monitor how much value you’re getting from it. Is the inclusion of this diverse set of advisors in your decision-making process helping you achieve better results?
One quick way to evaluate the effectiveness of your conversations with your advisors is to think about moments of discomfort. If you haven’t had any, that could be an indication that you and your advisors are a bit too like-minded. At least some of your conversations should involve difficult questions and hard truths. And at least some of their advice to you should involve some honest “tough love” about where your current efforts fall short.
The insight that businesses with strategies set by diverse boards of directors will quantifiably out-innovate and measurably outperform those with more insular and homogenous leadership is a relatively new but enormously significant one. Applying this insight to managing your own career and sphere of influence is a strategy for improving your effectiveness and preparing yourself to take on greater challenges in the fast-changing marketplace. The experience of building and engaging with a truly diverse advisory board can pull you out of your comfort zone — in the best possible way.