What Researchers and Nonprofit Leaders are Learning about Diversity on Boards

The board members of a nonprofit have the power to set the tone—both inside and outside an organization. And that job increasingly requires encouraging a diverse set of stakeholders to lead, said Alisa Miller, MBA ’99, MPP ’99, executive chairman of media company PRI-PRX and board member of the Lumina Foundation.

“What makes transformative changes is getting others to join our choir who might be singing a slightly different tune,” Miller said during the keynote of the Rustandy Center for Social Sector Innovation's On Board 2019 conference in Chicago.

The Minneapolis-based media and business leader shared some tips for how boards can “cultivate pluralistic constituencies” and build strong organizations that are better equipped to tackle complex social and environmental issues.

Diversity, equity, and inclusion also represent important areas of research. In this piece, we explore what we can learn from research and practice.

Diverse teams can offer an edge

For nonprofits, creating a diverse board can trickle down to a more effective organization with innovation at its core, Miller said. “We need to lead the way and set the example at the governing level,” she said. Miller stressed that racial, ethnic, and gender diversity is a key threshold toward achieving inclusion on a board. In addition to that, Miller’s organization has consistently focused efforts on recruiting board members from across political perspectives to further promote diverse thought, she added.

Research shows that diversity can lead to more creative thinking and innovation. A 2015 study coauthored by Max Nathan of the London School of Economics and Neil Lee of Lancaster University looked at 7,600 London companies, finding a so-called “diversity bonus” associated with diverse management teams. Diverse teams were more likely to introduce new product innovations and reach international markets than their homogeneous counterparts.

Likewise, a 2006 study showed that three-person groups with “surface-level” racial diversity—e.g. differences in skin tone or accent—outperformed groups without racial diversity in a decision-making exercise where sharing information was a requirement for success. Racially similar groups were less likely to realize each person had a different set of clues—an assumption which hampered their ability to think creatively about a solution, according to research coauthors Katherine Phillips of Northwestern University, Margaret Neale of Stanford University, and Gregory Northcraft of the University of Illinois at Urbana-Champaign.

Avoid tokenism – and ‘twokenism’

Many boards are aware of the value of diversity, but simply having one person who shares an opposite perspective or comes from a different background is not enough, Miller told the audience. “Avoid tokenism,” she said. “We need to move past that kind of dynamic.” In many instances, that may mean seeking out more than one opposing view, she added. “You may need at least three board members who represent another perspective to form a critical mass for the culture of the board to change.”

Research from Booth professor Marianne Bertrand examined the mixed results of gender-based quotas on boards, specifically related to a law Norway passed in 2003 mandating 40 percent representation of each gender on the boards of publicly limited liability companies. In a study coauthored with Sandra Black of the University of Texas, Sissel Jensen of the Norwegian School of Economics, and Adriana Lleras-Muney of the University of California, Los Angeles, findings showed “the new reserved seats on the board were filled with women who are observationally better qualified to serve on boards along many dimensions than women appointed prior to the quota, suggesting that previously untapped networks of top business women were activated by the policy. As a consequence, the gender gap in earnings within boards fell at the same time as the boards became more diverse.”

In another study published this year, researchers demonstrated an emerging phenomenon: “twokenism.” The University of Pennsylvania’s Edward H. Chang and Katherine L. Milkman, New York University’s Dolly Chugh, and Columbia University’s Modupe Akinola found that boards were less likely to add women after the board included exactly two women, the social norm. They hypothesized that the “twokenism” may be, in part, an attempt to satisfy public perception.

Build a culture of inclusivity

Even after diverse board members join, making them feel welcome is critical. Recruiting board members with different perspectives is key, but how organizations integrate them into the group is often more important, Miller said. It can be difficult to share views when joining a pre-established dynamic. Encouraging positive interactions and facilitating “rigorous debate at a strategic level” from the get-go allows for meaningful contributions, she said.

When members don’t feel acclimated, “covering,” or hiding a part of their own identity occurs, according to a recent report from Deloitte. The result? Organizations won’t get the full benefit of adding diverse members. When individuals feel different from the majority of their peers, research shows withholding their own beliefs can be detrimental to self-worth and may make them less committed to their role as a result.

Being thoughtful about how diverse board members continue to adjust is crucial, Miller said: “You have to think about how people are on-boarded and be thoughtful about how everyone gets to know each other. There’s extra effort that needs to be made so you don’t make people feel like the ‘other.’”

Alisa Miller gave the keynote at the On Board conference on nonprofit board service on March 8, 2019, in Chicago. Hosted by Chicago Booth’s Rustandy Center for Social Sector Innovation, the sixth annual On Board conference in Chicago convened a crowd of nearly 300 Booth alumni and students and business and nonprofit leaders. Attendees learned key trends in nonprofit board service, gained insight from faculty into how research and other academic tools can be applied in the nonprofit sector, and connected with others looking to make an impact in the social sector.

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