Board inclusion framework: Enabling boards to govern inclusively

Foreword

Diversity and inclusion are central to Deloitte’s values and are embedded in the firm’s culture as core competencies for leadership. Our experience has shown us that to engage diverse talent, build inclusive leaders, and foster an innovative, courageous, and equitable culture, we must start at the top. Boards have a responsibility to lead the way.

That is why when I became chair of Deloitte’s US board a year ago, one of my early actions was to commission a team to assess our own board’s ability to effectively govern inclusion. Inspired by the findings of a 2019 Wharton study on board culture commissioned by Deloitte, and in collaboration with Deloitte Consulting's Diversity, Equity, & Inclusion practice, the very first Board Inclusion Framework was developed.

Through this framework, we were able to understand and authentically address where we are on our inclusion governance maturity journey, and what our priorities in achieving greater strength to that end should be. Instilling a culture of individual accountability, and reexamining influence on decisions, firm strategy, and behavior both inside and outside of the boardroom enabled our board to more effectively respond to what became the ultimate pressure test—the onset of the COVID-19 pandemic and subsequent demonstrations against social injustice. While we, like many, are still in the early days of learning through these crises and assessing what our ‘next normal’ will be, if one mission is abundantly clear, it is to emerge stronger on the other side.

Our intention by sharing the Board Inclusion Framework as part of Deloitte’s collaboration with NACD NXT™ is to provide tangible ideas for leaders who recognize that a diverse and inclusive board leads to better outcomes. And, as we move toward a more equitable future against the backdrop of a post COVID-19 world, it couldn’t come at a better time.

—Janet Foutty, US Executive Chair of the Board, Deloitte

Inclusion is an issue of importance permeating all aspects of an organization. What can boards do to further promote and solidify an inclusive culture at the organizations they oversee? A great deal, as it turns out. Boards have a meaningful role to play in building an inclusive enterprise, and they can govern in ways that put C-suites and organizations on a positive path.

This framework is designed to help boards explore their role in governing inclusion and initiate conversations on inclusion at the board level.

This framework offers

• A structure to set the foundation for understanding board-level inclusion and inclusion governance, and for understanding how boards can think about promoting and embedding an inclusive culture at the organizations they oversee
• Initial questions that board members can ask to assess their own board’s level of inclusion governance
• Key insights and actions for boards to help improve their inclusion governance practices

Introduction to the Board Inclusion Framework

What are diversity and inclusion?
While diversity and inclusion may be inextricably linked, they are not one and the same. Boards can benefit by understanding the distinct definitions of both diversity and inclusion: ¹

• Diversity refers to the presence of people who, as a group, have a wide range of characteristics, seen and unseen, which they were born with or have acquired. These characteristics may include their gender identity, race or ethnicity, military or veteran status, sexual orientation, ability, experience, background, skill set, perspective, and more.
  
• Inclusion refers to the practice of making all members of an organization (including board members) feel welcomed, giving them equal opportunity to connect, belong, and grow—to contribute to the organization, advance their skill sets and careers, and feel comfortable and confident being their authentic selves.
  

Why should boards care about inclusion governance?
Conversation about the board’s role in influencing inclusion across the organization is rare in the boardroom. In 2019, Deloitte reviewed board committee charters at more than 100 of the largest US-based companies and found that while 65 percent of charters mentioned diversity and inclusion, the references most often only pertained to demographic composition (diversity).²

It is important for boards to promote inclusion as well as diversity. The benefits organizations receive from having an inclusive culture, along with a diverse workforce, are substantial. In an inclusive culture, employees are much more likely to see themselves as part of a high-performing organization in which teams collaborate and client and customer needs are more consistently met. Teams that are both diverse and inclusive also often perform better—promoting less groupthink and more innovation. In fact, the board, as a team, can exemplify this pattern. For example, when comparing low-and high-performing boards, high-performing boards are more likely to exhibit gender balance and inclusive behaviors.³

These benefits can translate into financial results. When operating in an inclusive culture and through inclusive talent practices, organizations generate up to 30 percent higher revenue per employee,⁴ are more profitable than their competitors, and become eight times more likely to achieve positive business outcomes.⁵

In short, because diversity alone does not guarantee that organizations are able to bring a wide variety of insights, life experiences, and perspectives to bear on their challenges and opportunities, boards should also value and promote inclusion as a separate yet connected priority to diversity. To do this, boards should understand their role in overseeing inclusion both within their boardroom and for their broader organization.

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Endnotes

¹ Mike Fucci and Terri Cooper, “The Inclusion Imperative for Boards: Redefining board responsibili- ties to support organizational inclusion,” Deloitte University Press, April 2, 2019.
² To assess whether corporate boards are engaged in inclusion governance the authors conducted a review of a nonstatistical sample of board committee charters for 136 companies ranked among the Fortune 500 as of February 2018. The authors researched the various existing board committees within the Fortune 500 firms, and chose to review charters of committees with titles that indicated a potential focus on human resources, people development, or diversity and inclusion (such as “public issues and diversity review committee” or “compensation and human resources committee”). Charters were downloaded directly from their organizations’ websites.
³ Deloitte Access Economics Proprietary Ltd., Toward Gender Parity: Women on Boards Initiative, October 2016, p. 70.
⁴ Mike Fucci and Terri Cooper, “The Inclusion Imperative for Boards: Redefining board responsibilities to support organizational inclusion,” Deloitte University Press, April 2, 2019.
⁵ Stacia Sherman Garr, Candace Atamanik, and David Mallon, “High-Impact Talent Management: The New Talent Management Maturity Model,” the WhatWorks Brief, Bersin by Deloitte, 2015. Please also see Juliet Bourke and Bernadette Dillon, “The diversity and inclusion revolution: Eight powerful truths,” Deloitte Review, Issue 22, January 2018, p.85.