April 4, 2019 – For shareholders, the cost of bad leadership behavior is mounting. A growing number of CEOs and other high-profile leaders have been ousted for allegations of sexual harassment, discriminatory language and other offenses that might have once been swept under the rug. The costs to their organizations are often staggering. “Recent CEO indiscretions at public companies have led to an average seven percent decline in market capitalization – or a $4 billion loss – in the days and weeks following the news,” according to a new report by Russell Reynolds Associates. And these numbers do not include reputational losses, legal fees and settlements, the cost of follow-on training or of replacing the disgraced executives.
At the same time, the need for leaders to create welcoming workplace cultures is growing exponentially. By the year 2050, researchers project there will no longer be a clear racial or ethnic majority in America, and immigrants and their children will account for 83 percent of U.S. workforce growth. “This heterogeneity is occurring as organizations become less hierarchical and more dependent on complex, knowledge-based tasks that require teamwork and collaboration,” said Russell Reynolds. “These multiple shifts point to a common leadership implication: to maximize performance, leaders will need to master the art of enabling people with different perspectives to work well together.”
The diversity and inclusion (D&I) imperative is fast becoming the new frontier in risk management. Evidence suggests there are also rewards to be gained from getting it right. “In order to succeed, companies need to ensure they have leaders who can create impact in a diverse workforce,” the report said. “Leaders who create diverse and inclusive cultures have a distinctive leadership profile. They possess certain innate instincts as well as learned competencies.”
Russell Reynolds research found that such leaders also tend to see better outcomes from the individuals and teams they manage, including greater employee loyalty, better decision-making and higher levels of innovation. To help companies hire and develop such executives, Russell Reynolds Associates has developed a new approach called the “Inclusive Leader” profile. This profile defines the four key competencies that characterize an inclusive leader, as well as the various behaviors that are associated with these competencies.
What is Inclusive Leadership?
What distinguishes inclusive leaders from others? The search firm defined inclusive leadership as a set of proactive behaviors that leverage the unique attributes of each person in the workplace with the goal of enhancing overall performance potential. Inclusive leaders excel in four key areas: They bring awareness and clarity to problem areas; they practice courageous accountability to help resolve those problems; they empower others; and they foster innovative collaboration to unlock the unique contributions of each person in a group.
The “Inclusive Leader” model further breaks out each of these four competencies into intrapersonal dimensions (related to how a leader self-regulates) and interpersonal dimensions (related to how a leader interacts with others). “Using our three-pronged assessment process, we not only can discern how likely an executive is to prioritize and excel at inclusive leadership, but also offer detailed, specific feedback on developmental steps to improve,” said the search firm.
The Russell Reynolds Associates Inclusive Leader Model
Inclusive leaders begin by bringing awareness and clarity to a situation, then progress to problem-solving and value creation. Russell Reynolds Associates said that “their strength depends on both intrapersonal dimensions as well as interpersonal ones. Each competency builds on the one before it.”
How to Assess, Select and Develop Inclusive Leaders
Inclusive leadership is powerful. Few organizations, however, are currently measuring, recognizing, developing and rewarding it. Only 40 percent of executives believe their leadership is held accountable for fostering an inclusive culture and only 35 percent said their leadership considers inclusive behaviors as promotion criteria for leaders, according to Russell Reynolds Associates’ recent Diversity and Inclusion Pulse survey, which asked more than 1,800 leaders globally about their organizations’ D&I strategies and practices.
These trends imply that many organizations are undervaluing inclusive leadership skills. “As a result, they miss important opportunities to encourage and promote leaders who have them, and develop the leaders who do not have them yet,” the search firm said. “Meanwhile, they are missing out on the full potential that diverse teams can deliver. We use a three-pronged approach to help organizations identify and develop inclusive leaders. This allows a robust process for identifying the extent to which individuals are effective inclusive leaders. It also forms the basis of personal development plans for individuals to become more inclusive.”
How to Identify and Develop Inclusive Leaders
Russell Reynolds Associates lays out three ways you can find leaders who will help diversify your organization:
- Psychometrics – Through personality tests, you can detect natural traits such as open-mindedness, self-reflection and curiosity that can enable inclusive leadership. Encourage leaders who are strong in these traits to lean into their natural tendencies, while coaching others to adjust toward more inclusive behaviors.
- Interviews – Connect with leaders one-on-one to understand their approach to leadership and how they see D&I adding value in their work. Interviews allow for a free-flowing conversation, with the goal of unpacking critical incidents in a leader’s background and their personal strategies to unleash the potential of diversity in the workplace.
- Referencing – Lastly, survey close peers and direct reports to solicit input regarding each leader’s interpersonal behaviors. This process offers a 360-degree perspective on how effective an individual’s leadership style is, and how inclusive it is perceived to be by others.
Wilton & Bain Joins Inclusive Culture Pledge
Diversity and inclusion in the workplace is becoming increasingly important for both employers and employees. Research has shown that diverse businesses are 35 percent more likely to financially outperform their industry’s national average. For potential job hunters, 67 percent now consider a diverse workforce to be an important factor when considering job offers.
Recently, London-based executive search firm Wilton & Bain joined leading companies from a range of sectors and industries in signing the Inclusive Culture Pledge, an initiative managed by the EW Group, a diversity consultancy. Throughout 2019, the search firm will receive specialist support in the following areas: gender pay gap, inclusive leadership, inclusive recruitment, cultural intelligence, measuring success and accessible communications.
Beyond identifying and coaching individual leaders, Russell Reynolds suggested that organizations need to invest in five key efforts in order to fully harness the effect of inclusive leadership and embed it into their cultures:
- Use the four core competencies of inclusive leadership to define and communicate what inclusive leadership means for your organization, what the core behaviors are, and what they would look like in practice.
- Measure leaders on the extent to which they display those behaviors, taking into account self-reports as well as feedback from others. Screen for these behaviors in the hiring process through interviews, referencing and assessments.
- Develop leaders to practice more inclusive behaviors or skills via developmental reporting, workshops and courses. Holding these leaders accountable to progress can lead to incremental improvement over time with the proper support.
- Reward those who are leading inclusively, as well those who are making progress in their development goals. These rewards can be financial, but can and should also involve recognition and promotion within the organization.
- Reinforce the definition, the goals and the rewards on a regular basis, so that the concepts remain fresh and relevant.
“This type of investment will ultimately lead to a virtuous cycle,” Russell Reynolds Associates said. “As external reinforcement helps the culture become more inclusive, individuals will also begin to internalize the concepts and hold themselves accountable for making the workplace a positive environment for all employees. Similarly, as leaders embrace inclusive leadership concepts, employees at all levels will be more likely to practice inclusive behaviors.”
Recognizing Inclusive Leadership
How are inclusive leaders different from average ones? Russell Reynolds Associates said that the following actions are what help define and differentiate them.
Outcomes of Inclusive Leadership
The search firm’s research showed that inclusive leaders significantly affect their employees’ experience at work; improving outcomes including job satisfaction, loyalty and sense of belonging. The firm said that when employees have positive working relationships with their leaders and feel they can act authentically in the workplace, they are more likely to contribute at higher levels and improve firm performance.
Inclusive leaders also contribute to improved collaboration, as they are able to leverage the diverse contributions of each team member and empower groups to perform beyond the sum of their parts. “Teams with inclusive leaders were more likely to make high-quality decisions, produce innovative ideas and perform at higher levels than others,” said Russell Reynolds. The firm found similarly positive effects for other team-level outcomes such as agility, effective communication and collaboration, risk management and readiness to disrupt, transform and focus on the future
“The diversity and inclusion imperative is the next frontier of risk management as well as a leading contributor to high performance,” the Russell Reynolds report said. “While no leadership style can guarantee good behavior or business growth, it’s clear that the inclusive leadership behaviors we have identified set the stage for both of those benefits – and that they are factors in executive selection and development that no organization can afford to ignore.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media