The need for striking an Age Diversity Balance in Boardrooms.
The global average age of the founder of a successful start-up is around 40 years . The average age of founders of start-up companies backed by venture capitalists is around 31 years . On the other hand, the average age of boards is about 62 years . Both the founding management and the board of directors are indispensable to a company’s success. However, the glaring gap between the average age of the two groups is hard to ignore.
In a simplistic viewpoint, the global trend appears that the board of companies are being run by one generation while the management is controlled by another generation. Consequent to the generation gap, there is bound to be a difference of perspective, adversely affecting the business performance in the long run. The words of the legendary American financier, Bernard Baruch ring true in this context, “There is only one thing wrong with the younger generation. A lot of us don’t belong to it anymore.”
Traditionalist organizations will find it difficult to succeed in the age of constant innovation and disruption, especially if the senior leadership team cannot fathom ways to grow in the new environment. An example that comes to mind is that of General Electric (GE), which was founded by the world’s greatest inventor and innovator, Thomas Edison. After the resignation of Jack Welch in 2001, the leadership of the conglomerate was handed over to Jeff Immelt. There was a stark variation in the management style of both the leaders: while Welch focused on growth through expansion and venturing into new areas of business, Immelt focused on profits by refocusing the company on its core expertise of manufacturing. He reacted to events rather than leading them, unlike Welch. Consequently, GE is a laggard among its peers today and investors see little hope for the company to revive its former days of glory.
Conclusively, organizations need to have their fingers on the pulse of the rapidly evolving technological era. Age diversity in the boardroom is an effective solution to make this happen. Bridging the age gap is essential for the success of a business, especially in the context of a continually changing, increasingly disruptive environ. Evidently, the wisdom of the old combined with the adventurism of the young is the equation to the success of organization. Boards should therefore be a balanced mix of the members of both the generations – the young and the old. Only then will they thrive in the new world.
Inducting new, younger members on the board can prove to be an efficient strategy on three counts: one, it is a great way to have a perspective on the stakeholder ecosystem comprising of digital natives who look at the world differently from the boomer generations. Two, it is an effective way to retain the brightest employees with the organization. By engaging the younger crop in governance decisions, they get a perspective of the decision-making processes and the culture at the top. This experience, in turn, enables young leaders to think laterally, in the process preparing them for potential leadership roles in the future. Three, inducting young members on the executive leadership team serves as a wonderful reverse mentoring opportunity for the senior members of the executive team. Because most of the senior members grew up in the different era, interacting with youngsters on an equal plateau lends them an insight on the how millennials and the centennials think.
Given the advantages, an increasing number of organizations are willing to induct youngsters on their boards. They find it to be an effective way to stay connected with their younger breed of stakeholders and also be in the know-how of the latest technological disruptions. They realize that only experience is not the solution to plot a successful forward strategy in the rapidly changing environ. Expertise in digitalization is equally important, if not more.
However, a lot of board members are hesitant to induct young, inexperienced and freshly-minted entrepreneurs in the elite boardroom. And yet, they are keen to compete with their counterparts who are bold enough to induct youngsters on to their executive boards. Shadow boards can be plausible solutions in such cases. Shadow boards are also known as mirror boards. They are parallel team of younger employees who are nominated as directors to provide feedback on the decisions that are taken by the actual board of directors.
However, boardroom age diversity can bear effective results only when companies implement the concept seriously. Just inducting members of the younger generation on the panel without giving them the liberty to voice their viewpoint will hardly yield any results. The older members should therefore be open to the ideas proposed by younger members and respect their thinking and approach to business. On their part, the younger crop should be equally staid about their additional responsibilities and be earnest in their approach to learning new lessons in managing a company from the top level.
In the end, it is all about creating a strong connection with your stakeholders – whether young or old.
