For most corporations, the organizational structure is pretty similar. In most cases, this includes departments composed of staff who report to leaders that either have the title of managers or department heads. Those leaders will then either report to a division leader such as a vice president, or directly to a chief officer or partner.
The chief officers can include a range of titles including CEO, CMO, CFO, and COO to name a few. The CEO usually sits over core business operations, the CMO heads marketing, the CFO is tasked with managing finances, and the COO can oversee human resources or any other tasks that are important but don’t directly tie into key operational activities.
These roles are collectively referred to as the “C-suite” and can shape how a corporation relates to the community it claims to serve, as well as with its workforce. Everything from marketing campaigns and outreach initiatives to hiring practices and company culture are influenced by the C-suite. And when the top of the organizational chart lacks diversity, it can backfire.
The Current State of C-Suite Diversity in the U.S.
In 2022, Harvard Law School reviewed C-suite compositions in the 100 largest companies listed in the S&P 500 (referred to as the S&P 100) and found that most corporations struggle to create diverse C-suites. Recent stats show that most C-suites are overwhelmingly male and white. Only 23% of all S&P 100 corporations had Asian, Black or Hispanic C-suite members compared to those demographics representing 37% of the workforce.
To make matters worse, 95 of the 100 firms that had more than seven executives in the C-suite had dismal records. 29% had no Black members in the group. Even in organizations that did have some diversity in the C-suite level, minorities and women were almost overwhelmingly not represented in COO or CFO roles which are usually stepping stones towards the CEO position. Instead, it’s more common to see Black leaders shunted into supply chain or HR leadership positions — which usually aren’t natural segues for the CEO role.
More important than the lack of representation was the “why” behind it. The research discovered that poor representation “at the top isn’t due to a pipeline problem.” Rather, the issue was “a lack of equity in assessing, developing, and promoting talent.” Worse still, this can be a self fulfilling issue where not seeing diversity in the C-suite means that recruiters and even decision makers never bother considering Black qualified candidates because the status quo reinforces the idea that it’s not necessary to do so.
Ultimately, the study found that biases prevented otherwise capable individuals from even being considered for more plum opportunities that would put them on the pathway to achieving a CEO role. Likewise, failing to infuse new blood into C-suite consideration means that it’s possible for the same faces to cycle through multiple corporations — which includes occupying seats on advisory boards.
Why C-suite Diversity Matters
Research continues to prove that companies that fail to diversify their C-suites do so at their own peril. It’s not about checking off boxes, it’s about building out a well-rounded organization that yields peak performance, better relates to target audiences, and innovates with agility.
Better Decision Making
There’s a reason that people are often encouraged to travel to new places and pursue dialogues with individuals from different backgrounds. It’s because learning about new perspectives can broaden your own and help you look at the world from a more holistic stance. And the same is true in the boardroom.
A C-suite composed of people that are homogenous may feel comfortable and still function adequately, but that company may struggle to understand how to pivot when challenges arise or identify new opportunities. This is especially true for businesses that are directly consumer facing and either offer products or services that fall into trend categories.
Because trends evolve almost daily, a diverse workforce (and C-suite) can accurately identify opportunities and ensure that a company is ahead of the curve instead of playing catch-up.
Improved Consumer Relatability
Especially in a country as diverse as the U.S., it’s impossible for one individual to accurately anticipate consumer response across genders, identities, or ethnic groups. On more than one occasion, a brand has had to issue a public apology for launching a campaign that fell flat with audiences because decision makers failed to anticipate consumer reactions along identities.
Pepsi hoped to recreate Coca-Cola’s iconic 1971 “Hilltop” ad campaign with its “Live for Now” Kendall Jenner commercial in 2017. Instead, people found it to be a flippant response to real world protests that were occurring in the U.S. over human rights. Burger King’s ad featuring artist Mary J. Blige in 2012 singing passionately about fried chicken wraps fell flat as people felt it played too easily into harmful tropes about Black people.
In 2018, Heineken stepped in it by promoting a pale beer launch with an ad featuring a bartender sliding a bottle of pale ale past several dark skinned actors before it stops in front of a fair-skinned woman — revealing the tagline “Sometimes, Lighter is Better.” And even Dove, an active corporate advocate of the Crown Act, yanked an online clip in 2017 after coming under fire for a poorly timed cut scene that implied the brand’s body wash transformed a dark skinned Black model into a white woman.
There are countless examples of these marketing mistakes that routinely alienate population segments — which begs the question “who approved that ad?” When there’s more diversity in the decision making rooms, these obvious mistakes can be avoided.
Better Corporate Performance
Along with making better decisions and improving flexibility, a diverse C-suite might just mean your business could crush financial goals. Research underscores that firms with more diverse executive silos tend to outperform companies that are more homogenous at the top.
A McKinsey & Company 2023 study found that companies with an at least 30% female-led executive team financially outperformed male-only led firms by 18%. Additionally, ethnically diverse-led executive teams financially outperformed firms with homogenous teams by 27%. The takeaway is that diversity equals improved profitability.
Prioritize a Diverse C-Suite for a Stronger Business
Countless research continues to point to the bottom line that diversity is good for business. However, decision makers need to ensure that this is reflected not just in lower entry to middle management positions — but all the way to the top of the food chain. Qualified diverse executives translate to stronger teams, smarter decision making, and better financial gains.
