Creating More Equitable Succession Practices

What we learned from studying Fortune 500 General Counsel Appointments

CEOs and CHROs face a growing mandate to increase diversity on their executive teams, with a steady drumbeat of pressure from internal and external stakeholders, including investors, regulators, customers and employees. There is a good reason behind this pressure, as companies with thoughtful approaches to diversity, equity and inclusion (DE&I) see real payoffs. McKinsey & Company’s multiyear research shows companies with higher proportions of women and ethnically diverse executives are up to 36% more likely to financially outperform their peers. Similarly, Russell Reynolds Associates’ survey of nearly 850 global executives found those at organizations with advanced DE&I strategies are about 30% more likely than others to feel highly loyal, innovative and set up for top performance.

Yet the road to change often looks steep, given the current state of leadership. White employees comprise 78% of the total workforce, but 88% of current CEOs, and more than 80% of most managerial roles that lead to CEO, according to 2020 data from the US Bureau of Labor Statistics. This overrepresentation in top roles makes achieving equity hard for both practical and psychological reasons.

Within current C-suites, however, the general counsel role is one that shows visible progress. Women and ethnically diverse legal executives make up an increasing percentage of newly appointed GCs, based on Russell Reynolds Associates’ analysis of the Fortune 500 over the past 8 years.
What accounts for this positive momentum? Much of the progress can be attributed to robust grassroots networking and advocacy efforts within the legal community. Organizations such as the Minority Corporate Counsel Association and the Hispanic National Bar Association have done a great deal to raise the profile of their members, while supporting them through community-building and development opportunities. We also frequently hear about the personal generosity of current general counsels in mentoring and sponsoring emerging talent, both at their organizations and beyond. To reinforce these efforts across the legal ecosystem, some GCs require their external law firms to diversify the team that serves them.

Other corporate functions and business units could learn a lot from these laudable efforts. However, they are not enough to sustain progress in ensuring diversity among GCs or any other group of executives. Instead, CEOs and CHROs must look at the systemic and scalable actions their organizations can take to embed DE&I in their hiring, promotion and development practices.

In our work with clients, we recommend approaching C-suite diversity through the lens of improving succession and search processes. Key action items fall into three main categories:

Forward-looking development programs are inherently beneficial to companies because they prepare the next generation of leaders well ahead of a planned succession and give the company more well-qualified candidates to consider when a leadership transition occurs. To increase the diversity of participants, however, current leaders need to take some additional steps.
 

When companies look externally for talent, they often rely too heavily on pedigree factors or recommendations from close sources that make a candidate feel like a safe choice but do not necessarily correlate to success in the role. To scope in as much relevant talent as possible, we recommend assessing talent on accomplishments and track records rather than checking certain boxes. Leaders can create a more diverse and qualified pool of talent in the following ways:
 

A key question for leaders: What needs to happen for younger generations of under-represented talent to stay long enough to be considered for GC role? To build a powerful retention strategy, leaders should:
 

Changing cultural norms can be challenging work, but it is also incredibly rewarding. Robust assessment, development and search processes maximize the talent pool and mitigate inherent biases, making it more likely a company will choose someone who brings what is needed to the role rather than relying on shortcuts. Ultimately, companies that strengthen their succession planning processes will not only make executive selection less risky, they are also likely to see stronger leadership teams and cultures that fully leverage the talent of their people.