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4/8/2020 Why Leadership Diversity Matters in Handling Crises Like COVID-19 - Knowledge@Wharton

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Employee health and safety must be the foremost consideration of any business during the coronavirus pandemic. But one of the greatest challenges is understanding the needs and circumstances of employees who themselves are diverse in all of the traditional measures, but also are a�ected by widely varying life, work and family conditions, writes Lloyd W. Howell, Jr., in this opinion piece. He is chief �nancial o�cer and treasurer of Booz Allen Hamilton, a global technology and management consulting �rm.

As an African American engineer and businessman, I’ve seen �rsthand the impact of diversity on organizational and �nancial success, but in my current role as CFO of a Fortune 500 company, I’ve never been more convinced that diversity is essential for successful leadership in times of crisis. With the rapid spread of the COVID-19 virus, and the health uncertainties,

Mar 23, 2020  Opinion North America

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Why Leadership Diversity Matters in Handling Crises Like COVID-19

4/8/2020 Why Leadership Diversity Matters in Handling Crises Like COVID-19 - Knowledge@Wharton

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sudden disruption and roiling �nancial markets that have come on its heels, businesses across the nation are struggling to make fast, hard decisions, often serving highly diverse customer bases, with no time to spare.

Employee health and safety must be the foremost consideration of any business during this viral spread, but one of the greatest challenges is understanding the needs and circumstances of employees who themselves are diverse in all of the traditional measures, but also are a�ected by widely varying life, work and family conditions.

Beyond that, business requirements and operational modes are changing drastically in an instant, with standard decision processes cast aside and few models immediately available to quickly understand the �nancial and operational impacts of decisions.  Who’s on tap to chart a new course, and their life and career experience, can be as important as the course itself.

During crises, the presence of diversity and the practice of inclusion is essential to challenge us to look at problems di�erently and consider a wider range of �nancial issues and impacts that we might not otherwise.  Diversity within �nance organizations is particularly important as, in addition to providing standard �nancial services, they oversee some or all risk management for many companies, and the well-developed ones serve as an essential voice in mapping the strategic direction of a company.  Theirs is an important seat at the table right now.

Diversity and Stock Market Returns

According to The Wall Street Journal, the �nancial industry was the best performing sector in its study of the link between �nancial performance and diversity across S&P 500 companies. The Journal’s study determined that the 20 most diverse companies — dominated by banks and insurers — had an annual stock return of 10% over �ve years, compared to 4.2% for the 20 least diverse companies.

As a CFO overseeing a �nance organization of 1,300, I �nd those �nancial sector results promising, but I think it’s essential we leave nothing on the table. In my own group, we’ve made progress on improving core measures of diversity, particularly in mid-levels and leadership, and we are committed to do more across the �nancial organization.  First, we are focusing on having consciously unbiased discussions about potential rising stars and supporting them with promotion opportunities, mentorship, special projects and visibility with leadership to bring them higher into the organization. Ensuring that recruits see our diversity when they meet us is essential, too.

4/8/2020 Why Leadership Diversity Matters in Handling Crises Like COVID-19 - Knowledge@Wharton

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But here’s where we look to take the potential impact to the next level: We �nd an even greater impact on business performance comes from giving the same level of attention to �nding and developing sta� with diverse skillsets and training them on how to apply their unique professional expertise to higher level �nancial problems or business crises within our �rm.

Within my department, we have sta� trained in tax accounting, Sarbanes Oxley regulations, treasury functions, government accounting, compliance and other areas. But to raise this diversity of training from a slate of sta� with functional skills to the level of in�uential strategic business partner requires development, mentoring, and fostering an environment of credentialization. An important part of diversity in a �nancial organization is supporting and encouraging diversity in credentials and certi�cations that provides a level of trust and con�dence to the larger organization we serve.

I see the value in the context of our more thoughtful responses to COVID-19, a crisis which re�ects the increasingly complex, interconnected nature of business today.

We ask our �nancial sta� to look at larger problems with a “CFO mentality,” meaning that every individual decision by sta� at every level should be made as if they are sitting in my own chair, looking more broadly at impacts across our company and market. To get there, as an example, we train our professional sta� to look beyond the mechanics of cash collections, to understand the end-to-end process and impacts, starting with client issues related to payment timing all the way to the impact on cash deployment and guidance to investors. With that context, their diverse core skillsets have greater in�uence and inclusion in corporate decision- making.

Diverse Leadership and the COVID-19 Crisis

This charge, and the positive impact of diversity in all its iterations, is particularly powerful as we come together as a team to consider larger issues that directly impact �nancial performance. Take capital deployment strategy as an example area that would be reviewed through the lens of a crisis: In my group, a respected, credentialed treasury team looks at balance sheet capacity, tax experts review those considerations, accounting and reporting teams have a role, and the operational sta� weighs in on issues of banking and payroll. In capital deployment, many decisions are of a highly judgmental nature — it’s never black and white; there are many

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options. To get to the right answer requires diversity in personal and life experience layered with diversity in deep professional expertise, along with the willingness to be inclusive of other ideas.

These ongoing tactics are paying o� for my company in a very public way. A year and a half ago, in June 2018, I stood before investors with my CEO and for the �rst time used the con�dence from improving our �nancial functions to lay out a three-year investment thesis that called for, among other things, ADEPS (adjusted diluted earnings per share) growth that was later updated to 66%, a dividend yield of about 2%, and 6% to 9% annual revenue growth. So far, we are well on track to meet our goals; in fact, we are the organic growth leader in our sector, and in the last �scal year alone, our revenue grew 8.7%, as we achieved record revenue and earnings.

And already I see the value in the context of our more thoughtful responses to COVID-19, a crisis which re�ects the increasingly complex, interconnected nature of business today. These types of crises won’t get any easier. Our employees, the communities we serve, and our shareholders expect us to use every possible tool to address them, most importantly the full scope of diversity of the very people in decision-making seats.