You can do it through gender diversity. The qualified woman candidate for your board is out there — if you look for her in the right places and with the right process.
— By Janice Reals Ellig and Ilene H. Lang

‘I’d love to put qualified women on our board,” asserted the CEO of a major corporation. “We just can’t find them.”

It’s a common complaint, and it’s conceivably a key reason behind the virtual stagnation in the number of women directors in corporate America — an average increase of only one half of one percentage point per year since 1995.

It’s also a puzzling assertion. After all, women are half of everything — employees, investors, customers, the global community. Women make or influence 80 percent of consumer decisions and hold more than 50% of managerial and professional positions. Yet women can still claim only a toehold in the C-suite of corporate America, with fewer than 3% of the Fortune 500 CEO positions and fewer than 16% of corporate officer slots. Since the C-suite is a primary source from which director vacancies are typically filled, there is a need to dig wider and deeper in order to tap into a rich well of female talent.

Recent research from Catalyst, the leading nonprofit corporate membership organization working to advance women and business, supports the view that the search is worth the effort. The study examined the correlation between the number of women on the board of directors and corporate financial performance. The results spoke volumes: on average, Fortune 500 companies with more women directors had significantly higher measures of financial performance than those with the least — 53% higher return on equity, 42% higher return on sales, 66% higher return on invested capital. And companies with three or more women directors performed even better! This mirrored other Catalyst research on women corporate officers and financial performance: more women in the C-suite, on average, correlated to 35% and 34% improvement in return on equity and return on sales, respectively.

So it is perhaps not surprising that a new Catalyst study reveals a strong relationship between the two dynamics: more women on the board predicts more women corporate officers five years later. Bottom line? Appointing more women to corporate boards correlates, on average, with significantly improved financial returns and more women in the C-suite. A very appealing win/win.

So how have some CEOs/boards been able to successfully catapult over the supply hurdle to find qualified women for their boards? The answer rests with the leadership: the board’s commitment to expand gender diversity, careful planning, and a willingness to broaden their vision and widen their search. That’s what it takes to elevate a good board into a great board. How can your board do the same? We’ve identified five practical steps:

1. Analyze the Tone at the Top
Getting from good to great starts, as always, at the top. That’s where the tone is established and the example set. So step 1 is to analyze the diversity at the top of your organization.

Since it’s a board’s task to evaluate the company’s strategy and the effectiveness of the CEO, a prevailing sameness in the backgrounds, gender, expertise, experiences, and alma maters of board members may also foster a one-note consensus on those key measures. It’s a signal that this board is potentially losing out on the benefits of challenging dialogues, independent thinking, and the sheer churn of creativity inherent in a more diverse board.

By contrast, gender diversity at the top communicates to shareholders, management, employees, and customers that their perspectives are valued. In an era when rating agencies, regulatory bodies, and investors see gender diversity and stakeholder representation as measures of good governance and managerial strength, diversity at the top reflects a company positioned to lead in a global economy. Where such diversity is not seen, regulators and rating agencies may assume outmoded cultural stereotypes and willful indifference to the marketplace. The potential dangers of that perception are many, including reputational risk.

2. Assess Competency Needs
What are the gaps on your board? Which skills, talents, demographics are needed to build a team better positioned for the future? What about the less obvious qualitative performance gaps, such as a director’s interest and time commitment?

If your board routinely self-evaluates and/or enforces term limits, it’s likely that openings will occur. Take these opportunities to refresh the board by identifying missing skills and competencies that will strengthen the board and provide a roadmap for the future.

3. Commit to an Action Plan
Creating an action plan and committing resources to it are the essential next steps.

Set a goal of at least three female board members. That might mean filling one or both of the next two vacancies with (or creating new vacancies for) qualified women whose skills and competencies fit the board’s identified needs. Catalyst data show that major corporations, including Aetna, Avon Products, Northeast Utilities, PepsiCo, Texas Instruments (see sidebar), and WellPoint Health Networks, dramatically changed the gender mix of their boards over a 10-year period. “Their vision of gender diversity and the competitive advantages that it might bring remained strong,” says Deborah M. Soon, Catalyst vice president, Executive Leadership Initiatives. “It required effort, but each and every board can change its board composition and reap the benefits, if it so wishes.”

4. Demand a Diverse Candidate Slate, then Search Smarter
Demanding a slate that includes both women and men with those key competencies is a good start. But where to find them?

Begin by looking beyond the obvious universe of sources. Women aren’t in hiding, but you have to start looking in the right places. CEOs and board nominating chairs must break out of that easy comfort zone — targeting only the usual cast of current and former CEOs — and take a more creative approach, expand their scope, and do some legwork. Here are just a few places where the search can begin:

Regional networks of senior women in business, science, finance, and law.
Referral services from Catalyst (www.catalyst.org), the Alliance for Board Diversity, and the American Bar Association’s Direct Women Institute (www.abanet.org).
The International Women’s Forum and its affiliates in major cities (www.iwforum.org).
The Committee of 200, or C200 (www.c200.org).
Women Corporate Directors (www.womencorporatedirectors.com).

A good executive search consultant has access to these and a plethora of other resources. In addition, the creative search consultant should be able to target the often overlooked high-potential women who will be promoted to the C-suite in the next two-plus years; smart organizations catch such women as they are on the rise. Also worth a look are qualified women who attend board director summits and boot camps, many of whom are presenting to and working with their companies’ boards on issues of good corporate governance.

A committed board will challenge its chosen search firm to cast a broad net, eschewing the requirement that female candidates be sitting or former CEOs of publicly listed companies. Such a board will also accept that finding the right qualified women takes time. As we like to say, and many people have heard us say, “It takes digging, seeking, and pushing back.”

5. Stay the Course
Achieving the goal for female representation on the board also means working to build a pipeline for upcoming board retirements. We’ve all heard the tales of board directors rejecting candidates they don’t know or requesting only trophy names they think will confer prestige —women who are typically unavailable or already “boarded up.”

That’s why the commitment to getting from a good board to a great one needs to be consistently reinforced by the chairman, the CEO, and all board members — for, admittedly, board composition doesn’t change overnight. By its very nature, the process is slow. Only the team at the top can speed up this glacial pace — and the ultimate responsibility lies with the board to do so.

And here’s the point: It can be done. Many companies are doing it, to the clear benefit of their financial performance and capabilities for future success. Moreover, the pool of qualified women candidates exists, brimming with talent and ambition. It spans the globe, which is why each and every board search should do the same. The qualified woman candidate for your board is out there — if you look for her in the right places. She can be a valued and valuable addition to a board’s return on diversity — ROD, a new measure of corporate success for the 21st century. With so much at stake and so much to gain, why not?