Diversity is a good thing for a corporation. It's long been common knowledge now that having women and minorities on your board of directors is good for business and a new study has revealed that diversity in a CEO's own personal social network can create more value for their companies.
The study, published in the Journal of Corporate Finance, analyzed BoardEx data supplied by the Center for Corporate Performance. Researchers from the Stuart School of Business at Illinois Institute of Technology, Lally School of Management at Rensselaer Polytechnic Institute and the Gabelli School of Business at Fordham University examined a sample of just over 1,200 CEOs who headed S&P 1500 firms between 2000 and 2010.
The researchers evaluated each CEO's social network by examining their school and work affiliation and their leisure and social ties (such as clubs and charities) in the past and present. The connections had to be in at least senior management or higher positions to be considered.
Findings of the study revealed that organizations whose CEOs had high levels of network diversity had a higher ratio of market value compared to corporate assets, something known as Tobin's Q ratio.
The actual monetary value diversified leaders bring to their companies gets a bit complicated, but in a write up about the study in the Harvard Business Review, the researchers said CEOs with high social network diversity can bring in as much as 16 times their salary in market value for a business.
Further to that, they also found that leaders who took over companies from people with less diverse networks actually drove up their stock price.
In their write-up, the researchers noted that CEOs with more diverse networks generally had access to foreign investment opportunities and more access to new and innovative ideas that helped their companies.
"Our findings have broad implications. Today's CEOs require expansive knowledge to innovate and respond to increased competitive pressure," the researchers wrote. "Although acquiring knowledge can be costly, our findings suggest that the more diverse the social networks of the CEO are, the greater the growth opportunities are for the firm through exposure to different types of information and knowledge."
This all begs the question: How does one get a more diverse network?
Let's take a look at four ways to do just that:
1. Join clubs and professional organizations.
If you want to expand your social network, you have to be sociable. I have been a member of our local Rotary Club for years and I encourage anyone I meet to get involved with their local chapter or the local chapter of their Chamber of Commerce or any other club that helps people. You'll meet people and make connections, and you'll get to do some good in the world -- which is good for your soul.
I've met interesting people -- both business and non-business related -- in many different organizations, from Toastmasters to sailing clubs. You never know where you will meet someone that can bring you your next big deal, idea or new star team member.
2. Become a mentor.
One of the best ways to meet up and coming leaders is to mentor them yourself. Many universities and professional organizations have programs where you can volunteer to take a budding entrepreneur or CEO under your wing and show them the ins and outs of business. Since they represent the future of business, they are invaluable connections to have.
3. Join a board.
Joining a board of directors will instantly give you access to other people in influential positions. It's perhaps the easiest way to make solid business connections with people who could instantly change your own business' fortunes.
My part-time job is executive director of a nonprofit my family started. I've see firsthand how nonprofit boards are often filled with great, accomplished people who want to do some good in the world. Those kinds of people are great to have in your social network.
4. Organize a charitable event.
People love to give. If you organize a charitable event and invite people -- and encourage them to invite people -- the event can turn into an amazing networking opportunity. My wife and I hold charitable events all the time: 5k runs, food hamper packing events and disaster relief drives. We meet with other businesses and service providers with whom we can work and cooperate beyond that charitable event.
Obviously, all of these things take time and effort. If you're serious about diversifying your network -- and maybe helping some people along the way -- they're well worth it.