With the rapid advancement of technology and the shift in workplace demographics, the need for greater board diversity has never been stronger.
Company decisions made in the boardroom impact both the operation and workplace culture. Therefore, creating a board team with complimentary attributes results in strong corporate governance and strategic execution and in turn, signifies to the wider company that diversity is valued and practiced within the entire organisation.
- The Evolution of Boardroom Culture
- The Benefits of Diversity in the Boardroom
- How to Increase Boardroom Diversity
- Key Takeaway
The Evolution of Boardroom Culture
For years, in many organisations, board independence was discouraged, with members feeling beholden to the CEO and subsequently tunnel-visioned in their thought process. Opinions and new ideas were disregarded, and this led to an environment of fear – fear of standing out, of thinking adversely to the majority, and of losing their place on the board.
For the most part, this is a thing of the past. Top CEOs now want to surround themselves with a high-calibre team of directors, to ensure that there’s representation across all departments involved in the decision-making process. However, there is still a noticeable lack of diversity occupying these roles. Personnel Today reports that in 2021, white males accounted for 90.4% of leadership positions in the UK’s top 20 firms.
The Benefits of Diversity in the Boardroom
Boardroom Diversity Facilitates Innovation
If a board consists of leaders with the same demographic, then it’s likely that many will share the same thoughts and opinions, due to overlapping experiences. But when more people from different backgrounds hold leadership positions, it challenges the echo chamber and facilitates innovation. Diversity creates an environment where ideas can be elevated through the reviewal and feedback of multiple perspectives.
As Larry Fink, Chairman and CEO of BlackRock, puts: “Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking, have, as a result, a more diverse and aware mindset. They’re less likely to succumb to groupthink for miss or new threats to a company’s business mode. And they are better able to identify opportunities to promote long-term growth.”
Boardroom Diversity Builds Stronger Rapports with Stakeholders
A diverse board is a better representation of your shareholders, employees, and customers. This increases the likelihood of the board’s decisions resonating with their stakeholders’ best interests. Shareholders will be more satisfied with the company’s direction, employees will be happier, and customers will be better taken care of, amounting to further investment, increased productivity, and more sales.
Boardroom Diversity Enhances Workplace Culture
Companies and their employees benefit from a diverse and inclusive culture when leaders are appointed that create a psychologically safe workplace, combat systems of discrimination and subordination, embrace employees with different identity groups, and make cultural differences a resource for learning and improving organisational effectiveness. Leaders that have first-hand experience of being inadvertently disadvantaged by or outright discriminated against corporate systems, will be better equipped to recognise exclusionary flaws in procedures, and help to pave the way for future leaders.
Boardroom Diversity Increases Revenue
Through a combination of the reasons above, businesses that have strategically incorporated diversity across their workforce and principally in the boardroom, have experienced profit growth. One study from McKinsey & Company International found that businesses that incorporated more diversity into the workforce were 33% more likely to have a higher financial return.
How to Increase Boardroom Diversity
In the UK, positive discrimination is unlawful under the Equality Act 2010, meaning companies cannot recruit solely on the basis of ethnicity or any other protected characteristic. It is important that diversity is recognised as more than a tick box in the recruitment process, and that board-level appointments are hired as a result of merit and the valuable contribution they can bring to a business.
So, while you can’t actively look to recruit diversly, there are approaches you can take to ensure that your hiring process is as inclusive as possible.
Review Your Company Policy
Creating an effective and diverse board is often complex and requires careful consideration in the recruitment process, taking into account multiple types of diversity. To enhance the recruitment strategy, developing a company policy for board seats can demonstrate to shareholders, employees, and other organisations that the business is committed to diversity in the board composition.
Utilise an Executive Search Firm
Inviting a third party into the hiring process can help eliminate internal subconscious biases. After the firm has shortlisted candidates based on merit, businesses provide feedback on why they do/don’t want to proceed with each candidate. Preparing and reporting back this feedback will help internal teams to realise whether their hesitations about a candidate aren’t justified.
Additionally, executive search firms have access to a larger and more diverse pool of potential candidates and networks. As opposed to interviewing solely from internal leadership’s own networks – who will likely be from similar demographics. Learn more about how top executive search firms find and shortlist candidates.
There is a greater focus than ever before on appointing inclusive board members that can make a substantial contribution to the business, by challenging decisions in the boardroom and identifying operational improvements. A diverse board can provide more than a “check in the box”, it can expand the knowledge, experiences, and practices that go into a company’s decision-making process and ultimately, drive growth for the business.
Get In Touch
For more information on how you can create a more inclusive boardroom, or to discuss any recruitment requirements you may have, please contact Lee Bhandal on 07590 529 274 or email@example.com