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Tuesday, 25th July 2017
 

BOARD DIVERSITY

THE BUSINESS CASE FOR BOARDROOM DIVERSITY

The boardroom is a seat of authority. It is the steering wheel for the whole organisation. It influences the culture and values, provides leadership and drive, and is accountable to its shareholders and other stakeholders. The UK statistics about this composition show that it is by and large white and male, and therefore grossly unrepresentative of the actual mix of UK society, especially in terms of women and ethnic diversity. The latest Davies Report (2011) predicts that it would take 70 years for the Boardroom to have equality for women at the current rate of change! It explains:

‘Inclusive and diverse boards are more likely to be effective boards, better able to understand their customers and stakeholders and to benefit from fresh perspectives, new ideas, vigorous challenge and broad experience. This in turn leads to better decision making.’

A Board sceptic may well ask, why change when performance is good, and the team gets on well and has the right mix of skills? Also, underlying change there is often fear, especially where the change can take the Board to unfamiliar terrain – for example, if in climbing the ladder, one has never been part of a diverse team, how will such diversity gel at the top?

Research also shows that many leaders actually believe sub-consciously, that women and ethnic minorities are less able and motivated than them. The unspoken perception must be that they either lack the skills, or cannot work hard under pressure, or work to set commands and direction. Prejudice is very real, and cannot be denied or avoided. It needs to be addressed directly.

The truth is that there is growing evidence that diversity in a team generates huge benefits. Here are some of the most simple and logical strengths of diversity:

  • In an era of globalisation, having leaders from diverse backgrounds helps you to adapt to global changes and deal with global cultures much more effectively and sensitively;
  • If women comprise half the potential workforce, surely by avoiding them in leadership we are missing half the talent?
  • Successful products and services require a skill in understanding the customers and suppliers, relating to their needs and expectations. Leaders increasingly need to ‘fit out’ and ‘fit in’ at the same time. The evidence shows that there is much more ‘fitting in’ at present and too little ‘fitting out.’
  • Global boardrooms are changing. In Norway, there is a law that requires a minimum of 40% of Board members to be women. In Singapore, multi-cultural teams and leaders are the norm, without any legal quotas. It is simply seen as the best way to operate.
  • There is strong evidence of the existence of diverse senior talent in the UK, including women and ethnic minorities with management experience and exceptional resumes. It is simply not true that the skills do not exist – what is true is that in terms of recruitment, Boards often fish from the same pool. They need to diversify their horizons and work with diverse headhunters.
  • Nature has shown us for hundreds of years that if we plant the same crop every year, we will destroy the land very quickly. Mono-culturalism and mono-sexism starves an organisation of innovation and critical thinking, minimising challenge in the boardroom and therefore increasing the risk of large scale disasters. For evidence, look at the Board memberships of the big Banks which failed in the 2008 Banking crisis. There was virtually no diversity in the leadership teams. And this diversity will mitigate risk, helping significantly with corporate governance.
  • Leaders need to lead by example. If the top does not practice what it preaches, and is not meritocratic, what signal does it give to employees lower down the organisation? It gives the wrong cultural signals about the reality of meritocracy.
  • The Equality Act 2010 makes discrimination of any kind illegal. The costs of breaking the law are significant, not just financially, but in terms of management time and resources and reputational damage.

It is critical that leaders understand the power of difference. Research shows that few leaders do, and the conventional thinking is to seek familiarity and similarity in the boardroom. In truth, the lack of diversity in the boardroom in 2011 Britain, especially when we have global companies headquartered here, should be an embarrassment which demands immediate action and pro-activity from any forward-thinking CEO. Also as the population mix of Britain is changing rapidly, Public Boards need to reflect the communities they serve.

Article added on 12th September 2011 at 10:02am

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