What does a ‘good’ board look like?

Easy to manage? Filled with compliant board members? Keeps up appearances?

The purpose of a successful board is to listen, contribute and challenge key decisions that affect entire organisations. Board diversity encompasses various factors such as race, ethnicity, gender, gender identity, sexual orientation, age, social class, physical ability, or attributes, religious or ethical values system, national origin, and political beliefs.

In this article, we will explore the numerous benefits of boardroom diversity that go beyond mere tokenism.

1. Encourages diversity of thought.

Having individuals with multiple backgrounds and different skills raises challenging questions and debates within a group. Decisions made by such individuals are thought to be of higher quality than those from similar backgrounds who tend to ‘groupthink’. Individual minds are thought to offer uniquely innovative solutions and strategies. Disruption of the ‘norm’ encourages the development of great ideas that may otherwise go unnoticed.

2. Helps to address complex, corporate issues.

Having diverse people on a board that are reflective of the real world, encourages a mixed approach to problems and challenges. If responses to issues regarding products, distribution, marketing and sales are the same – change will be difficult to master within an organisation.  

3. Improves brand reputation.

Companies with diverse boards often enjoy improved reputation and brand image. They are seen as more socially responsible and progressive, which can attract both customers and investors who prioritize diversity and inclusion.

In fact, diversity and inclusion at the board level can echo through the rest of the company and set a positive example for diversity-building among its people. Research shows that 57% of employees want their company to prioritize this approach in their workplace.

4. Increases revenue.

Numerous studies have found that companies with diverse teams are more profitable than homogenous businesses. Content employees are more productive and effective when it comes to problem-solving, which often leads to less turnover and higher output.

Companies in the top quartile for racial and ethnic diversity are found to be 35 per cent more likely to have financial returns above their respective national industry medians.

5. Creates a Diverse and Inclusive Culture.

The importance of hiring diversity and inclusion goes beyond the boardroom. It sets an example for the rest of the organization, fostering a culture of inclusivity that can lead to better employee engagement and retention.

An essential step in increasing board diversity is implementing a rigorous and fair selection process. Many board appointments are currently driven by social connections, which can exclude qualified candidates from diverse backgrounds. To achieve greater diversity of thought in the boardroom, organisations should cast a wider net in their selection processes, actively seeking female directors and directors from different ethnicities, ages, and socio-economic backgrounds. Enlisting the use of a talent partner to help achieve board member selection is a great solution to overcome bias in the hiring process.

Conclusion:

The benefits of diversity in the boardroom extend far beyond compliance. A diverse board brings diverse perspectives, fostering innovation, better decision-making, and increased profitability. It also aligns helps to set up organisations as a mosaic for the diverse world they operate in which enhances brand reputation. By actively promoting hiring diversity at the highest levels of leadership, companies can solidify their position for success in an ever-evolving business landscape.

Building a truly diverse board does not come without its challenges. Some solutions include running a diversity audit, securing a commitment to board hiring diversity, expanding recruitment efforts, formalising succession plans, and encouraging transparency.

At North Search, we are committed to facilitating appointments free from bias. Our partners engage us in auditing services, succession planning, c-suite recruitment, and bespoke executive search diversity hiring mandates.

If you would like assistance developing your own search strategy, contact us to receive your complimentary planning session with our team at North Search today.