All boards strive to have directors in place who improve decision making to help drive business success. However, the lack of diversity on boards is a major stumbling block to the delivery of an effective board that adds value. Too many remain resolutely stale, male and pale. These are what I term “Jurassic boards”, because they are, in effect, populated by dinosaurs. These boards often have a tendency to focus on the past and not on the future, and are more likely to lead those organisations they steer into extinction. By John Harte, the Managing Partner at Integrity Governance ( pictured ) .
When it comes to diversity on boards much of the debate to date has quite rightly focused on the importance of demographic diversity. The representation of ethnic minorities, women, LBGT and those with disabilities, for example. Demographic diversity remains very important, but it is one of the five drivers of diversity on boards that we have identified that help to deliver effective decision making and good governance.
The four others include:
1-Diversity of skills. The board of a marketing agency should not be made up entirely of marketers, for example, as they will all have a similar outlook. It’s vital to have directors with different skill sets, such as finance, operations and IT. Today, it’s particularly important to have a board member skilled in digital because of digital disruption being a key driver of business success. This is even more critical with the pandemic supercharging the move to online across all sectors.
2-Diversity of experience. Do the directors have the right experience based on where the organisation needs to head? And can they help the business get there? For example, if acquisitions are a key objective does anyone on the board have experience of acquiring businesses, and in aiding an organisation to successfully navigate through the process? In this case ensuring that the board has directors who bring merger and acquisition experience will be crucial.
3-Diversity of thinking styles. Some directors may focus more on oversight and compliance and others on foresight and the future of the business. Alternatively, there may be directors who push for fast change and others who may be more cautious. A good mix of these types of thinking styles in the boardroom is what is needed for them to be effective. It’s also worth bearing in mind that effective boards are those well equipped to deliver value in their four lines of sight – oversight, hindsight, insight and foresight. Boards must have directors who think across these four areas.
4-Diversity of circles of influence. This is important in ensuring the interests of the business are represented amongst groups that could impact on their future success or failure. Therefore, having directors with links to or contacts on the appropriate regulatory bodies, and / or local or central government is a must have for many.
In our experience true board diversity is broader than any one of the five drivers of diversity™ we have identified. Only boardrooms with diversity across these five areas will deliver wider perspectives, improved decision making and outcomes.
However, it’s imperative that effective boards know that diversity does not come at the price of merit, and it’s equally important to realise that diversity without inclusion is simply a box ticking illusion. It’s inclusive boards which welcome new directors from different backgrounds and with a range of thinking styles that will reap the rewards and gain added value.
Diversity is one factor in delivering board effectiveness
Taking a step back, it’s important to recognise that diversity is one of five factors that help boards to be effective. The others include having role clarity, so directors know where they need to add value. Secondly, ensuring effective board processes are in place, particularly for reviewing the performance of directors and the CEO, along with training, succession, transition and induction plans, to make sure the board remains fit for the future. Thirdly, it’s strong relationships in the boardroom that support the stewarding of the creation of value; and finally the board must build a good culture aligned with the values of the business.
In summary
As we come out of the worst of the pandemic now is the perfect time for boards to ask how fit is the composition of their board for the future? In particular, how well does the board match up to the five drivers of diversity™? The composition of the board, beyond just demographic diversity, is something directors need to regularly assess to ensure they deliver good governance, and help drive effective decision making in the long term. Ideally, they should also look beyond diversity and consider the four other factors that drive board effectiveness to ensure it is truly adding value with good decision making.
