There is a growing consensus that more diverse boards lead to more growth, innovation and ultimately, profit. Some studies claim more diverse boards lead to better market performance, while others have found no relationship between the two matters; the level of impact is not clearly proven yet, though evidence is beginning to mount. While that question might be up for debate, most companies strongly believe that what State Street calls “the responsibility factor” means that addressing equality issues by introducing D&I initiatives at board level is imperative.
There is much enthusiasm around making space for new voices in the boardroom, but there are also concerns. Among women, there is a strong desire to join boards where their industry experience and insights are valued, as opposed to tokenistic efforts where they are appointed purely based on their gender. There are also concerns around diversity of ideas, where boards may take a progressive approach to hiring women, people of colour and members of the LGBT+ community, but hire only from Ivy League universities, resulting in elitism and the potential for groupthink.
Quotas and term limits can be controversial. Diverse candidates tend to be younger, since the traditional pipeline of candidates to boards was accessible only to those who were older, white and male. However, a parallel challenge appears when board members who fit that description are asked to step aside – leading to allegations of ageism. In the world of tech, where youthful vibrancy has always been a valued commodity, IBM and Hewlett Packard are both facing lawsuits based on alleged ageism. A board that becomes outwardly diverse but fails to remain inclusive to its older members has undermined its own goals.
Most boards will continue to need and value the input of long-established members. The experience of having gone through multiple economic cycles is of particular importance; a board member who went through restructuring after the 2008 crash is likely to have extensive input if their board is looking at restructuring as the result of the pandemic. Meanwhile, other areas like digital transformation and cybersecurity are likely to be dominated by their younger counterparts who have come up in these areas.
Boards should hold regular discussions on what expertise they should be looking for to support the organization. Finding diverse candidates means looking beyond traditional pools. At board level in particular, there is always the risk that hiring will happen informally on a golf course, omitting any candidates who are not already part of such circles. Subcommittees may be a good approach to ensure a rigorous process is in place, while the use of external consultants with broader networks can also help.
Boards should consider the skill sets the organization needs to fulfill its goals for the coming years. If expansion plans are on the horizon into new geographies or sectors, ensuring the board has some expertise in these areas is wise. Cultural “fit” can be a pretext for hiring more board members who think in the same way, so it’s less important to have that than it is to hire for good listening and communication skills.
This content was originally published here.