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Towards True Board Diversity

For a long time now I have not weighed in on the boardroom diversity debate. I think I have a pragmatic view of this issue, and most people I speak to about it tend to hold similar perspectives. I hope that this post can be read with an open mind, a balanced perspective, and I invite constructive conversations around it if you wish to put forth your [equally valid] views.

Gender ‘diversity’ on boards and in senior management has been the topic du jour for some time now. There is a plethora of articles, opinion pieces, and research that backs up the case for greater representation of women in leadership positions. And so there should be. The gender equality debate has achieved many positive outcomes and continues to do so.

However, I feel like we do ourselves a huge disservice by only focusing this conversation on gender. I want to see us broaden the conversation beyond gender equality. True diversity cannot – and should not – stop at gender alone.

This world is made up of more than just ‘men’ and ‘women’ [particularly now with the definition of gender becoming more fluid]. Of course this shouldn’t come as a revelation. Australia’s anti discrimination laws point to a slew of characteristics that can be used to define (and discriminate) us – race, skin colour, religion, political opinion, national extraction, social origin, age, medical record, criminal record, marital status, impairment, disability, nationality, sexual preference, and trade union activity, just to name a few.

Case in Point

To illustrate my point, I will use Adelaide as an example. Using 2011 Census data*, there are approximately 19,600 people living in the city of Adelaide; with 51.7% being male and 48.3% being female. When considering ethnicity 27.4% identify as having English ancestry, 18.7% Australian, 16.6% Chinese, 5.9% German, and 3.8% Indian to name a few. Furthermore, 32% of people in the City of Adelaide, came from countries where English was not their first language.

Roman Catholic was reported as the main religion (15.3% of population), with 5.6% following Buddhism, 3.2% Islam, and Greek Orthodox and Hinduism each followed by 2% of the population. Surprisingly, the number of people reporting as being “non religious” experienced the greatest change, increasing from 26.1% in 2006 to 34.1% in 2011.

In the greater Adelaide area, 55.3% of people are aged over 35 years. 3.2% of the population in the City of Adelaide reported needing help in their day-to-day lives due to disability.

When considering education level, 46.3% of the greater Adelaide area holds no formal qualification, with 18.2% having attained a bachelor or higher degree.

I could keep going. As you can see, we are all made up of a wide range of non-gender characteristics. Why then are we focusing the diversity conversation on gender alone?

Why should diversity matter?

A study cited in the Strategic Management Journal demonstrated that both gender and ethnically diverse boards are more likely to:

  • Create an environment in which the diversity that female directors bring is welcomed and viewed favourably.
  • Have nominations that are based on candidates’ qualifications
  • Result in a more ethnically diverse female body that mirrors the ethnic diversity of firms’ stakeholders
  • Accentuate the positive impact of female directors on accounting performance
  • Have shareholders who believe that ethnically diverse boards are more attentive to diverse needs and better protect their interests, and hence view favorably boards’ gender diversity.

Research by McKinsey demonstrated that more diverse companies were better able to secure top talent employees, improve their customer focus, increase employee satisfaction, and improve decision making, leading to an ongoing cycle of increasing returns. McKinsey suggests that even “diversity in age, sexual orientation, and experience (such as a global mind-set and cultural fluency) are likely to bring some level of competitive advantage for [diverse] companies.”

What this means for boards

In my “sophisticated” straw poll of my fellow board directors, the majority agreed that the board should represent and reflect the stakeholders and/or customers that the organisation currently services, or wishes to serve in the future. Often this is not just a ‘men’ or ‘women’ demographic.

For example, if your business has a strategic goal of expanding into China, you should strongly consider having someone from China, or who has a deep and rich understanding of or experience in Chinese culture, on your board.

Diversity should not start and stop in the boardroom. McKinsey’s study demonstrated that “companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians, [and] companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.” McKinsey concluded “… diversity is probably a competitive differentiator that shifts market share toward more diverse companies over time.”

Having proactive recruitment policies, utilising creative recruiting strategies, and being open to having staff work in different ways (e.g. remote workers) opens the organisation up to accessing a diverse workforce.

What this means for future leader development (a cause close to our hearts)

Programs with the objective of developing our future leaders should involve a diverse range of individuals. This diverse learning environment provides a realistic context for participants to grow, develop, and understand how to work with people from different cultures, genders, age, life situations, and backgrounds.

Organisations have the opportunity to take advantage of the benefits that a diverse leadership team delivers. The higher returns that diversity is expected to bring – as demonstrated in the McKinsey study – shows that businesses are better off to invest and facilitate true diversity in their organisations sooner rather than later.

 

Diversity in the boardroom and organisation is a cause we should all be championing. It can produce tangible benefits to the board team and staff. I encourage your board to introduce methods to increase its diversity across the organisation.

I’m interested to hear what your thoughts are on diversity in the boardroom.

*All statistical data retrieved from id.com.au on 21 June 2015.

newsletter for new and aspiring company directors

February 14, 2017

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Get on Board delivers education and development courses that are open to individuals from all professional backgrounds and all types of industries (public, private, NFP, sporting organisations and clubs, etc.). Get on Board focuses on aspiring directors – those people looking to join a board in the near future – and on new directors – those who are currently in their first to fifth year of sitting on a board. Everything that we do is geared towards developing the corporate governance skills, and the business, strategic and financial acumen of new and aspiring company directors.

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