Multidimensional board diversity should include social diversity (e.g., age, race, and gender) and professional diversity (e.g., skills and experiences). Diverse boards are more equipped to navigate complex business decisions and can better consider the implications of such decisions.
This article discusses the benefits of board of directors diversity and how organizations can recruit board members with diversity in mind.
Benefits of Board of Directors Diversity
Given boards’ tremendous responsibility and decision-making power, there is corporate value in maintaining an intentional and continuous commitment to diversity. Diverse boards bring a valuable range of outlooks and opinions and can provide many benefits to their respective organizations, including:
- Additional perspectives—A diverse board can better meet the needs of an organization’s diverse set of clients, customers, and stakeholders. Various perspectives can help tackle ideas from new angles, allowing fresh insights to emerge and disrupt common thinking patterns.
- Improved corporate governance procedures—The board is responsible for establishing a system of rules, practices, and processes by which the company is directed and controlled. With diversity at the forefront, corporate governance practices can become more inclusive, positively impacting company culture and keeping pace with ever-evolving markets and consumer bases.
- Greater conflict resolution capabilities— Different backgrounds and opinions can catalyze expanding viewpoints and improving decision-making processes. Diverse professional and personal backgrounds may also be beneficial in resolving any workplace disagreements that arise.
- Enhanced business practices—A diverse board with a mix of genders, ethnicities, and career experiences are less likely to succumb to groupthink or dismiss new threats to a company’s business model. Since they can better identify opportunities to promote long-term growth, diverse companies are more likely to experience higher financial returns.
- Bolstered risk management tactics—A lack of diversity can open organizations to complex litigation and corporate liability issues. Since diverse boards tend to have better risk management and decision-making skills, such liabilities and risks may be avoided or minimized.
- Higher engagement levels—Implementing improved diversity practices can prevent the board from becoming stagnant by refreshing core skill sets and challenging potentially complacent board culture.
- Stronger compliance measures—Over the past few years, federal and state regulators and major stock exchange have developed standards regarding diversity and inclusion expectations for organizations. Moving forward, organizations must account for board diversity to remain compliant with various laws and standards.
How to Recruit With Diversity in Mind
After an organization determines it may lack diverse viewpoints within its board of directors, it should critically examine and improve how board members are identified and recruited. While there is no easy solution to increasing board of directors diversity, here are steps organizations can take to improve:
- Create more transparent and objective criteria for board positions. Organizations should focus on the skills the board needs rather than the skills it currently provides. Boards can drive skill-based recruitment by creating a board matrix to identify and fill in potential gaps.
- Implement formal performance evaluations for board members. Evaluations can create comparable data for identifying, disciplining, and removing underperforming board members, thus establishing a continuous engagement and improvement culture.
- Avoid replacing “like for like.” Boards tend to instinctively replace existing members with candidates with similar experiences to their predecessors. Diverse recruitment strategies should identify which skills are actual priorities when filling open positions.
- Develop a pipeline of diverse board candidates. Organizations should actively create opportunities to connect with and mentor potential board members, looking beyond existing business contacts to find diverse perspectives.
Multidimensional board diversity should include social diversity (e.g., age, race, and gender) and professional diversity (e.g., skills and experiences). Diverse boards are more equipped to navigate complex business decisions and can better consider the implications of such decisions.
This article discusses the benefits of board of directors diversity and how organizations can recruit board members with diversity in mind.
Benefits of Board of Directors Diversity
Given boards’ tremendous responsibility and decision-making power, there is corporate value in maintaining an intentional and continuous commitment to diversity. Diverse boards bring a valuable range of outlooks and opinions and can provide many benefits to their respective organizations, including:
- Additional perspectives—A diverse board can better meet the needs of an organization’s diverse set of clients, customers, and stakeholders. Various perspectives can help tackle ideas from new angles, allowing fresh insights to emerge and disrupt common thinking patterns.
- Improved corporate governance procedures—The board is responsible for establishing a system of rules, practices, and processes by which the company is directed and controlled. With diversity at the forefront, corporate governance practices can become more inclusive, positively impacting company culture and keeping pace with ever-evolving markets and consumer bases.
- Greater conflict resolution capabilities— Different backgrounds and opinions can catalyze expanding viewpoints and improving decision-making processes. Diverse professional and personal backgrounds may also be beneficial in resolving any workplace disagreements that arise.
- Enhanced business practices—A diverse board with a mix of genders, ethnicities, and career experiences are less likely to succumb to groupthink or dismiss new threats to a company’s business model. Since they can better identify opportunities to promote long-term growth, diverse companies are more likely to experience higher financial returns.
- Bolstered risk management tactics—A lack of diversity can open organizations to complex litigation and corporate liability issues. Since diverse boards tend to have better risk management and decision-making skills, such liabilities and risks may be avoided or minimized.
- Higher engagement levels—Implementing improved diversity practices can prevent the board from becoming stagnant by refreshing core skill sets and challenging potentially complacent board culture.
- Stronger compliance measures—Over the past few years, federal and state regulators and major stock exchange have developed standards regarding diversity and inclusion expectations for organizations. Moving forward, organizations must account for board diversity to remain compliant with various laws and standards.
How to Recruit With Diversity in Mind
After an organization determines it may lack diverse viewpoints within its board of directors, it should critically examine and improve how board members are identified and recruited. While there is no easy solution to increasing board of directors diversity, here are steps organizations can take to improve:
- Create more transparent and objective criteria for board positions. Organizations should focus on the skills the board needs rather than the skills it currently provides. Boards can drive skill-based recruitment by creating a board matrix to identify and fill in potential gaps.
- Implement formal performance evaluations for board members. Evaluations can create comparable data for identifying, disciplining, and removing underperforming board members, thus establishing a continuous engagement and improvement culture.
- Avoid replacing “like for like.” Boards tend to instinctively replace existing members with candidates with similar experiences to their predecessors. Diverse recruitment strategies should identify which skills are actual priorities when filling open positions.
- Develop a pipeline of diverse board candidates. Organizations should actively create opportunities to connect with and mentor potential board members, looking beyond existing business contacts to find diverse perspectives.
The Last Word
Overall, it’s clear that a socially and professionally diverse board of directors can help an organization effectively navigate challenges and improve its company culture, all while mitigating possible risks. For more risk management guidance, contact an InsureGood Advisor today.
