How to Increase Your Board Diversity And Why it Matters
Considering the tight link between board diversity, better decision-making and higher performance, it only makes sense for companies to seek more diversity for their top leadership.
According to theBoardlist Index, more than 92 percent of board seats are held by men.
“There has been so much talk lately about board diversity,” says YPO’s Diversity and Inclusion Director Clair Romera. “According to The 30% Club, research suggests that 30 percent is the proportion when critical mass is reached, when the voices of the minority group become heard in their own right, rather than simply representing the minority.”
Quickening the climb
While efforts to elevate the population of women board members are many, the ascent has been slow to reach the critical mass Romera speaks about. According to Kim Polese, founding member of the theBoardlist, a YPO strategic partner, success varies among large and small businesses.
“If you look at the stats for Fortune 500 and 100 boards, the percentage of women is higher compared to those at the startup end of the scale, which is overwhelmingly male,” says Polese, who also is Co-founder and Chairman of CrowdSmart, a company that applies prediction science to startup investing.
Lacking the resources and public pressure of larger companies, smaller businesses tap into their own networks. “Unless there is a concerted effort and actual resources being devoted to addressing more diversity, the tendency is to nominate who you know,” Polese continues. “It’s not that there aren’t talented female candidates. It’s just that people source from their own networks, and a much higher percentage of people in those networks are men.”
Fellow founding member of theBoardlist Chris O’Neill says improving board diversity takes changing mindsets and establishing better ways to match candidates and companies.
“If you want to bring about change, you first have to have the right mindset. This has become less of a challenge, but for many decades that wasn’t the case,” says O’Neill, who is also former Chairman and CEO of Evernote and current board member of Gap, Inc. “People have moved beyond justifying the status quo and lack of diversity. Most companies truly want more diversity and are proactively trying to add more diverse and under-represented candidates into the boardroom.”
“There are plenty of high-caliber women and diverse board candidates who haven’t been able to easily connect with open roles before, so theBoardlist is an effective matchmaker,” O’Neill says. “It also greatly reduces the friction in identifying high-quality, diverse potential board members.”
Doing well by doing good
Research also shows gender diversity is linked to financial performance. In one study, companies in the top-quartile for gender diversity on executive teams were 21 percent more likely to outperform on profitability.
“There’s a growing body of evidence suggesting that diversity is not only the right thing to do, it’s also great for business,” says O’Neill. “You drive better results, create more shareholder value and make stronger connections with a diverse population of customers and potential customers.”
Polese agrees, especially when it comes to tapping a growing market of women. “If a large percentage of your customers are women, and you have a very small percentage of women on your board, you’re missing an opportunity to create the best strategies around customer success and new product development,” she says. “That’s why you need to make sure your board is reflective of your customer base.”
Diversity also brings new viewpoints to boardroom decisions. “Quality decision-making involves considering a range of different possibilities, and that’s only possible if you have people who have diverse backgrounds and perspectives,” says O’Neill. “In my experience, when you bring those diverse perspectives to bear, the quality of decision-making is consistently higher.”
Polese calls this being cognitively diverse, with different perspectives, backgrounds and experiences affecting how board members think. “People who come from similar backgrounds and experiences think similarly. So you can miss the opportunity to consider different angles when making difficult, complex decisions,” she says. “Cognitively diverse teams make better decisions because they’re not in an echo chamber.”
On the horizon
The large number of millennials entering the workforce will impact the pace of change. “Millennials are much more aware of diversity issues, so diversity will become a given,” O’Neill says. “I think the net of it is, you’re going to see much more women on boards, and boards will be better because of it.”
Polese also believes diversity is on a positive future path. “Everywhere you look, there are new efforts emerging around diversity, and the attention on this issue is higher than ever,” she says. “That will really start to drive change in a way that I haven’t seen since I started my career. While it won’t happen within a few years, it may happen within a generation, as more women assume leadership roles in the C suite. But we don’t have decades to wait because diversity really does matter.”
To learn more about YPO’s partnership with theBoardlist and how YPO members can benefit, read more here.