Time for change: diversity dynamics in the boardroom
The Financier Worldwide article, “Time for change: diversity dynamics in the boardroom,” quoted Russell Reynolds Associates Consultant Sarah Galloway on the relationship between boardroom diversity and a company’s operational performance and how the appointment process can play a key role in promoting those underrepresented at board level. The article is excerpted below.
Diversity is one of the key buzzwords of our age. It is a concept deemed increasingly desirable across many spheres, particularly in the corporate world, where it permeates from the shop floor up to, and including, the boardroom.
A 2020 report by the Parker Review Committee ‘Ethnic Diversity: Enriching Business Leadership’, which explores the ethnic diversity of UK boards, reveals that, as of 31 December 2019, 37 percent of companies surveyed in the FTSE 100 and 69 percent of the FTSE 250 have not met the target of at least one ethnic minority director on their board. In addition, only 6.8 percent of all FTSE 350 companies had directors of colour on their boards, with eight companies accounting for nearly 25 percent of those that do.
“While there has been some movement in reaching the targets set in the 2017 Parker Review Committee report, overall progress among FTSE companies has not been as expected,” points out Steve Varley, chairman of EY UK, a co-sponsor of the report. “Building a talent pipeline of high potential diverse leaders and pursuing an open approach to reporting on the diversity of your board can have a real impact on long-term culture. Clearly, more needs to be done.”
“There is a growing body of evidence that shows diverse business leadership teams have better business outcomes,” says Sarah Galloway, an executive search and assessment consultant at Russell Reynolds. “A more diverse board will bring a wider range of viewpoints to the table, leading to broader and more robust debate about the issues at hand. This increases the chances that a business will better address the needs of all its customers, more fully understand the full range of risks in decision making and ultimately create a more inclusive and engaged culture for its employees.”
On the flip side, a less diverse board can make incisive debate less likely, leading to generally unproductive discourse.
Boardroom diversity is very much about highlighting differences in approach and experience. To this end, one of the key areas for promoting those underrepresented at board level is the appointment process.
In the view of Ms Galloway, there are many areas companies can improve to access diverse talent. “Eliminate bias from role specifications, replace ‘culture fit’ with values alignment, be open to non-traditional backgrounds, be prepared to take someone with no previous board experience, carefully manage transitions to set new directors up for success, and use creative strategies such as ‘shadow boards’ to develop a pipeline of talent,” she suggests.
Today, the pressure on companies to be more diverse and representative in the boardroom is intense. To embrace the benefits that greater diversity brings, companies are reviewing their policies and procedures, ably supported by a burgeoning number of campaigns, movements and initiatives.
For example, in the UK, Lord Karan Bilimoria, the Confederation of British Industry’s (CBI’s) first ethnic minority president, is spearheading an initiative to make FTSE 350 boardrooms more diverse. Called ‘Change the Race Ratio’, the initiative has set a target for at least one racially and ethnically diverse board member at every FTSE 100 company by the end of next year and at every FTSE 250 firm by 2024.
“There will be an increasing demand for the leadership of companies to reflect the world they operate in, meaning a greater focus on ethnic, as well as gender, diversity,” expects Ms Galloway. “This is reinforced by the Black Lives Matter movement together with the Parker Review target in the UK of ‘One by 21’. Evolving workforce engagement strategies and a focus on diversity below board level means the role of a board member will go further than ever before.”
To read the full article, click here.