Why diversity on boards is good for business
By Alison Kirkland
If the role of the board of directors is to support and advance the strategic direction of an organization, one might assume that a group of like-minded individuals would be most effective in achieving that goal. The growing body of research and intense discussion around board diversity, however, is showing the opposite to be true.
Diversity isn’t about rogue directors with their own agendas, but rather individuals with different knowledge and experiences, who will trigger discussions that contribute to the success of an organization. The complexity of situations that confront boards and the speed at which the business environment changes means there is not just one answer to a question or a singular way to approach a challenge. Varying perspectives arising from gender, age, cultural background, geography, expertise, and experience mean the insights shared and the questions asked of the CEO result in better decision-making, which, in turn, yields better organizational performance.
The Status of Women Canada report, Women on Boards: A Competitive Edge, identified six key ways that an organization benefits by having women on a board of directors:
- Greater financial performance, including return on equity, share performance, and stock price growth;
- A much larger talent pool from which to select board members when skilled women are included in the mix;
- Heightened innovation and creativity resulting from varied perspectives and experiences;
- Enhanced client insight because the board is more reflective of the composition of society;
- Positive reputation related to corporate social responsibility reflected in good employee relations, ethical product sourcing, strong environmental and human rights records, and support for local communities; and
- Board effectiveness as measured by attention to the strategic direction, accountability through audits and risk management, and more objective decision-making.
According to Sandra Altner, CEO of the Women’s Enterprise Centre of Manitoba, “We were astounded when more than 100 women registered for an information session in Winnipeg about getting involved on corporate boards. Women certainly have a role to play, but just don’t know how to get started.”
The Women’s Enterprise Centre of Manitoba and Status of Women Manitoba have been working to develop a database of qualified women who would be ideal candidates for positions on corporate and publicly traded boards. The goal of the partnership is to create a ‘one-stop shop’ that would facilitate bringing together women with the necessary skills and the boards that need them.
While diversity on a board is necessary and governance requirements may dictate some of the board composition, each organization must determine what diversity means to them. The skill set required is the first and foremost consideration when filling vacant seats. The new database will provide an opportunity for a potential board candidate to outline the skills and experience she will bring to the board table and for the organization to articulate what gaps in the skills matrix it needs to fill. The hope is that streamlining the process will make it easier to reach candidates who might otherwise be unknown to an organization.
Developing an effective, diverse board requires a deliberate approach. One of the first steps in the process is securing the commitment of the CEO and chair. Not only must they buy into the value of a diverse board, they must create a culture of inclusiveness and respect that encourages challenging the status quo. But board members must remember that their role is threefold: Oversight, insight, and foresight.
While governance rules guide oversight, it is insight and foresight that have the most significant impact on the success of an organization. Education, experience, gender, age, cultural background, and geography all inform an individual board member’s insight on a particular subject. When there is diversity at the table, directors may feel more comfortable sharing opinions they might otherwise keep to themselves. Those perspectives fuel conversation around the strategic plan, trends in the market, and big-picture goals — all important fodder for successful decision-making.
Filling vacant board positions can be challenging. The people we admire and associate with tend to think and behave as we do. When it comes to recommending someone for a board position, we draw on that network. Prospective board members must actively expand their network to connect with individuals and organizations where they could contribute as a board member. At the same time, CEOs and the nominating committee must cast a wider net to find those individuals with the skills and perspectives to enhance business success.
There is no shortage of qualified people for boards. Sometimes it takes a bit of looking, but the reward is definitely worth the effort.
Alison Kirkland is the director of communications and client services at the Women’s Enterprise Centre of Manitoba — an organization dedicated to supporting women entrepreneurs as they start and grow their businesses.