Throughout the history of the corporate world, business leadership has been dominated by men. As new reports surface that link diversity to improved board performance, board diversity continues to be a hot topic. While some companies are beginning to get their feet wet with expanding the diversity on their boards, in most cases, there's still a long way to go.
Part of the reason that boards are moving slowly to make changes related to diversity is that while board directors and executives agree that board performance benefits from board diversity, leaders have trouble defining diversity and they have a way to go in developing new practices to promote the idea that their board values it.
Boards are advisory and governing entities in which board directors and executives complement and balance each other out with their various viewpoints, skill sets, backgrounds and experiences. It will take changing the current longstanding practices and policies to net changes in their results. While that statement sounds simplistic enough, it requires boards and senior leaders to change their beliefs and attitudes first.
Boards will first need to increase their knowledge about diversity to gain a better understanding of what diversity truly means, how it benefits them and other stakeholders, and how they can realistically achieve it.
Recent Research on the Connection Between Board Diversity and Improved Performance
Boston Consulting Group (BCG) did a study of over 1,700 companies in the United States, France, Germany, China, Brazil, India, Switzerland and Austria. The study looked at businesses in a variety of industries and included small, mid-size and large corporations. The study was based on the following six dimensions of board service:- Age
- Gender
- National origin
- Career path
- Industry background
- Education
Linking Board Diversity and Performance
A couple of other interesting, notable and perhaps surprising facts came out of the BCG study. Globalization and technology emerged as additional factors in revenue growth. The study showed that the impact of diversity was highest for companies that had a high focus on digital innovation. The impact of digital technology was measured as a proportion of digital investment to operating expenses. This is certainly an area to keep an active pulse on, as its connection to diversity has the strong potential to magnify innovative efforts exponentially. The other surprising nugget of information yielded from the study was that companies that had significant operations and interests in multiple countries had a stronger connection between board diversity and performance. The range of countries that took part in this study painted a picture of how the development of countries also had a major impact on the connection between diversity and success. Here's what the study showed:- Educational diversity was significantly less in Germany than in India.
- Diversity in age and gender was more apparent in developed companies like the U.S. and France.
- Diversity in educational background was more prominent in developing countries like India, China and Brazil.
- Diversity of national backgrounds made a significant difference in France and the U.S.
- Diversity of industry background played a stronger role in Brazil, China and India.
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