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Diversity in boardrooms is not a box-ticking exercise- it’s a strategic necessity

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Diversity and inclusion in all areas of life is a positive, and business is no exception. But the higher in the corporate hierarchy you look less diverse the picture. Diversity in boardrooms isn’t a PR exercise, it’s a known fact that diverse boards make good business sense. However, there has been a worrying decline in ethnically diverse candidates lately. The numbers were down 12% in 2023 for non-executive board appointments across the UK’s 150 biggest listed companies according to the UK Spencer Stuart Board Index. What is the issue here? Amanda Rajkumar, a board-level HR practitioner and former Adidas chief HR officer, explains…
Last year saw devastating wars, the breakout of generative AI and an increasingly critical climate crisis transform the world we live in. Unfortunately, in times of crisis, businesses tend to default back to prioritising experience over diversity of mindset on their leadership teams and boards – a trend we saw play out last year and looks set to continue into 2024.

Boards are primarily responsible for increasing shareholder value and overseeing the strategic direction of the company, but the composition of these decision-making entities is a key determining factor for the effectiveness and profitability of the strategies they implement.

To achieve change we need diversity in boardrooms

Change and challenge require boards to think broadly. A range of skills, opinions, backgrounds and experience are essential to making sure all the information is on the table to make the best decisions at the right time.

It is easy to wait for a current crisis to be resolved before focusing on improving board diversity, but it takes time to change representation at the top, and there will always be a new crisis to focus on. If you don’t have diverse representation on your board now, that doesn’t reflect well for the diversity of your company further down the line.

In my experience, robust nomination committees, with a clear agenda and mandate to change and improve representation, are key to creating diverse boards. It helps to avoid board members recommending other board members, which is how positions have been filled historically and often leads to very similar individuals sitting on a board together. Groupthink perpetuates.

Time and speed to hire is often one of the biggest blocks to hiring more diverse profiles coming onto a board, so it makes sense to have a nomination committee using internal or external headhunters who pipeline potential candidates passively, well in advance of a board position vacancy. You avoid rushed hires and have the time to consider who will be the best add (not fit).

Giving diversity a chance not just the lone voice is key to inclusivity

Achieving diverse representation on boards cannot be a box-ticking exercise. Focusing on appointing “at least one diverse board member” means change doesn’t have a chance. Targets signal change but must be met with long-term commitments and board culture must change to ensure all voices are heard.

Having been and seen the ‘lone voice’ around boardroom tables, I understand the challenges. It takes a lot of energy to constantly be the voice of difference and can leave one feeling like the outsider.

Too often, I have seen the few diverse board members in a room remain silent in meetings because they don’t feel safe or supported enough to contribute. But these are the exact people we need to speak up and raise opinions.

Enough of token representation

Boards need more than token representation; they require multiple diverse voices to avoid creating perpetual outsiders. Having more than one of something on any board can help lessen this effect.

Diversity in boardrooms is not an option; it’s a necessity. Boards must actively champion and prioritise diversity to reflect the world they operate in, reduce business risk and enhance overall performance. The call for diversity is not about meeting quotas; it’s about ensuring robust decision-making and securing a sustainable future for businesses in an ever-evolving global landscape.