There is a lot of focus currently on the topic of diversity on boards. The underlying premise for diverse boards is no longer about good corporate citizenship but rather about contributing value to a business, and that makes good business sense.
Top 5 Business Reasons for Diverse Boards
- Improve corporate financial performance. Studies have shown that companies with more diversity on their board have had higher financial performance in three important measures: Return on Equity, Return on Sales, and Return on Invested Capital.
- Enhance decision-making quality. Diversity of thought comes from, race, gender and ethnicity and extends to age, culture, personality, skills/expertise, educational background and life experiences. More diversity on boards helps avoid ‘group-think’ and increases independence, which can enhance the quality of decision making on the board.
- Broaden networks to tap into for board renewal. Board members should ask themselves:
~Does the composition of the board represent the employee base, the customer base or business partners/competitors?
~What skills or perspectives do we need to broaden that is not currently on the board?
~What is our diversity mandate and what steps have we taken to increase board diversity? (For more information on diversity mandates, please read my related post: Are you advancing your Board Diversity mandate?)
- Foster innovation and creative thinking. Functionally diverse teams are more innovative, set clearer strategies, are more likely to react to competition, and are quicker to adapt to organizational changes.
- Enhance board effectiveness. Boards need to be accountable for their own actions and this begins with evaluating their own performance through annual board assessments.
If you are building a diverse board because it makes good business sense and are seeking qualified diverse board candidates, please email firstname.lastname@example.org.