Both sides of a diverse board and how to do it the right way

You have probably seen the buzzworthy headlines about how diversity at the board level is a must, and how you will see immediate improved operating results. However, according to a 2019 article Published by The Harvard Business Review, evidence that board diversity benefits firms is mixed. In fact, A 2015 meta-analysis of 140 research studies found a positive link between female board representation and accounting returns, but no significant correlation with market performance. Other studies have shown no clear relationship between diverse board representation and overall performance.

At TXT we strongly advocate diversity across all levels of companies and acknowledge that the quickest way to have an immediate impact is from the top down. So we were naturally surprised at the findings. After all, it is only logical that board diversity would help your firm’s performance through a combination of the following contributions:

• Multiple Perspectives: Diverse board members bring varied viewpoints, experiences, and backgrounds, fostering creativity and a better understanding of stakeholders.
  
  
• Enhanced Problem-Solving: Diverse expertise and backgrounds lead to innovative approaches and effective strategies, adapting to a changing business landscape.
  
  
• Improved Governance: Diversity prevents groupthink, enabling constructive debates, rigorous analysis, and informed decision-making.
  
  
• Better Representation: Diverse boards showcase inclusivity, build trust, attract top talent, and reflect the broader society.
  
  
• Financial Performance: Research links diverse boards to higher financial performance, driven by improved risk management, innovation, and decision-making.

While further research has found stronger correlations between diversity and performance, and the HBR article goes on to provide several cases of how a diverse board increased earnings, bettered company culture, and improved companies on the whole, we resonated with the following point – diverse talent knows when you are serious about doing the right thing, and when you are just pursuing them to check a box. In fact, there are several cases of top talent backing out of an offer because they felt they were being “tokenized”.

It is only natural that there is no correlation between diversity and performance if you are just going through the motions. The most successful boards are those that are open-minded, embrace change, and are willing to walk the walk.

We have helped our clients recruit top diverse executive and board-level talent and can attest to that first-hand. In fact, over the last two years, nearly 80% of our hires have come from diverse backgrounds.

If you are interested in learning more about our services in boardroom diversity, please get in touch!