“Many conversations about diversity and inclusion do not happen in the boardroom because people are embarrassed at using unfamiliar words or afraid of saying the wrong thing—yet this is the very place we need to be talking about it.”
Inga Beale, Former CEO Lloyd’s of London
There’s no doubt that board diversity and performance are inextricably linked. In PWC’s latest annual Corporate Director’s report, 93% of the directors said diversity around the boardroom table brings unique perspectives, and 85% said that it enhances board performance. But creating and sustaining an inclusive culture may be one of the hardest challenges a board can face.
Looking at the current situation, it’s clear that UK businesses still have some way to go. According to a new global report by Deloitte, ‘Women in the boardroom: A global perspective’, women leaders on the continent boast the largest share of global boardroom seats, led by France (43.2%), followed by Norway (42.4%) and Italy (36.6%). The UK saw a 7.4% increase of women holding UK board seats in 2022, but its boardroom diversity still lags behind six European countries as well as New Zealand and South Africa.
Of course, diversity and inclusion is not just related to gender. There are other important dimensions of diversity that government, regulators, businesses, and investors should consider, including ethnicity, LGBTQ+, disability, neurodiversity and socio-economic background.
Addressing the gap
So how can boards begin to meaningfully address the gap? As a start point, leadership teams need to be able to identify the problem and have a willingness to tackle it, which, in itself, is no small task. Changing the culture of an organisation runs much deeper than simply tracking D&I metrics and a few token hires. Recruitment on the basis of identity, however well-intentioned, is problematic and goes nowhere near far enough to ignite lasting change.
Instead, it’s important to consider how the leadership team is setting the tone for the rest of the business. Increased ethnic minority and all-gender participation at every level are vital if businesses want to have a truly inclusive culture. To achieve the strongest company boards requires diversity of thought and experience, which will only be possible if there is an inclusive pipeline of talent.
Towards lasting cultural change and the ESG framework
Many studies have shown that the only way to effectively change the culture of an organisation (and keep it that way) requires staff engagement and education at every level, not by leadership decree. At board and senior leadership team level, this means showing real commitment to change and empowering staff across the company to challenge and support the development of D&I proposals. This process provides a platform for improvement, identifies fresh ideas and new leadership, and gives confidence across the company that all voices are valued.
One area that has seen an interesting development since the pandemic, is an increased focus on the “ESG” framework. This is used by investors who take environmental (E), social (S) and governance (G) factors into account, alongside - and sometimes before - financial indicators. To be ESG compliant, the board must take steps to understand its current gender, ethnicity and LGBTQ+ breakdown at all levels of the business.
Previous D&I policies in the past haven’t been enough to drive the cultural change that’s needed. Now, with increased focus on ESG, an organisation’s D&I strategy is all encompassing and much more likely to meet the needs of what investors, and society as a whole, are looking for. Tracking metrics including gender parity will enable boards and leadership teams to set appropriate goals, manage risk, design effective initiatives, demonstrate D&I successes to stakeholders, and engage their workforces – resulting in better business outcomes.
Key actions for boards
It’s clear from the research and real world evidence that specific D&I strategies are needed at both board AND organisation level, here’s why:
It’s the right thing to do! Why wouldn’t you want everyone to have a fair shot at progression? It’s a reality that should be deeply held by us all.
Investors are increasingly interested in D&I and are looking to the board to step up to the mark and lead by example.
Clients and customers are expecting more from the organisations they deal with and buy from, and supplier diversity compliance requirements are becoming more common.
Employees and potential recruits are looking more to organisations that have a sense of purpose and are doing well on D&I metrics, critical with talent in short supply.
D&I requires genuine hard work and sustained effort - cultural change cannot be shifted overnight. There is no ‘one size fits all’ approach, and sustainable change requires leaders to embrace uncomfortable conversations and confront the unknown.
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