Why C-Suite Diversity Matters
September 4th 2023 | Posted by Dave
Diversity is a common topic for discussion in business. Despite the conversations, progress towards embracing diversity is slow, although changes are happening.
In 2022, 36% of UK board seats were held by women compared to 24% in 2016, and 61% of boards had at least one director who identified as ethnic.
The progress, although slow, shows there is desire to improve diversity. This is partly due to new FCA rules regarding the reporting of diversity and partly as a result of the benefits diversity brings which we consider more closely below.
When businesses are considering diversity at board level, one of the biggest incentives is enhanced financial returns. It has been shown that UK-listed firms with diverse boards have better profits when compared with white male dominated boards. This difference is likely due to the range of backgrounds and experience at the table.
An innovative approach
Having a diverse board in place helps to avoid the “groupthink” scenario that can happen when all board members have the same perspective on a situation because their experiences are similar. This leads to a more innovative business approach. For example, companies with female board members tend to be more focussed on research and development than mergers and acquisitions which is often the focus of all male boards.
An engaged workforce
Employees tend to feel more valued and supported when they see people who represent them at board level. So, having a diverse board means employees feel the board understands them and is more likely to have their best interests at heart. This creates a more inclusive and productive environment across the business.
An environment that is open to change
Change is a part of any successful business, as it evolves and grows, so embracing change at board level is essential. The Harvard Business Review discovered that diverse boards more readily embraced transformation while working to reduce attached risk. The Review found that when female board members are present words such as “create”, and “transform” are used more often than more risk associated language such as “chance” and “bold.”
The advantages of a diverse board are obvious. However, it’s important to create such a board in the right way. This should never just be a numbers exercise where people are put in place simply to fulfil quotas. Diversity is more about making it possible for people from diverse groups and backgrounds to progress to board level. Having this environment in place means that a diverse board can be created organically.
An organic approach to diversity works best because it does not feel forced. The business simply welcomes a variety of people onto its board and this approach continues on an ongoing basis. As this happens, the organisation increases its profits, improves employee satisfaction and performance, and evolves to remain competitive and succeed. Being in this position enhances the reputation of the business and makes it an attractive choice of employment for the most talented young professionals who welcome an inclusive working environment.