Shaping Tomorrow’s Leadership: How Important is Board Diversity?

In 2024, organisations embracing board diversity in the race for gender equality lived experience, ability, and expertise are better positioned to innovate and thrive in global markets. While many recognise the importance, effective implementation can be a challenge.

 The Case for Diversity on Boards

An organisation’s performance is determined from the top down, meaning a truly diverse board can impact the profitability, strategy, productivity and effectiveness of the entire business. Companies with diverse leadership can far outperform their less diverse peers and competitors.

Diverse Group in a meeting room discussing diversity on boards

Profitability

Research overwhelmingly supports the idea that companies with diverse boards are more profitable. According to a 2023 McKinsey study, companies with gender-diverse boards are 27% more likely to have better financial outcomes, while those with ethnically diverse boards have a 13% greater chance of outpacing competitors. Board diversity empowers companies to create more resilient strategies. This is because diverse boards bring a wider range of perspectives and insights, allowing companies to understand better and cater to diverse markets.

Diverse boards also reduce the risks of groupthink, where homogenous teams may fail to challenge each other’s assumptions. This leads to more strategic decision-making, directly affecting the company’s bottom line, and improving a company’s reputation with investors, employees, and consumers, which results in higher stock prices and better market performance.

Innovation

Beyond profitability, workplace diversity, equity, and inclusion on boards contributes to innovation, with different perspectives bringing fresh ideas, and more advanced problem-solving. Look closely at companies already on the map for championing board diversity and you’ll see a direct correlation between board diversity and innovation.

Mastercard

Mastercard has consistently promoted diversity at the board level, with its directors representing a range of genders, ethnicities, and experiences. This diversity has played a role in the company’s innovative push towards digital transformation and financial inclusion with initiatives such as Digital Doors, which helps minority-owned small businesses go digital and stay competitive. Mastercard’s ability to innovate and serve its diverse global customer base in this way is a reflection of the diversity of its leadership and their remit to bring inclusive ideas to market.

Johnson & Johnson

The Kenvue board (formerly Johnson & Johnson) comprises individuals from diverse racial, ethnic, and gender backgrounds and thus directly contributes to their innovation in healthcare. They’re currently at the forefront of creating culturally tailored healthcare products and campaigns in women’s health and skincare, for example with their Neutrogena brand offering products designed for different skin tones and types, reflecting a commitment to inclusivity that stems from leadership-level diversity. Here, board diversity helps the company tap into new markets and create products that meet the needs of a wide range of consumers.

Brand Perception

A diverse board can significantly enhance both brand perception and employer branding, particularly as organisations are increasingly evaluated on their commitment to diversity, equity, and inclusion (DEI) by Millennials shaping the workforce. The result is an organisation that’s more appealing to customers, employees, and investors in workplaces across all industries and levels of governance.

Unilever

As recurring themes of sustainability, corporate accountability, inclusivity, and equality continue to dominate the headlines, customers are prone to align with brands that reflect their values. When Unilever committed to board diversity, the move to improve internal governance reinforced the company’s brand image as an advocate for sustainability and social responsibility.

Citigroup

Citi has also consistently shown a commitment to diversity, with over 50% of its directors coming from underrepresented groups, including women and people of colour, reflecting Citi’s global customer base and strengthening its image as a forward-thinking, inclusive financial institution breaking down barriers in the traditionally male-dominated banking industry.

Salesforce

In 2023, the Salesforce board of 13 included six women and three people of colour. This diverse make-up plays a key role in Salesforce’s brand as an innovator and a leader in social justice. By showcasing its commitment to diversity at the highest levels, Salesforce has positioned itself as a progressive company in the tech sector and the company’s dedication to DEI continues to bolster its employer brand, attracting top talent who are drawn to its inclusive and purpose-driven culture.

Best Practices for Achieving Board Diversity

Creating a diverse board isn’t just about filling quotas. Tokenism – appointing individuals simply for the appearance of diversity – can be a damaging practice, undermining the integrity of a board and leading to poor governance outcomes. Instead, boards should focus on genuine talent acquisition with a holistic approach to achieving board diversity. This should include a recruitment strategy developed with tools such as board skills matrices and board assessments.

At Corporate Diversity Pathways, we support organisations to create tailored leadership development strategies. To get the maximum benefit, we recommend a combined approach commencing with a Hogan certified Board Assessment to identify the essential characteristics required for board effectiveness. The assessment provides boards with the opportunity to gather feedback from each other about thegroup’s performance, culture, and oversight including identifying gaps in expertise, gender representation, and broader DEI metrics. This is complimented by a Board Skills Matrix to map current and future skills, experience, and perspectives required for effective governance and resilience. This approach ensures that all appointments are made based on a deep understanding of the board’s strengths and opportunities across people, culture and oversight.

diverse team members during a meeting about the importance of board diversity

Transformative DEI Consulting Services

Our transformative DEI consulting services are driving real change as the organisation’s we partner with approach diversity on their boards with strategies grounded in science and data. We focus on intersectional diversity and aim to recruit boards made up of people from diverse ethnicities, age groups, and socioeconomic backgrounds, while also ensuring gender balance.

As an organisation with world-class DEI consultancy expertise, we’ve witnessed firsthand that when diversity encompasses cognitive diversity – varying approaches to problem-solving, leadership styles, and perspectives shaped by personal and professional experiences – organisations can reap the benefits of aligning corporate ethics with the values of increasingly conscious consumers and candidates.

If your organisation is ready to take the next step toward board diversity we can support through structured recruitment processes, independent interviews and diversity on boards training for the nomination committee to tackle unconscious bias and prepare your organisation for future success.

Contact us to discuss partnering with CDP to develop and implement effective diversity strategies for your board.

Ready to create a workplace where everyone thrives?

Our evidence-based solutions are designed to transform your company culture, enhance team collaboration, and drive sustainable success.

Take the first step towards a more inclusive future. Connect with us today!