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Why Creating An Inclusive Board Is Vital For Your Company

June 30th, 2015 by

Having a diverse board has a trickle-down effect to the rest of the company, and the studies leave no room for doubt here: gender and ethnic diversity is very, very good for business.

The studies are clear on this one: having women on the company board is good for business. Earlier this spring, non-profit organisation Catalyst reviewed the masses of research done on this topic to find there is a strong correlation with having women on the company board and a whole host of positive factors: higher return on sales, share price growth and lower risk of insolvency.

All the UK’s FTSE 100 companies have women on their boards now, a government report from March showed. This is good news for the rest of the companies too: it’s important for women on the lower rungs in the company to see that this is a company where it’s possible to make it to the top. This trend is something firms should be encouraging; companies with better gender diversity “had fewer instances of governance-related scandals such as bribery, corruption, fraud, and shareholder battles”, according to the MSCI.

The boards of the UK’s biggest companies now contain 23.5% women, according to the government report. This is progress, but there’s a way to go still. Research from McKinsey shows that 74% of men agree or strongly agree that diverse leadership teams including significant numbers of women generate better company performance, but there’s a lack of awareness that needs to be overcome in order to fix the shortfall. “Building men’s awareness of the issue is of great importance, since the less aware they are, the more they tend to believe that gender diversity measures are unfair. More awareness brings more support,” concluded McKinsey.

Long hours and difficulty securing flexible work hours are often cited as obstacles for progressing at work when it comes to people who care for young children. While this is also increasingly of concern to fathers, traditionally mothers have been the ones to ask for this. While allowing people to have flexible work hours is a great start, companies need to make sure that people aren’t penalised for taking advantage. A study from EY found that 9% of employees at companies with a flexible work policy reported that they’ve “suffered a negative consequence” by utilising it, such as getting passed over for a promotion.

Looking beyond gender, ethnic diversity in the office has also been linked to a more innovative environment, which in turn has a positive effect on market growth. But also here, the makeup of the board has wide-ranging implications for the rest of the company, according to findings by the Center for Talent Innovation: “Without diverse leadership, women are 20% less likely than straight white men to win endorsement for their ideas; people of colour are 24% less likely; and LGBTs [lesbian, gay, bisexual, trans] are 21% less likely.”.

The reason why this is so important, suggested the study authors, is that when at least one member of a team has traits in common with the end user of a product, the result is that the entire team then understands that user better: “A team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client.”.

Having said that, having a diverse workforce won’t mean much if the culture isn’t inclusive. People need to feel like they can air ideas without judgment if a company is to truly benefit from what everyone has to offer. “Leaders who give diverse voices equal airtime are nearly twice as likely as others to unleash value-driving insights, and employees in a ‘speak up’ culture are 3.5 times as likely to contribute their full innovative potential,” found the Center for Talent Innovation study.

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