Is your Board of Directors diverse enough? Here are 5 reasons why it should be
Every great company has a great board behind it. A great board supports the CEO and does everything in its power to help the company move forward. The job of most Boards is to monitor risks, set strategy, provide guidance with regards to recruitment, and deal with succession planning. For a Board to be highly effective, it needs to comprise of individuals who were or are at the top of their game professionally and have a successful track record in the industry. Building a diverse Board is essential as diversity ushers in new insights about markets and business practices.
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Here's why company Boards need to lean towards diversity:
Better decision-making
When there is diversity on a company Board, multiple views are offered on the possible outcomes of any action. Because of a variety of views being put forward, the Board members are likely to consider the risks, implications, and consequences of possible actions. If a company’s Board is comprised of one type of people, they will have a hard time grappling with the problems they are faced with. Having Directors from diverse backgrounds will allow the Board to deal with risks from many angles.
Challenging the status quo
Constructively challenging the status quo from time to time is a healthy practice and more and more Boards need to indulge in it. If a Board wants to constantly challenge itself to keep pace with the changing dynamics a company undergoes, it needs to have diversity. A diverse Board is able to indulge in robust dialogue of differing views that are offered respectfully and listened to patiently.
Protection against groupthink
Groupthink is a phenomenon that acts as a barrier to good judgment. It is a form of self-censorship that leads to the failure of critical thinking because the group consensus overrides one’s ability to present alternatives to an unpopular opinion. It occurs when a majority of the group members think in the same fashion. This is why diverse Boards are important. They protect the company against the dangerous phenomenon of groupthink.
The trickle-down effect
When your company’s Board consists of a diverse group of people, it sets an example within the organization. This is better known as the trickle-down effect. When the Board supports gender equality and members from different cultural and racial groups, the company opens itself to hiring employees from a variety of backgrounds.
Increased range of services
When there is a diverse collection of people at the Board level, there are different skills, languages, and experiences at play. This allows a company to provide customer service to a greater amount of people. For instance, when a hotel employs people of different races, it will have the confidence to accommodate guests from a variety of races as well. To put it simply, having a diverse Board increases the range of services a company can offer.
Diversity in perspective can take a company a long way. Diversity leads to better risk management and more innovation, and therefore companies are constantly advised to put together a diverse Board of Directors.