McKinsey’s Diversity Matters report found “a statistically significant relationship between a more diverse leadership team and better financial performance” – meaning having a more diverse board has shown to increase profits. The report went on to explain that more diverse companies have a competitive advantage because they are more able to win top talent. This diversity of experience leads to greater cultural fluency that, in turn, improves their customer orientation, employee satisfaction and decision making.
Many business leaders have been making similar arguments for several years. Yet, when The Parker Review report (a joint initiative between EY and the Department for Business, Energy and Industrial Strategy) was published in February 2020, it revealed that 37% of FTSE 100 boards have no BAME representation. FTSE 250 boards are even less diverse, with 69% of respondents lacking ethnic representation in their boardroom.
Here are three areas companies need to address to increase the diversity of their board members (including NEDs):
- Improve reporting and transparency
This was a central recommendation made by the Parker Review. One of the most disappointing aspects of the review was that many FTSE 350 companies were unable to sufficiently capture ethnicity data within their organisation. This data is an essential starting point; without it there can be no real commitment to addressing the issue.
- Engage, listen and seek to understand
The Diversity Project has recently published a useful range of resources to help conduct those conversations.
- Take action
Boards and non-executive directors have a key role to play in developing an internal leadership pipeline of high potential ethnic minority professionals. There’s a lot of talk about widening access to opportunity. But, research from Business in the Community (BITC) found that while 43% of ethnic minority employees would love an opportunity to fast track to senior management, only 10% are experiencing this.
That’s not surprising when you consider that the BITC research also found that only 33% of employees stated that they have a senior-level champion for diversity and inclusion in their workplace. Companies need senior executives who will take ownership and action for this. And, changing the business culture is part of the solution.
There needs to be a board-level commitment to ensure everyone across the organisation is respected and listened to. Even, or especially, when they express opinions that challenge the status-quo. An ethnicity taskforce, reverse mentoring and strategic partnerships with external organisations that contribute to improving racial equality in our wider society, are all useful ways for senior leaders to create a culture where identity is valued.
Boards will increasingly be held accountable for inclusive leadership. It’s time to look at what needs to be done differently to attract and develop a more diverse pool of talent. That means addressing unconscious bias in recruitment, talent development, career progression and board appointment processes.
To develop a future talent pipeline, senior leaders need to ensure all employees have the resources, support and tools to help them navigate and take ownership of their career. This could include coaching and mentoring, as well as more structured support for identifying and accessing internal promotion or high-profile project opportunities. Gathering data on the numbers of under-represented groups at all levels of the talent pipeline will help drive and sustain progress.
The time for board members to act is now. They can provide visible leadership, and act as executive sponsors, to build a more diverse and inclusive talent pipeline for the future. That involves firm commitments to cultural change and supporting the career progression and C-suite representation of under-represented groups.
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