Over the past year I’ve had the chance to speak to a variety of business leaders about their Covid-19 recovery plans and while the outlook remains unclear and businesses face many challenges, there is no doubt that diversity and inclusion have risen up the corporate agenda and are regarded as key enablers to building back better.
We need to leverage this momentum. Particularly at a time when we have seen huge disruption and with the devastating backdrop of widening inequalities exacerbated by Covid-19 and systemic racial injustice exposed the world over. It is now undeniably clear that leaders must step up and that diversity and inclusion is no longer an optional extra, it’s a core requirement to the future of business. So much so, that the UK’s financial watchdog, the Financial Conduct Authority (FCA), is seeking to implement new rules that will force listed companies to disclose their c-suite diversity credentials.
A new report by Women on Boards UK, The Hidden Truth: Diversity and Inclusion in the FTSE All-Share looks at board diversity across the FTSE All-Share for the first time. Of the 261 companies directly below the FTSE 350, we found that less than half of these companies (48%) have met the target for 33% women on boards. This is compared to two thirds (65%) of the FTSE 350 companies. Equally troubling is that more than half (54%) of the 261 companies have all-male executive leadership teams against just 8% in the FTSE 350. The report also reveals that 37% – 98 companies – have only one or no female directors and just 3% of board members are directors of colour.
While progress has been made over the past decade, this data reveals just how far we still have to go. As diversity committees are set up and heads of D&I hired, we must ensure this becomes more than a box-ticking exercise and is a real ambition to make ongoing change.
One way to ensure your diversity and inclusion efforts are meaningful and focussed on long-term impact is to start at the top. The drive for diversity in the boardroom reflects the importance of getting the best talent into the roles with most potential for influence. Successfully broadening the perspectives and priorities in non-executive roles will underpin the strength of your business as well as of the UK economy.
So how can diverse boards help companies to build back better? Improved performance comes from decision making informed by a range of perspectives. It is the ‘diversity of thought’ which is important to critiquing assumptions, bringing in a broader range of factors for consideration and fully understanding the company’s customer base. Seeking board diversity is not about giving those from under-represented groups preferential treatment. It is about shifting your recruitment lens to consider the widest possible pool of candidates and assessing them objectively based on their expertise – whilst considering your genuine business need for cognitive diversity in the boardroom.
Here are some key steps for diversifying your board:
- GETTING EVERYONE ON BOARD. The first stage is to make sure there is a consensus on your board – or nominations committee – that this approach will be beneficial. You need to ensure everyone understands that boardroom diversity is proven to be far from a ‘nice thing’ driven by feminism, equality and fairness (though it is that too), but a key component in equipping companies to successfully navigate today’s fast changing operating environment. Numerous studies have shown that companies with diverse boards are more profitable, that gender diverse boards correlate with less excessive risk-taking and business failure. What’s more, financial services regulators are encouraging diversity while investors, shareholders and customers and staff are demanding it.
- SLIM DOWN YOUR RECRUITMENT BRIEFS. The board sets the candidate briefs for new non-executive directors. You may not intend your candidate brief to narrow down the pool of candidates to a particular demographic, but it can do. Often briefs are based on a wish list from everyone on the nominations committee and research shows that the longer the list of requirements for a role is, the less likely women are to apply for it – or be appointed. Focus your recruitment briefs on 2 or 3 areas of experience that no one else on the board can provide.
- REMOVE POTENTIAL FOR UNCONSCIOUS BIAS. Research indicates that whilst we can each become more aware of our own biases and stereotypes, they are extremely hard to shift. Anonymise the early selection steps by removing candidate names, dates of qualifications and even university or school names from applications. Score candidates against the 2 or 3 requirements in your brief. This approach not only ensures a skills-focus but gives a framework to question and justify your selection as a panel, resulting in more robust choices.
- WIDEN YOUR CANDIDATE POOL. Many boards still recruit their non-executives through networks. This carries a big risk that you have settled for the first ‘good enough’ person you find, rather than looking at a full range of available candidates. And, bringing together people who are all linked increases the risk of ‘group think’ can reduce the quality of decision making. It’s important to advertise your role openly and transparently. Women on Boards host a non-executive vacancy board for our members; your own channels like social media and marketing should also not be underestimated as a source of candidates. Being open and transparent about your search not only ensures a strong pool of candidates but can also increase your customers and staff confidence in the successful appointment.
- CONSIDER YOUR INTERVIEW PROCESS. Although interviews will naturally follow a candidate’s experience, some level of standardisation of questions allows for better comparison between candidates. Having a prepared list of questions also helps ensure the interview focuses on the skills needed for the role, rather than being side-tracked into shared interests or experiences. Also, consider the diversity of people who are interviewing. Whilst it is important that interviewees do not feel like the ‘odd one out’, simply bringing in one ‘diverse’ team member has been shown to have minimal impact on hiring decisions.
While change can feel risky, particularly in a climate where risks are high, the biggest risk is in taking no action at all and in continuing with decades-old models of business-as usual in a fast-changing, post-pandemic world.