Why Organizations Need Board Diversity

Board diversity is often associated with getting more women represented on boards. In 2012, women held only 16.6 percent of all board seats at Fortune 500 companies, according to a Catalyst census. That means a staggering 83.4 percent of the seats were taken by men. The gender gap is still wide not just in the United States but in many parts of the world as well, despite of active efforts to bring more women on board (pun intended).

Why Board Diversity?

But board diversity isn’t just about having more women fill up seats on corporate boards. It’s also about having more people of different ages, ethnicities, abilities, and experiences serving as board members. Real board diversity happens when directors from a variety of backgrounds come together to contribute their unique opinion and perspective on important matters that affect their organization.

But isn’t having a board of widely diverse directors simply going to result in conflict? The answer is yes, of course. When there are many differences in opinion and perspective within a relatively small group of people, decisions are harder to come by. Individual directors would want to understand why their fellow directors think the way they do. This can lead to several discussions, with each side trying to convert the other until they settle on a compromise. Forming a majority vote may take some time.

Need for Diversity within the Board

On the other hand, a homogenous board is more likely to agree on the same things and arrive to the same decisions, resulting in quick resolutions and perfectly harmonious working relationships. However, this isn’t always a good thing especially for an organization seeking growth and development in other directions. There is hardly room left for groundbreaking innovation without someone shaking up the status quo. People who think alike will see a given situation from the same, or similar, point of view. With no one to question them, they’ll quickly settle into their comfort zone — and stay there for a long time until stagnation sets in. When they realize that change is necessary, it may already be too late. It’s a hard lesson to learn, and Kodak knows that firsthand. Even though its bankruptcy has recently ended, its failure is still a story that lives on as a cautionary tale.

Board diversity is good because it allows more possibilities to be explored — possibilities that would otherwise be missed by a homogenous board. Also, when an organization’s target market is diverse, it makes much more sense to have a diverse board, too. For example, a company selling women’s clothes and accessories would benefit from having a female director because she knows firsthand what women want, being a woman herself. One can argue that market surveys are useful in determining what customers prefer, and that’s true. But can surveys make strategic decisions the way a board member can?

Of course, it’s understandable why some organizations are wary about board diversity. It brings change, and for many people, that can be scary. It’s even scarier when it comes hand in hand with uncertainty. When there’s a whole organization at stake, risks should be managed, and not carelessly taken.

Positives of Board Diversity

It can’t be denied that board diversity has risks, but overall, the positives outweigh the negatives. There’s nothing like board diversity to bring a much-needed change in perspective for organizations that are already so settled in their processes and strategies. With so many new technological developments that can affect an established organization nowadays — cyber threats, social media branding, cloud services, mobile computing, wearable gadgets, just to name a few — it’s important that a corporate board is ready to adapt to quick changes to keep its organization afloat. Otherwise, it will lag behind its more adaptive competitors.

Unfortunately, that seems to be the case for many boards when it comes to technology. According to a PricewaterhouseCoopers survey, 64 percent of directors aren’t updated on tech matters that can affect their organization. The common belief that IT is a concern for the CIO, and not the board, still persists.

This isn’t a surprising at all if a board is composed mainly of older directors whose skills are in finance or sales. But when board diversity is encouraged, younger and tech-savvier directors will find a place on boards.

These younger directors can lead the way to technological awareness, and\ can start with the board itself by introducing a virtual board meeting solution like a board portal. Most directors already have their own iPhone, iPad, or Android device, so transitioning from paper-based board meetings to paperless ones shouldn’t be difficult.

Tech expertise is just one of the various skills directors can bring to a board that’s open to diversity. There are still many more waiting to be tapped. All it takes is an open mind for organizational progress.