Why diverse boards are good for us, and good for New Zealand
Damien Grant’s column has created quite the debate.
His column last week used a couple of academic studies to argue that there is no direct correlation between women being on a board and the performance of that board. The conclusion was that there is no direct correlation, then we don’t really need to create diverse boards. The current level of representation is high enough, Mr Grant says, because it reflects the current demand from women to sit on boards.
I’m not an academic so I’m not going to delve too far into the academic side of that argument. The two aggregated studies make me curious to their methodology, as both consider a number of academic studies across more than 30 countries to conclude whether women on the board contribute to a rise in productivity. I wonder how you compare like with like across countries with different cultures, productivity and growth? How does looking at publicly listed companies only reflect a country like ours where the majority of businesses are SMEs? How do you ensure that all these different studies with their differing definitions of diversity are comparable?
It seems to me that the smaller studies on businesses in similar countries are probably a better example of the impact of diverse boards on New Zealand business.
I do know though that the current number of women on New Zealand boards should not be read as an indicator of the level of ambition. Women likely contribute a lot more to boards than we can currently quantify in New Zealand because we do not have statistics that show us the entire landscape of who sits on them.
Much of the debate on women on boards in New Zealand focuses on just the publicly listed companies, where women make up only 19% of board composition. These figures do not include women’s contribution to iwi boards, school boards, not-for-profits, SMEs and the numerous other organisations that support New Zealand’s economy and provide essential services. What this tells us is that women are interested in governance – they just do not always make it onto the boards of publicly listed companies.
Diversity on boards is important because it helps to improve culture. This is essential in an environment where the Fourth Industrial Revolution and the disruption it brings to our current ways of working is creating an environment for organisations that are marked by volatility, uncertainty and change. Companies are no longer competing against other organisations within their towns or cities, they are competing on a global playing field where technology enables commerce to operate across boards.
To navigate these challenges, many organisations have looked to how they might be able to encourage innovation to allow their teams to be agile, nimble and adaptive. This drive can be seen in the tech sector, where its leadership in driving productivity and performance through culture is challenging traditional models of work.
Diverse boards set the tone from the top and help to create open, innovative and participatory cultures where people feel free to speak up and talent can be identified and nurtured without unconscious bias.
Research from the Centre for Talent Innovation shows that companies that prioritise diversity in leadership are 45% more likely than publicly traded companies lacking it to have grown market share in the last 12 months and 70% more likely to have captured a new market. This is because modelling inclusive cultures right throughout the board and management creates a flow on effect throughout the organisation. It enables cultures where everyone is able to speak up and be heard, allowing for new ideas that would not have otherwise reached management. In many industries, getting technical knowledge from the person doing the job or a different perspective can be the difference between sticking to a system enforced from above or generating new efficiencies.
Diverse boards make us more likely to identify and nurture the talent we might not have otherwise seen. Numerous double-blind studies have shown that when gender is shown on a job application, the female candidate is less likely to be chosen than when the name is not available. When leadership reflects a diverse group, it means that this unconscious bias is less likely to be taken into account and a true meritocracy develops where stereotypes on particular groups do not drive decisions.
Encouraging diversity does not mean tokenism or promoting diversity over skills. It also does not mean disregarding the contributions and expertise of our male directors, many of whom have acted as important allies in cultural change.
We know diversity is good for our workplace cultures. There is research that shows it increases employee engagement, customer service and satisfaction – which all help drive company performance and deliver on the board’s responsibility for delivering long-term value.
Women constitute 50% of our workforce and 50% of our consumers. It makes sense that we encourage initiatives to increase their participation on boards. After all, if we relegate talent and ambition to one gender, one age or one ethnicity we might miss opportunities to promote our best talent.
Kirsten Patterson is chief executive of Institute of Directors.
This is supplied content and not commissioned or paid for by NBR.