Boards Treading on Inclusivity Eggshells
The business case for diversity has been well made. Just as investors would not put all their eggs in one basket and expect a strong return, nor should business leaders surround themselves with clones and expect ongoing commercial success.
But when it comes to talent management, FTSE companies suffer from groupthink and fail to recognise what a truly diverse workforce looks like. That failure can stifle innovation, which in turn erodes value, weakens share price and puts them at the mercy of hostile bids.
The FRC lays a foundation
The Financial Reporting Council’s 2018 UK Corporate Governance Code has taken a step in the right direction. It encourages companies to focus more on the workforce and touches on culture, engagement, succession and board diversity. It also highlights Section 172 of the Companies Act, relating corporate success to the interests of employees as well as other stakeholder groups.
Yet it stops short of asking companies to report on how their talent and D&I strategies support the business model and achieve that success in the first place.
Male, pale and stale
The executive search industry’s approach to diversity is unenlightened. For many years, board level search firms have shifted the same old ‘good eggs’ from one company to a close competitor, instead of taking a risk on a golden egg that could make a marked difference. Protectionism is still rife in banking and professional services, where mirror-image appointments are commonplace.
Most search firms lack the natural acumen to identify and push genuine wild card candidates who could help propel their clients into the future and they are not incentivised to do anything more than give a cursory nod to tokenism.
Stereotypes do not create value
The government-backed Davies Review helped the FTSE 100 reach a milestone of a quarter of board positions being filled by women in 2015. The subsequent Hampton-Alexander Review has increased that target to one third of FTSE 350 board members being female by 2020. While this represents progress, it only scratches the surface.
People, like eggs, come in a variety of shades and sizes, but that does not mean they are different on the inside. Being female adds perspective to an otherwise male board, but a middle-aged, Caucasian, university-educated female is unlikely to have a mindset that differs greatly from a male with equivalent characteristics. This kind of one-dimensional diversity does precious little to add value.
Sir John Parker, Chairman of the Parker Review Committee, furthers the debate: “Today’s FTSE 100 and 250 boards do not reflect the society we live in, nor do they reflect the international markets in which they operate. Whilst we are making good progress on gender diversity in the boardroom, we still have much to do when it comes to ethnic and cultural diversity.” He concludes that boards need to better reflect their employee base and the communities they serve.
Quotas are restrictive
Quotas support stereotypical diversity and can encourage bad decisions on board appointments that undermine a company’s readiness to compete.
There is no point parading the ideal board composition as a shining example of best practice if it does not match the market, if there is no genuine process for exchanging diverse viewpoints or if the management blend is not reflected further down the organisation.
When imposed, diversity becomes a dirty word. To avoid walking on egg shells, we should focus on inclusion.
It's all about inclusion
A company’s leadership should embrace a variety of skills, mindsets and life experiences that match all its stakeholder groups. It should reap value from those symbiotic relationships, like biodiversity in the natural world, where the interaction of complementary species results in a more productive ecosystem.
When recruiting leaders, companies need to develop their embryonic D&I practices, think beyond the superficial and include selection criteria that will uncover less obvious attributes. These bring different viewpoints to the table that can effect positive change:
Diversity of thought: education, background, circumstance.
Diversity of experience: challenges faced, sector, role.
Diversity of network: influencers, influencees, geographic reach.
Widening the gene pool
Just as in-breeding leads to genetic disorders in humans, companies are weakened when they limit their sphere of knowledge and inspiration to their own kind. True diversity means thinking beyond ‘square peg, square hole’ and eliminating the kind of bias that is excused by claiming ‘cultural fit’.
A traditional bank, for example, may be inching up the digital evolution curve, under threat from new market entrants for whom e-commerce and online customer service are already second nature. Limiting the board search to a stagnant candidate pool, instead of poaching in fresh water, will not break the groupthink mould of a lookalike board. It will curb the ability to explore, advance and compete effectively.
PLCs are too PC
The problem with public limited companies these days is that they are just that. They are limited in their representation of the general public. They kid themselves that ticking boxes, running gender pay initiatives and rolling out unconscious bias training makes them more diverse. Political correctness has no place in business.
The board, in conjunction with the CHRO, must take responsibility for driving the talent strategy towards inclusion and must incentivise search partners to do the same. Together, they must find new ways to embrace authentic differences, to mix up leadership DNA and to incubate innovation. Then, as sure as eggs is eggs, they will secure greater, sustainable commercial success.
About Jonathan Hime | Founder & Managing Partner at Equiida
Jonathan is a British entrepreneur and businessman with a successful track record over 20 years in growing leadership advisory companies worldwide. He is a trusted advisor and confidant to a large network of C-level executives who run some of the most influential and progressive companies. Jonathan brings a value centric and commercial approach to business transformation and has helped hundreds of companies and individuals in their pursuit for growth and performance improvement.
Jonathan has a huge desire to positively disrupt the thinking and strategies of executives relating to succession planning, cultural dynamics in the board, as well as sourcing the next generation of leaders. He has been a regular contributor to panel discussions, newspapers and industry journals on topics relating to diversity, leadership and the emerging trends in the boardroom.
