The Diversity Imperative

19 July 2007 by Virginia Bottomley

The stereotypical white male middle-class board ill serves most companies at a time when nearly all significant businesses face intense competition. Market forces are encouraging chairmen to take a critical look at the profiles around the table.

Both commercial and public organisations are under fierce pressure to deliver value. For commercial enterprises, this is profit and profitability; in the public sector, it is the efficient and effective delivery of universal services.

Correctness derided

The emphasis on diversity in the Higgs corporate governance code two years ago stimulated a fresh focus on the composition of commercial boards.The public sector has shown the way. Though political correctness is frequently derided, government has led the commercial world in placing qualified people from diverse backgrounds into leadership roles.

Are boards changing for the better? The evidence is only moderately encouraging. Too many boards remain staffed by men of similar education, career paths and social tribe. An effective board must understand and respond to the markets it serves. A monoculture tends to look inwards and fails to test its own assumptions. Better to look out of the window than in the mirror.

Group-think

The old Marconi board was widely seen as uncritically homogeneous, leaching Lord Weinstock's capital on a series of hightechnology acquisitions, egged on by the City and the media. Its board members were highly skilled, yet failed to ask whether the emperor had any clothes. Collective responsibility matters but group-think,
however good the group, can wreck value. There is an internal imperative, too. Companies no longer offer merely employment but membership. They expect
commitment, not just work, from their staff. If a company is to engender loyalty, employees want to be led by people whose values they share.

Clear meaning

There are sound commercial reasons for promoting diversity in the boardroom. We should be clear, though, what we mean. Legislation addresses age, gender, race, religious belief, disability and sexual orientation but there are other dimensions such as education, place of residence, social class, occupational status and life experience. There are some notable examples of women in leadership roles spanning a wide range of business sectors. But there are still very few men or women of minority ethnic backgrounds in visible leadership positions. Many are in family and unquoted businesses.

Fresh perspectives

Change is coming, but slowly: we are far from embracing difference in its widest sense. The temptation to recruit known and trusted people is strong.The percentage of women on FTSE boards has barely risen above 10 per cent in recent years. Try a different way of looking at diversity. A multiplicity of ideas and approaches emerges when boards absorb people from different fields and backgrounds. Andrew Harrison, former chief executive of the RAC, became chief executive of EasyJet; Paul Deighton, previous chief operating officer of Goldman Sachs Europe, became chief executive of the London Organising Committee for the Olympic Games; and Luqman Arnold, ex chief executive of Abbey National, became chairman of the Design Museum. Such moves bring fresh perspectives. As headhunters, we see moves like these with increasing frequency. Many organisations seek people from outside their sector.There is an acceptance of the need for a fresh approach.

Gaining impetus

The CBI employers' group went for diversity of the deeper kind when it appointed Richard Lambert, former editor of the Financial Times, as its new Director-General. In time, the culture change that appointments like his represent will gain impetus.

Looking out of the window

The most forward-looking organisations recognise changing demographic trends, availability of skills and the benefits of a more diverse workforce. Valuing diversity emphasises inclusion and mutual respect. Nothing illustrates an organisation’s attitude to the future more clearly than its choice of new board members. By this measure, boards are starting to turn away from received wisdoms. They are looking out of the window for new members. This is good for business and society.

Virginia Bottomley heads the board practice for Odgers Ray & Berndtson in London. She co-chairs the firm's diversity working group with Margaret Sentamu, who was formerly head of the Church of England's Ministry Division selection unit.

Category: Best Practice