Diversity in the Boardroom Flashcards
DIVERSITY IN GOVERNANCE
What does Principle J of the 2018 UK CG Code say?
What does Provision 23 say? (3)
Principle J = both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths
The annual report should describe the work of the NC, including:
(1) the process used in relation to appointments, its approach to
succession planning and how both support developing a diverse
pipeline;
(2) the policy on D&I, its objectives and linkage to company strategy
(3) the gender balance of senior management and their direct reports
DIVERSITY IN GOVERNANCE
How is diversity different from equality?
Why do most companies initially approach the issue of diversity through an equality and rule-based lens?
Equality = the moral case for equal opportunities (has led to legislation and governance regulation and is based on the ethical argument for positive discrimination and female representation percentage targets)
Diversity = the concept of valuing everyone as individuals
They are externally compelled to consider other groups and perspectives because they are legally obliged or regulated to do so
However, the business case for diversity (the impact of board diversity on its internal and external stakeholder dynamics) is of great value
TYPES OF DIVERSITY
What is a common way to categorise diversity? (2)
What 5 categories do Mannix and Neale (2005) suggest?
(i) Surface = visible demographic differences
(ii) Deep = one’s attitudes or beliefs that are not so immediately apparent
(1) Social category difference = race, gender, age
(2) Differences in knowledge and skills = education, training, experience
(3) Differences in values/beliefs = cultural background, ideological beliefs
(4) Personality differences = motivational factors, cognitive style
(5) Organisational/community status differences = title, tenure, friendship ties
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - THE COMMON BUSINESS CASE FOR DIVERSITY
What is the business care for diversity?
Diversity affects broadly what 6 dimensions? (3 external benefits and 3 internal benefits)
Business case = diversity generally improves performance
External benefits:
(1) A diverse organisation has a reduction in the cost of integrating new workers
(2) A diverse leadership group increases company reputation = attract best talent
(3) Broader diversity enables a better customer strategy (increased customer representation within DM)
Internal benefits:
(4) Diversity improves innovative and creativity due to multiple perspectives being considered
(5) A diverse group membership will increase the impact on problem-solving abilities and enhance DM
(6) Improves board flexibility, agility, and resilience = increased diversity enhances ability to adapt to external environmental conditions
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - SURFACE DIVERSITY - GENDER DIVERSITY
What was the 2016 Hampton-Alexander Review goal for women on boards?
What are the specific positive impacts on the dynamics of boards that women can have? (4)
In terms of broader organisational performance, what did the McKinsey study show?
What is HR benefit of gender diversity?
FTSE 350 Boards to have 33% female representation by the end of 2020 (all FTSE 350 met this)
evidence that female directors (1) enhance board independence, (2) take their NED roles more seriously, (3) prepare more conscientiously for meetings, and (4) ask difficult questions
McKinsey study = boards with greater gender diversity outperformed those with less female representation
Gender diversity enables organisations to access the widest talent pool (women form 51% of the UK population)
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - SURFACE DIVERSITY - GENDER DIVERSITY
Researchers use ‘collective intelligence’ as a single component to measure what?
It was found that teams with higher collective intelligence, that is, those that outperformed others consistently over time, had what 3 key components?
What is the take-home message for boards?
Measure team performance
(1) had more women (the more women they had the higher performing they were)
(2) had higher average individual empathy scores (women are more likely to have empathy for others’ views and therefore enhance the quality of dialogue in the boardroom)
(3) were more likely to have high levels of turn-taking = were skilled at both speaking up but also including others when needed
to recognise the importance of selecting and training for social intelligence in addition to experience and expertise
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - SURFACE DIVERSITY - RACE & ETHNIC DIVERSITY
What was the 2016 Parker Review goal for ethnic diversity?
What are the internal benefits of ethnic diversity on the board? (2)
What are the external benefits? (3)
In terms of broader organisational performance, what did the McKinsey study show?
every firm in the FTSE 100 to have at least one BAME (Black, Asian and Minority Ethnic) board director by 2021, and every FTSE 250 company by 2024
Internal = (1) a more inclusive leadership and (2) enhanced corporate culture
External = (1) brand enhancement, (2) attracting and retaining the best talent, and (3) de-risking the supply chain
McKinsey study = boards with greater ethnic diversity outperformed financially those with less ethnic diversity
(US study = + correlations between board level ethnic diversity and firm profitability in the same way as gender diversity)
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - SURFACE DIVERSITY - AGE DIVERSITY
The idea that many boards are lacking in diversity because they are ‘stale’ (over-represent older generations) is a working assumption of much boardroom commentary.
However, is this assumption correct?
In terms of boardroom diversity, is generational diversity a concern for boardroom dynamics?
When may age be a significant consideration?
The general conclusion is that the assumed generational differences in the workplace (adoption of IT, working attitude etc.) are not supported by the scientific evidence
generational diversity is less of a concern for boardroom dynamics than is commonly considered in the public media
Age may potentially only be a significant consideration when mapped against a company’s community, customers and consumers
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - SURFACE DIVERSITY - COUNTRY CULTURE DIVERSITY
With the increased opportunities provided by globalisation and the greater movement of populations around the world, cultural diversity on boards is becoming a necessity for those boards who either have, or aspire to have, some form of an international stakeholder presence.
How may processes be affected by highly culturally diverse teams? (2)
Therefore, the key point about cultural diversity is what?
(1) may suffer with ‘process losses’ through task conflict and decreased social integration = differing opinions on approach and cultural cliques when working together
(2) may experience process gains through increased satisfaction and enhanced creativity = high levels of innovation and increased enjoyment from the stimulus that differences bring
It is highly dependent on context
= If an organisation has significant stakeholders who are working in, or who are from, other cultures, then must include this cultural voice within the boardroom
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - DEEP DIVERSITY
The 2018 UK CG Code refers to diversity of of ‘cognitive and personal
strengths’. What 3 things does this cover?
LEARNING STYLES
What are the 4 different learning styles according to Honey and Mumford?
When teams approach tasks, it is perhaps useful to have a good spread of these types of learning styles. In a board room context, recognising and understanding these different approaches can be what?
(1) learning styles, (2) personality types (Myers Briggs EI/SN/TF/JP), and (3) team role types
(1) Activists = people who learn best through experience
(2) Reflectors = people who learn best through reflection
(3) Theorists = people who learn best through theory
(4) Pragmatists = people who learn best through hands-on trial & error
be beneficial in understanding differing approaches to preparing for meetings, contributing to discussions, or following through on actions
THE IMPACT OF DIVERSITY ON DYNAMICS & PERFORMANCE - DEEP DIVERSITY
TEAM ROLE TYPES
What does the Belbin Team Roles framework describe?
What are the 9 team roles in the frameworks and their unique contributions and allowable weaknesses?
describes what types of team role strengths are required within a team to enhance that team’s performance (balance of different roles = more successful)
(1) Plant = the creative problem-solver, but often too preoccupied
(2) Coordinator = the mature chair role, who can often be seen as manipulative
(3) Monitor-evaluator = sober and strategic, but lacking drive to inspire
(4) Implementer = turns ideas into practical action, but somewhat inflexible and slow to respond
(5) Completer-finisher = highly conscientious but inclined to worry and reluctant to delegate
(6) Resource investigator = extroverted networker, but often overoptimistic
(7) Shaper = challenging and driven, but can offend people’s feelings
(8) Team worker = diplomatic and listening, but sometimes indecisive in the crunch
(9) Specialist = single-minded and highly skilled but often overly technical
DIVERSITY MINDSET
Boards must move from being different ‘from’ each other, to being different ‘for’ each other.
However, what is the problem?
How is cognitive bias defined in terms of diversity?
How can we get a window into our implicit biases in relation to diverse or minority groups?
Why is this useful?
Everyone is inherently biased
Cognitive bias = having an attitude or ‘implicit association’ about a particular group that operates beyond our control and awareness, that informs our perception of a person (or social group), and that can influence our decision-making and behaviour towards the target of that bias
Use the Harvard University Implicit Association Tests (7 online for free = gender, race, weight, sexuality etc.)
How people respond to their test results is often a good indicator of how seriously they are willing to consider the idea of unconscious bias affecting their diversity mindset
DIVERSITY MINDSET
Essentially, bias can emerge at any moment in any context, but perhaps the most pernicious type of bias behaviour is what has been come to be termed as micro-aggressions.
What is meant by this?
What are 3 useful principles to communicate/promote to counter microaggressions?
Micro-aggressions = words or actions that, although they would probably not be noticed by the person enacting them, reinforce stereotypes and thus reduce the likelihood of viewing people according to their individual merits
Principle 1 = 3 things you should never do = ignore it, excuse it, become immobilised by it
Principle 2 = 2 things you should always do = address it, communicate with those involved
Principle 3 = 1 thing you need to decide = address it now or address it later
HOW TO PROMOTE A DIVERSITY MINDSET - PROMOTING A DIVERSITY MINDSET WITHIN THE BOARDROOM
What is a useful starting point?
What are 6 things that each director may consider as action points to develop the diversity mindset?
starting point = diverse teams work better when they are told that diverse teams work better, so do this and share relevant information/evidence
(1) Measure one’s potential bias using the Harvard University Implicit Association Tests
(2) Obtain feedback on one’s behaviour in light of the diversity bias results (to what extent have others noticed?)
(3) Get to know each director personally beyond board meetings
(4) Lead and sponsor diversity initiatives = consider one’s own bias and become a role-model
(5) Avoid making jokes at the expense of others and challenge inappropriate humour
(6) Review board practices in light of diversity considerations
HOW TO PROMOTE A DIVERSITY MINDSET - PROMOTING A DIVERSITY MINDSET MORE BROADLY
What can the board do more broadly to develop an increasingly diverse executive pipeline within senior positions in their organisation? (8)
(1) create greater transparency about the make-up of the workforce = understanding what level of diversity exists within an organisation to start with is vital to see how improvements can be made
(2) clarifying how diversity can be a strategic capability
(3) mapping diversity in the company’s community and consumer base
(4) agreeing which specific types of diversity are required, and then measuring, monitoring and managing them over time
(5) ensuring the NC is clear on the importance of diversity, so they can apply it to their actions
(6) recognising the costs associated with the introduction of diversity, and supporting it so that momentum continues
(7) creating a mentoring culture, especially around mentoring diverse groups
(8) ensuring that the recruitment process and its members include diversity
