Diverse boards = better profits. So why is it taking so long to improve diversity?
Women are good for business - that's what research by McKinsey demonstrates, with those companies with higher diversity outperforming those who are still catching up. In the world of business, it's clear that diversity at board level helps build success. Yet in the FTSE 100 only 14% of exec directorships are held by women. So why is it taking so long for business to improve diversity?
On International Women's Day it seems apt to look out how improving diversity can improve businesses. If you were to offer a business the opportunity to have better than average profitability, surely they would jump at the chance to understand how they can achieve it. Companies spends huge amounts on consultants and internal changes, all focused on improving their profits. Yet it appears diversity at board level can help do that but hasn't been implemented in many companies. Why not?
Linking board diversity to improved profitability can be demonstrated at a high level but the direct effect is harder to prove. Is it just that these businesses are well run in the first place and simply have a more open attitude to diversity? Yet surely that is evidence that well run businesses see the value in diversity and are willing to size that opportunity.
Equally, change in diversity at board level was never going to happen overnight. We are dealing with changing historic attitudes and each board member needs to bring the right skill set, regardless of gender. Progress always feels slow, however the hope is that as evidence accrues that diversity is good for business, it will become more readily adopted and considered when making board appointments.
The exciting thing is that boards are now looking beyond just gender diversity and that change seems to be happening at pace. Speaking to businesses, it is clear that achieving 'Diversity of Thought' is now a real issue on boards agenda and a key goal in their governance structure. Companies are looking at how they can achieve it, with different routes into their profession. Within law, the increase of apprentices is a great step to offer those who may not normally see law as a career path a new alternative into the profession.
Yet again, this will take time to be achieved and it needs a long and sustained focus - it can't just be on agendas for a short period, this must be a long term commitment. I hope that in a few years time we'll be reading that diversity at board level has gone beyond just gender diversity and that this change continues to improve businesses profitability and success. That will be the perfect model for sustained and successful change.
companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the bottom”