The benefits of diversity in boards are well documented and efforts to ensure greater representation of minorities and women in the boardrooms have begun to pay off. The impact of diversity on corporate performance remains largely unknown.
An argument that is often cited is that a board with greater variety of genders and ages will have a wider knowledge base. This information will not be accessible to the men and women who are all the same. In the same way an organization with more diversity is likely to have more “cognitive diversity” and have more options in deciding how to move the business forward than a less-diverse one.
However, there are other factors in play. The people who are considered to be to be minorities or tokens within a group may self-censor or refuse to express opinions and opinions that are contrary to the majority. This means that the board may not be able to take full benefit of the diversity of thought it has incorporated into its composition.
Furthermore, even though academic research indicates that diversity in the demographics can have a positive influence on board decisions, it shows that this is not the only thing that matters. Other aspects, like the independence of board members and their educational qualifications as measured by the amount of years of education that have been completed beyond a bachelor’s degree, can have a significant impact on performance.
Companies seeking to improve their boardroom composition must be creative in their search for new members. For instance, companies should consider reaching out at businesses and universities to find potential candidates. They could also form task forces to investigate areas where the best candidates might not be easily identified. This approach is a far more effective method of increasing the diversity of the board than using external or internal consultants to suggest names.