Diversity Drives Board Performance

The composition of your board of directors can help you drive your company value and increase shareholder and other stakeholder returns.
Diversity Drives Board Performance
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Founder: Sirdar Group
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It’s 2018 and fairly common knowledge that research reflects the value of diversity around a boardroom table. Whether that diversity is gender, race, ethnicity, age, orientation or otherwise, the bottom line is that diversity drives board performance.

Diversity does not mean less qualified directors on your board. It means ensuring you have a variety of personal backgrounds, skills, experience and ultimately insight around the table. Inherent in the research is the assumption that the creation of such diversity is approached professionally and that appropriately qualified individuals are appointed to your board.

This article does not consider this question from a South African B-BBEE perspective. Rather it intends to share best practice, backed by research, to support the development of truly high-performance boards.

Our aim is to assist you to put practices in place that will drive your company value and increase shareholder and other stakeholder returns, ultimately supporting the contribution you make to the development of this economy.

The composition of your board of directors is one aspect that enables you to achieve this. So here is some practical advice to support you on the journey.

 

YOU HAVE TO START SOMEWHERE

In the process of creating diversity around your boardroom table you literally have to start by taking an initial step. If you already have a board this might mean appointing one more director who brings a new perspective to the table.

Otherwise it may mean committing to appoint a director who brings diversity to board discussions next time a director retires or has completed his or her term.  Privately-held and family business boards often consider this to be more difficult because they only have two or three non-executive directors.

However, this fact in itself gives you the opportunity to add one more non-executive director without too much impact. The value of this additional contribution to your boardroom discussions should justify any marginal investment in directors’ fees.

 

DEVELOPMENT DIRECTORS

This is an idea that I have seen utilised in a couple of businesses where boards wanted to bring a particular aspect of diversity into the boardroom but struggled to find the right fit. As an alternative they invited an individual with the perspective they sought to attend the board meetings as a ‘development director.’

These were individuals with clear potential who had not yet been non-executive directors. The intention was to support their development as a director through their involvement in the board at the same time as gaining their valuable contribution in critical decisions.

The companies supplemented the involvement in the boardroom with appropriate training and mentorship so that the person would be able to be appointed as a director in time. This approach essentially enabled the development director to get his or her first formal board appointment.

 

BACK TO THE MATRIX

At the beginning of any appointment process, before even going to market for candidates for your board, review your board composition matrix. Those who have been in boardrooms for many years will be all too familiar with the focus of such a matrix on the skills and abilities of the directors of a specific board.

However, if expanded to consider a wider set of diversity, including all of those referred to above and other aspects such as the type of perspectives required around your boardroom table you will really focus your search well. 

If you are looking to improve the performance of your board in 2018, reflect for a moment on whether or not your board of directors reflects the sort of diversity your company can be proud of. If not, what is the first step you are going to take?

Diversity does not mean less qualified directors on your board. It means ensuring you have a variety of personal backgrounds, skills, experience and ultimately insight around the table, encouraging a variety of perspectives.

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