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October 2016

Why Your Diversity Initiatives Are Having No Effect On Your Company's Board

The good news is that with the help of human resources executive search firms, many companies are working hard to implement initiatives that diversify the workplace. The bad news? While they are succeeding to build more diverse employee bases, their boards remain heavily white and male.

Research shows that gender-diverse companies are 15% more likely to outperform their peers and ethnically diverse companies are up to 35% more likely. So, why are so few businesses taking the same steps to diversify at the board level as they do at the lower levels of employment.

One reason cited by human resources consultants is that nearly all new board members are CEOs and CFOs. According to one industry report, last year, 73.2% of new appointments went to CEOs and CFOs; however, among all of the Fortune 500 companies, only 21 CEOs were women, nine were Hispanic, and five were African American.

Let’s just for a moment put aside the issue that so few women and minorities make it to the CEO and CFO levels – that is a problem to be addressed at another time. Rather, it is important to note that as long as new board positions go primarily to these high-level personnel, women and minorities will continue to be excluded from boards.

In order to diversify their boards, companies need to consider granting positions to individuals from different backgrounds, including academia, the government, and the nonprofit sector. Doing this would significantly expand the pool of qualified candidates to include many more women and minorities.

Limiting the pool of board candidates to one specific field of expertise is an especially prominent issue when it comes to tech companies. It has been well documented that women and minorities are severely underrepresented in the engineering and tech industries. Even fewer hold leadership positions in this field. When companies limit the scope of their search to one, very male-dominated industry, they pass over many brilliant business and academic leaders qualified to steer a tech business towards success.

Another persistent issue involves the real reasons boards choose specific new members. While one would hope that the most qualified candidate would get the position, this isn’t always the case. Many new board members come from within another board member’s personal network. Hiring your friends or your friends’ friends creates a safe space for members to execute their visions and share common perspectives.

Unfortunately, this pattern can also create a totally homogenous group of leaders. Despite the fact that diverse perspectives provide balance and often lead to new ideas, many people just want to be surrounded by people who agree with them. That, however, is not how good decisions are made.

Smart decisions, new ideas, and good business practices stem from a combination of differing viewpoints. Diversity initiatives from your human resources department need to stretch across the entire business hierarchy, from the hourly workers to the board of directors.