The UK’s FTSE 100 is the pinnacle of innovation, best practice and corporate governance. We celebrate the fact that, within its 20 largest companies, 55% of chairmen, 70% of chief executives and 55% of directors are not British born. Yet we also bemoan the fact that these companies fail to outperform overseas rivals built on home-grown talent. There seems to be a misconception that internationalism and diversity are one and the same thing. It is of course diversity that can improve company performance, but the term ‘diversity’ is itself becoming a misnomer.
Diversity must have purpose
Diversity is not exclusively about race. Middle aged, Caucasian, university-educated males are much of a muchness, whether they hail from the UK, USA, Germany or even Singapore. So, a board with an international dimension does not necessarily reflect the diversity of the societies it serves. An increase in female representation is not the sole answer either – the women need to reflect the real world too. Just as we can overestimate the importance of race and gender, we should not get hung up on age, ethnicity, sexuality and disability. Yes, these are pertinent to the diversity debate, but tend to be about diversity for its own sake.
Time for a new word
The problem is that the word ‘diversity’ has become the property of the politically correct. There is a risk that diversity will be seen by business as a diversion. To ensure that we never overlook the commercial agenda, we should find a substitute, an alternative word that contains an inherent business benefit. ‘Eclecticism’ would do the trick: ‘a conceptual approach that does not hold rigidly to a single paradigm or set of assumptions, but instead draws upon multiple theories, styles, or ideas to gain complementary insights into a subject, or applies different theories in particular cases.’ It is a diverse spread of talent that brings eclecticism to the boardroom table.
Take our cue from nature
Understanding the benefit of diversity is hardly grappling with rocket science. It is about matching a variety of skills, mind-sets and life experiences to a company’s customers, suppliers, employees and shareholders and reaping value from those symbiotic connections. The corporate world need look no further than the natural world for guidance. Biodiversity is positively correlated with the ecosystem by a mechanism known as ‘functional complementarity’, which states that the more species there are, the more niches are occupied, and the more productive the ecosystem is.
Variety underpins innovation
It is clear that a multi-faceted, cross-disciplinary board will be more effective in appealing to a range of different stakeholder groups. It will also drive innovation. Boards with similar members are less likely to think outside the box, more likely to accept the status quo and therefore more liable to stagnate. A degree of disagreement is healthy for debate. Challenging accepted norms leads to reinvention, new ways of doing things that keep a company relevant.
Just as in-breeding leads to genetic weakness in humans, companies are weakened when they limit their sphere of knowledge and inspiration to their own kind. Diversity can be in the shape of someone with a mobile telecoms sectoral background joining the board of a retail bank, or someone with a marketing or HR functional background joining a board traditionally made up of financiers and accountants. These wild cards often challenge the groupthink consensus of lookalike boards and make them sharper, more exploratory and better decision makers.
Quotas miss the point
It’s high time we moved on from the current obsession with fulfilling diversity quotas. Quotas focus on stereotypical diversity, which does not enhance business success. Companies need to take a cold, hard look at diversity through a business lens and re-evaluate its benefit. There is no point parading the ‘ideal’ board composition as a shining example of best practice if it does not match the market, if there is no authentic process for exchanging diverse viewpoints or if the mix is not reflected further down the organisation. Quotas can force companies to make bad decisions on board composition.
The business community needs to ignore the politicians, ditch the diversity rhetoric and embrace eclecticism. It is not internationalism or gender quotas that can bring success to the FTSE 100. The solution is simple: genuine variety in terms of top leadership and management at all levels. And the secret of variety, like the secret of all spices, is knowing when to use it.