Earlier this year, New Zealand was called out for the lack of women holding senior positions in their 27 NZX-listed companies. The country lags behind the UK, US and Australia with 18% of listed companies having zero female directors.
Research has shown that having women in top positions is not only good for optics, it’s also good for your bottom line. So how do you create a more inclusive boardroom? And more importantly, how do you ensure that this diversity drives better governance outcomes? The answer may be less about balancing demographics, and more about balancing thinking preferences.
Why is diversity in the boardroom so important?
Research has shown time and time again that having women in the boardroom improves business – the benefits include more equitable pay across all levels of the organisation, improved shareholder returns and more effective risk management, resulting in better outcomes for businesses, employees, customers and society as a whole.
On the flipside, a lack of diversity at the board level can have severe consequences, as we’ve seen in the fallout from the spate of corporate scandals in the last few decades. From Enron to Lehman Brothers to Facebook, the conversation is increasingly focused on how groupthink (the tendency for groups to make poor decisions in an effort to maintain group cohesion) contributes to failures in governance. If you’re surrounding yourself with yes men and yes women, who’s going to provide a different perspective? And who’s going to challenge a questionable decision?
How to increase diversity in the boardroom
While getting more women in board positions is important, there is more to diversity than simply paying lip service to gender equality or implementing quotas at the top echelons of business.
The percentage of women directors is on the rise in New Zealand – 77% of companies have a diversity policy and the percentage of women directors rose from 19% to 22% in 2018. New Zealand may be moving away from the Old Boys Club, but the boardroom is still a club, and it’s one with a strict door policy. Those appointed to boards still tend to have similar backgrounds and spend time in similar social circles – it’s common practice for new board members to be recruited from the networks of current board members.
Achieving balance in the boardroom is most certainly the key to more effective governance, but it’s not about who’s in the room, but rather, how the people in that room think. It’s called diversity of thought, and it goes beyond demographics.
What is diversity of thought?
Diversity of thought is about how people prefer to think. The Herrmann Whole Brain® Model provides us with a framework to look at how the brain works, with four different thinking preferences: analytical, structured, people-oriented and conceptual.
The reason diversity in the boardroom leads to better outcomes is because having different people at the table contributes to greater diversity of thought – different perspectives, different questions, different solutions. Gender is one part of it, yes, and diversity in education, culture, experience, personality and socio-economic backgrounds is important too – this is because all these factors impact how a person thinks.
Why do we need diversity of thought in the boardroom?
By having a spectrum of thinking styles represented in the boardroom, governance teams are more effective – they make better decisions, are better problem solvers and are more innovative.
Boards deal with a range of complex problems – too complex for any one person, or one perspective, to handle effectively. Diversity of thought ensures that complex problems are looked at from multiple angles. Research has shown that the best and most creative solutions come from the combination of all four thinking styles.
Diversity of thought also helps drive more effective governance – having multiple perspectives on the possible outcomes of any action is more likely to take into account the risks and consequences of the action. With different perspectives represented, a board is also more likely to consider the interests of not just shareholders, but also employees, customers and the community.
How to increase diversity of thought in the boardroom
Traditional approaches to diversity have focused on filling quotas or achieving a demographic balance. While it’s certainly a step in the right direction, boardrooms would benefit from taking a more holistic view of diversity in order to draw upon a wide range of perspectives and thinking preferences.
The HBDI® and Whole Brain® framework provide a foundation for building this kind of diversity, taking into account how different people on the board prefer to think, communicate and approach work.
The HBDI® assessment allows us to look at similarities and differences in thinking styles, helping governance teams to better understand their strengths and weaknesses, and to identify any gaps. Filling these gaps is the key to ensuring balanced perspectives on the complex issues facing boards. This can be used to build a board of thinkers with a greater potential for solving complex problems or creating innovative solutions.
A Whole Brain® approach to inclusion in the boardroom is a powerful way of helping those at the board level recognise the value of different perspectives, new ways of thinking and different approaches to work.
The HBDI® also gives you the tools to leverage these different ways of thinking, providing boards with the strategies they need to improve communication and overcome conflict (while diverse teams are less likely to experience groupthink, one downside is that they’re more prone to conflict and barriers to communication).
Want to find out how to improve diversity of thought in your boardroom?
