Organisations that fail to embrace diversity-promoting policies could be underperforming and hampering future talent pipelines as a result. So why are boardrooms still falling short when it comes to the ‘D’ word? SANDRA KESSELL investigates

Besides ethical and social implications, the creation of greater diversity in the boardroom has a proven financial imperative. Diversity in the C-suite challenges ‘group-think’ and according to research encourages an organisation to consider many alternatives and angles before decisions are made.

Beyond the balance sheet, organisations that embrace diversity are helping to future-proof their human capital; gender parity, mixed ethnicity and policies that are friendly towards lesbian, gay, bisexual and transgender (LGBT) candidates will find their principles also gain favour when it comes to recruiting – and retaining – the best graduates and most able and ambitious staff. Such companies are drawing from the whole pool of talent, not restricting their search to the same few arenas.

Ernst & Young’s Managing Partner of Talent, UK & Ireland, Liz Bingham, was awarded an Order of the British Empire (OBE) in 2015 for her work as a diversity ambassador. “I think the whole diversity and inclusion debate has moved from being a necessary ‘HR’ thing that is all about being nice to people to, actually, an understanding. In my view it was the global financial crisis that really accelerated the thinking about it,” she says.

Bingham, who worked as an insolvency practitioner for 30 years and was EY’s Head of Restructuring before taking up her current appointment, also puts forward the argument that wider-ranging thoughts and ideas, and to attitudes to risk, could have put the brakes on the kind of practices that led to the financial crash, stunting economic growth.

Encouraging diverse role models

“I think that economic debate is a much broader debate and is starting to be much better understood,” adds Bingham. EY isn’t new to the idea that diverse role models at the top of a company set the scene for up and coming business leaders. Arthur Young, the professional service firm’s founder, originally trained as a lawyer, but found his deafness and low vision made it difficult to pursue his chosen career. He switched to accountancy, set up his own practice and ever after felt driven to innovation and entrepreneurship, which helped him develop the firm towards the successful international practice it is today.

True to that original ethos, Bingham is regularly called to speak on the subject of diversity and to be a role model for other aspiring executives not just within the firm, but worldwide. Listed as an influential ‘out’ executive, in 2013 Bingham was named by the BBC as one of the most powerful women in the UK.

“I think it is hugely important at exec level, otherwise there’s a risk of it just being seen as rhetoric… and that just undermines the entire message. I think those role models are really important to encourage the next generation to look up in an organisation and say ‘Wow! There’s somebody that looks like me – I could go all the way here’,” says Bingham, who cites an inclination to “fish in the same old ponds” along with laziness as practices that keep women, ethnic minorities, LGBT and disabled executives off shortlists and out of the boardroom.

Despite Arthur Young’s pioneering approach to disability it remains a little discussed aspect of diversity, whichever country a disabled person lives in. Despite Britain playing host to the Paralympics in 2012, there are no figures to show how many UK board directors have some form of disability. In a survey published in 2014 on behalf of the charity Scope, experts interviewed during the research said they were particularly keen to see more disabled people as role models and in the kind of leadership positions that are responsible for championing change.

Writing in Diversity MBA magazine, president of US-based Springboard Consulting Nadine Vogel, who is considered a global expert on disability in the workforce, points out that people with disabilities are sidelined – an untapped source of talent, revenue generation and innovation since they number more than one billion people – 15 per cent of the world’s population. It’s a problem that is even worse among people who struggle with mental health incapacity, according to Poppy Jaman, CEO of Mental Health First Aid (MHFA).

The issue of quotas

Setting, and even achieving, quotas won’t help an organisation if it doesn’t also change its culture, says Frank Douglas, who has his own consulting firm, Caerus Executive, which he established by drawing on his experience as an international HR director. Born in Mississippi, he worked in New York City and Holland (for Royal Dutch Shell) before basing himself in the UK. His international background has encouraged his passion for developing leaders and organisations in emerging markets, with a particular focus on Africa.

Because of his experience he has grown to realise that the word diversity means different things, depending on the country. “If you say diversity in the US it’s an all-encompassing term covering men, women, Latinos, people who are over-45… that’s called ageism, not diversity, in the UK. In Africa, in the oil business, a board may be made up of 10 black men – what does diversity mean to them? You have to define ethnicity, for example, in each country,” he says.

In his consultancy role one of the ways he challenges company executives to consider their firm’s culture beyond gender diversity is by pointing out that while every white man knows a white woman, not every white male knows an ethnic minority person, or a disabled person, or someone who is gay or a transgender person.

Cognitive diversity is an important factor in making changes towards greater inclusivity, says Douglas. He urges those companies consulting him to recognise that their own improvement programmes have to be hungry and open to encourage the diversity they say they are seeking. Any under-representation within a company speaks of a fissure in its own talent programme processes, he believes.

“If you’re not getting the best out of your system you should do something about it,” he says.

Douglas also feels it is time for companies to expect their suppliers to have a cohort of diverse individuals on their own boards.

Walking the talk

“The US is more mature in this approach, which is: ‘When you’re tendering for my business I want to know what your diversity statistics are within your business’; I’m going to work with companies that walk the talk. So you start to bring pressure on to the supply chain and professional service providers from that point of view. In US companies that effort is a lot more progressed because there’s been a lot more focus on the supply chain in the tendering process.” It’s up to the biggest companies to set the scene, he feels.

“If you just extrapolate it – if I’m a recruitment firm and I’m going to a top company tendering for business and I know that part of the tendering process is the demographic of my own workforce then first of all, I have to make it a business issue for me, before I’m tendering for the business. Secondly, if I have an LGBT or ethnic minority sales consultant then my chance of them plugging into those diverse pools is probably also increased. Therefore the quality of the pools, through those candidates, is increased. It has a multiplier effect if companies start focusing on their supply chain, not just in recruitment, but all aspects,” he says.

In Finland, which has a relatively good track record on gender parity in upper management levels, getting women to take on roles leading to board appointments isn’t quite so straightforward. According to Sami Erviö, a partner at Odgers Berndtson, Finland, generous maternity allowances that allow women to stay off the career ladder can leave them behind their male colleagues in terms of experience gained. Erviö considers that the language barrier, part of the reason immigration has traditionally stayed low, has a knock-on effect when it comes to the number of non-native speakers recruitment teams have to choose from when they are filling Finnish boardrooms, creating a less diverse executive team.

Turkey is a multicultural environment that has always included large groups of people from ethnically and culturally diverse backgrounds. Professionals who have the necessary skills to perform at board level will find no barrier to appointment, says Ayşe Öztuna, the Managing Partner of Odgers Berndtson’s Istanbul office. The country has enjoyed a buoyant economy making it a powerhouse for businesses’ growth. Despite its well-educated workforce and young demographic there’s a shortage of talent simply because demand outstrips supply. That means no company can afford to overlook anyone with the ability to take up an executive role, regardless of gender and background.

Tracking results

“If they meet a business’s requirements – if that person is the one – the right talent gets into the board room or management team,” says Öztuna. “That also serves the interests of the population, consumers and clients.”

International law firm Clifford Chance, which has won awards for its approach to improving diversity, has bottom up and top down programmes. Laura King, Global People Partner, believes that it should be clear what a firm stands for in its recruitment materials: seeking the widest range of talent signals intention, she says.

“Tracking the result is also important,” she says. “What was the range of application and what happened during the process? But getting diversity into the organisation is not enough: organisations need to ensure everyone has development opportunities (challenging work, exposure to clients, training about working in a diverse environment) and assessment that recognises outcomes.

Whichever aspect of the diversity issue is being addressed, King believes the operational foundations are the same and she highlights strategies that can ensure fairness across the board.

“Ensure broad communication into the recruitment community, track results (systems readily enable this without requiring candidates to disclose to interviewers or recruiters should they prefer not to do so), ask your incumbent colleagues their views, ensure access to development opportunities, query results and report,” she says. King believes every organisation should be seeking means to differentiate and to attract the best talent.

“Role models at the top are an important part of this, but I’m not aware of an organisation which would compromise quality. Fortunately, it is not difficult to do both: achieve quality appointments and broaden the range of role models,” she says.

The matter of encouraging disabled candidates to apply for executive roles is an area that does not, currently, receive the same amount of media attention as other areas of diversity.

“There are challenges (visibility, privacy, for example) which may make this a more complex area for organisations to tackle through transparency, reporting and tracking. However, we have seen change and we hope that the pace of this will increase,” adds King.

Regular reporting

On quotas as a means to achieve the ‘right’ balance she says their efficacy may depend on the starting point, the potential talent pool, the current pace of change and the legal framework (this last because in some jurisdictions, quotas are impermissible). But she says every country has the opportunity, particularly at board level, to improve its diversity-led appointment criteria.

“Depending upon the length of time for which there has been equal access to education and employment, the pace of change may be impacted,” she says. “Organisations such as the 30 per cent Club have had success with targets rather than quotas. Transparency is behaviour-changing. Reporting regularly can also have a beneficial impact, which leads to change.”

King, who was a leading financial lawyer at the firm before taking up her current role, says people of different backgrounds, experiences and perspectives enrich debate and this in turn can drive more and better outcomes.

“If everyone is thinking the same thing, then someone’s not thinking,” she says.

A report published by Grant Thornton in August 2015 drew on interviews with more than 1,800 business leaders across 36 economies, and 82 in-depth discussions with board directors. It went beyond the usual gender debates in urging businesses to incorporate new perspectives on to their boards. However, there is a school of thought that more women should be involved in a company’s decision-making until there’s 50-50 parity.

In Japan, which bumps along the bottom of developed economies’ international statistics when it comes to women making executive boards, there’s a movement – Womenomics – a strategy Prime Minister Shinzo Abe has designated as a key element for the country’s economic growth. Japan is not alone. In Germany new laws now lay down ratios of males to females on executive boards. It has come about because, despite Chancellor Angela Merkel’s status as one of Europe’s most powerful and well-respected leaders, the nation struggles to make enough headway when it comes to gender parity in the boardroom of its top businesses.

Only seven per cent of Dax-listed companies have even one woman on the executive board, a figure that rises to 25 per cent if non-executive directors are taken into account. Quotas have been effective in raising female talent to board level at Europe’s largest airline, Lufthansa, and to creating a good number of women working in first and second tier management.

CEO of a £50bn investment fund, Helena Morrissey helped found the 30 per cent Club, with the specific aim of creating gender parity through targets rather than quotas. Morrissey, who has nine children, also chairs the corporate board of the Royal Academy of Arts, proving that it’s not motherhood that gets in the way of career progress.

Sandra Kessell is a business journalist