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There’s No One Size Fits All Approach to Diversity

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There’s No One Size Fits All Approach to Diversity

State Street Corporation’s “Fearless Girl” statue staring down Wall Street's big (male) bull turned up the volume on a conversation we've been having for years. The message wasn’t subtle: corporate boards have to get serious about gender diversity. If they don’t, they risk losing key talent, misunderstanding their customers, and—most importantly, underperforming in business.

Diversity’s positive impact on corporate results is increasingly well documented. For example, according to a Peterson Institute for International Economics study, companies that grew from zero female representation at board and C-suite levels to 30 percent female saw a 15 percent increase in net revenue margin on average. Research also shows that diverse teams make better decisions, are more creative and therefore better suited for generating disruptive ideas—a critical point in today’s fast-changing business environment.

Yet despite the known advantages, global progress in this area remains disappointing. Findings from Egon Zehnder’s 2016 Global Board Diversity Analysis reveal the world is not on track to achieve gender parity in the boardroom until 2036. The report, which examined 1,491 of the world’s largest companies across 44 countries, uncovered the global state of diversity and the contributing factors for growth.

First, the good news: Our findings reveal that gender parity in the boardroom continues on an upward trajectory globally—with 84 percent of all large company boards having at least one woman director, up from 76 percent in 2012. But that progress is slow and uneven. Countries such as Italy and France have transformed their boards, championing diversity with double-digit growth over the last four years. Meanwhile, the U.S and Russia have shown little to no progress, and countries like China and Turkey have demonstrated negative growth.

What this shows is that there is no one-size fits all approach to achieving diversity. In Norway, where 15 years ago diversity wasn’t even part of the dialogue, and the country has female representation on nearly 100 percent of boards, averaging 3.9 women per board. The catalyst for growth was a government-instituted quota in 2003, mandating that publicly listed companies fill 40 percent of director roles with women. The quota, which was the first of its kind, sparked a necessary revolution in a country where, at the time, only 9 percent of women held director positions.

The approach of using quotas was gradually adopted throughout much of Western Europe, a region that led in diversity growth over the last four years and claims an average of 26 percent of female-held board positions. But while quotas have worked in some areas, they do not guarantee success everywhere. Increasing diversity isn’t a cookie-cutter process; different regions require different approaches.

In the U.K. for example, a legally-mandated quota would likely be met with resistance, as it is less aligned with the country’s cultural and business operations. Instead, voluntary targets and a highly publicized government initiative to achieve 33 percent female board representation across the Financial Times Stock Exchange (FTSE) 100 Index by 2020 have contributed to women holding 26 percent of board positions.

In a market-driven country like the U.S., companies are likely to respond better to an emphasis on the superior performance of diverse organizations. With just 1 percent growth in board diversity between 2012 and 2016, change will come only when U.S. investors, employees and consumers use their market power to press for change.

But what does diversity really mean when it comes to boards? It must include gender, yes, but also nationality, age, experience and perspective—because in order to compete in global markets, and in the digital era, boards must be representative of the markets they serve.

Identifying these types of candidates means departing from traditional ways of sourcing talent. Talent selection should not be limited by industry, geography or current pipelines; most importantly, companies must be open to finding board members outside of the traditional P&L and CFO pool. The tenure of current board members should also be taken into account. Remaining innovative requires fresh, diverse perspectives; boards that don’t think about this risk unconscious bias and stale thinking. Will things change? They will—but only if we abandon a one-size-fits all approach to diversity.

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Egon Zehnder tracked gender and international diversity on boards around the world for the past 14 years. Where do 44 countries stack up? 詳細

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