Steps to increase executive and board diversity

Diversity and inclusion (D&I) is a frequent agenda topic for boards of many companies that are showing they are serious about this issue.

Most boards meet between seven and ten times a year, and 36% of them discuss D&I more than five times, while 62% discuss the subject fewer than five times a year, and a handful — 2% — never discuss it, according to executive search firms Odgers Berndtson and BoardEx’s UK Leadership Diversity Report 2021.

A serious focus on this issue can bring about needed change, according to Yemi Jackson, ACMA, CGMA, the CEO of UK-based talent acquisition and development company Engage Transform, which operates mainly in the finance and IT sectors.

“Unconscious bias always has to be addressed with a conscious effort,” she said.

Leadership diversity

In the UK, the number of women on UK FTSE 100 boards increased by a third over the past four years. In January, women occupied 36.2% of board roles — up from 27.7% in 2017.

At the same time, women made up 28.5% of FTSE 250 executive leadership teams — showing just a marginal increase on 2019 and coming up short of the voluntary targets of the UK government’s Hampton-Alexander review.

Data released in March from the UK’s Parker review revealed that 81 FTSE 100 companies now have at least one board member from an ethnically diverse background.

Jackson, also founder of Building Inclusive Boards, which provides mentoring and corporate governance training for board placements, said: “The biggest challenge [for] boards and in terms of diversity is … ethnic diversity … We have managed to achieve the 33% gender representation in the FTSE 100.”

However, as well as pursuing initiatives to increase board and leadership team diversity, Jackson said businesses need to celebrate and make all staff aware of those from diverse backgrounds who have been successful and secured leadership positions. “When you see someone that looks like you, that has a similar background to you, the motivation it [gives] … makes you think [if] they can do it, I can do it. I don't think there's enough of that.”

Unconscious bias training

Unconscious or implicit bias is a bias that affects people’s judgement and attitudes in ways they are not aware of and therefore is difficult to control.

Training to overcome potentially harmful unconscious biases in the workplace aims to make people aware of their biases and to reduce their impact when interacting with others, including in recruitment. And while evidence for the training’s effectiveness is not wholly conclusive, according to McKinsey & Co., in 2017 more than $8 billion a year was spent on diversity training in the US alone to address these issues.

For Susanne Thorning-Lund, an Odgers Berndtson partner specialising in board-level recruitment, equity and bias training can improve decision-making when recruiting for board and executive leadership positions. Currently, more than half of “nondiverse” companies do not apply any measures to reduce this type of bias, according to the Odgers Berndtson and BoardEx research.

Thorning-Lund said: “[Training guards] against what some would call a smokescreen for inequality. So, for example, [organisations] would say, ‘We recruit and we are transparent and open and recruit everybody on merit.’ … Actually, that really means that people do not realise and recognise that not everybody starts at the same place. Particularly those from … ethnic [minority] backgrounds, who have had to overcome significant obstacles throughout their entire career.”

Leaders’ role

The Odgers Berndtson-BoardEx report revealed that just 13% of nonexecutive directors and C-suite leaders say all their staff are aware of measures taken to reduce recruitment bias.

Leaders also need to visibly articulate and communicate what action is required to increase diversity, Thorning-Lund said.  

“It's quite stark that you have boards and executive leadership teams who know about the diversity initiatives that companies do, but actually a lot of their staff do not,” she added.

To avoid recruitment bias, processes can be put in place such as blind reviewing CVs, ie, not looking at the applicant’s name, gender, or other personal features that might cloud your judgement.

Thorning-Lund suggested that recruitment should be based firmly on a candidate’s capability rather than their experience, notwithstanding that many finance roles require strong technical ability. “To the extent possible [when recruiting], put in some broad aspects such as ‘the ability to deliver at pace’ for example, which is a softer way for an individual to illustrate a strength behaviour; it is a situational experience rather than a more formulaic technical competency.”

Further steps to increase diversity

Jackson and Thorning-Lund’s further advice for companies to increase board and executive diversity includes:

Own your existing demographic makeup and set targets. Thorning-Lund said D&I targets can be linked to executive bonus structures typically over a two- to three-year period. Thirty-five per cent of diverse companies identified by Odgers Berndtson and BoardEx in their report set leadership team targets for increasing diversity compared with 17% for nondiverse companies. At board level, the picture is similar, with diverse companies more than twice as likely to set board targets as nondiverse companies.

Companies should also try to find out why underrepresented groups excel in certain areas of the business but not in others.

Widen your board recruitment pipeline. This can be done by giving opportunity and mentoring to those with substantial experience but who may not appear to be an immediate fit.

Create partnerships and join initiatives to help the recruitment pipeline. In the UK these include Change the Race Ratio, #10000BlackInterns, and The Valuable 500. According to the Odgers Berndtson and BoardEx report, companies with diverse boards and leadership teams are more than three times as likely as nondiverse companies to engage with D&I membership organisations when recruiting for these positions. 

Review recruitment consultants used. Jackson said boards often tend to use the same recruiters because it’s convenient and quicker. “I would challenge the board to at least have three companies … they use every time they are looking to bring in a permanent board member.”

Ensure the recruiting panel is diverse. This can sometimes be difficult to achieve but is important to challenge unconscious bias that may exist.

Consider reverse mentoring. This can open up executives to different conversations and some of the obstacles that a particular cohort faces. “It proved to be incredibly valuable when boards were looking to improve their gender diversity,” Thorning-Lund said.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.