The Impact of Diversity on Board Performance

Many studies demonstrate the positive effects of diversity on board performance. A diverse group of people has different experiences, perspectives, and angles to approach a problem which can lead to solutions that would otherwise be overlooked by a more homogenous board. This is especially relevant for boards that comprise members of groups that are not represented. They will gain insights into the preferences and values of these groups which can assist them in better serving those groups as clients.

The diversity of backgrounds and experiences on a board may increase morale and build trust. When board members believe that their views and opinions are being heard and valued, they are more devoted to the success of the business. It is essential to keep track of your board’s progress in promoting diversity, and also to pinpoint any obstacles.

Diversification can also be used to decrease risk. A recent study by Berger et al. discovered that a greater gender and age diversity on the board results in better operational risk management and less exposure to market risk. It is important to remember however, that the same study also indicates that a large amount of diversity on the board could result in issues with cohesion and communication.

Additionally, boards with a diverse membership are more aware of the unique challenges faced by underrepresented communities which can push them to take action to encourage moral conduct and social responsibility in their businesses. It is important to continue to recruit and search for talented women, people with diverse backgrounds and LGBTQ candidates to fill the board positions.

boardroomsales.com

Tweet