The benefits of diversity in boards are well documented and efforts to ensure greater representation of minorities and women in boardrooms have begun pay off. The impact of diversity on performance is not fully understood.
One of the most common arguments is that increasing diversity in the demographics expands a board’s knowledge base, providing it with information that isn’t available to a homogeneous group of males or women. In the same way the board that is more diverse is expected to have more “cognitive variety” and explore different options when deciding on how to move the company forward than a less diverse one.
However, there are other factors to consider. People who are seen as minorities or tokens in the group might self-censor and not express opinions or beliefs that do not agree with the majority. In the end, the board might not be able to fully take full benefit of the cognitive diversity it has incorporated into its makeup.
Additionally, while research from academics suggests that diversity in the demographics can influence board decisions, it also suggests that this isn’t the only factor that is important. Other attributes such as board independence and educational qualifications, as measured by the number years of education beyond a bachelor’s degree can also have a significant effect on the performance.
Companies seeking to improve their boardroom composition should be creative in the search for new members. For instance, they should consider reaching out to universities and business programmes to find potential candidates. They can also establish task teams that will investigate the areas in which the most promising candidates might not be readily available. This is a better approach to increasing diversity instead of relying only on consultants either external or internal.