The Board Diversity Network, a program of the Harvard Business School Race, Gender & Equity Initiative, shares the latest research, insights, and Harvard Business School alumni perspectives on diversity in the boardroom.
Original article · Harvard Business School Published December 19, 2024
We know that diversity improves a team’s collective intelligence and decision-making. But what exactly happens when a corporate board becomes more diverse? Is there a difference between when a board becomes significantly more diverse versus only slightly more diverse? What does it take for a board to leverage the much-needed guidance and expertise of new members? Read on for more on the link between board leadership diversity and performance.
One or two new voices will not disrupt groupthink
At a glance, board diversity is improving. Research from the Conference Board shows that the number of women on S&P 500 boards has increased. The same is true for directors from racially and ethnically diverse groups. In a recent survey of over 180 board members, 81% said they see the benefits of diversity and inclusion. However, corporate boards are still struggling to listen to new voices.
- Harvard Business School faculty member Kathleen McGinn says (pdf) men more often consider themselves “insiders” in terms of decision-making and influence whereas women tend to feel like outsiders. Research by consulting firms confirms this. In a 2024 study with senior leaders, only 65% of women said they feel they can influence decision-making (compared to 85% of men).
- Companies can and should set diversity targets both at the board level and for employees to counteract tokenization and groupthink. As of 2021, more than 70 companies including Airbnb, Bank of America, and GE set public gender diversity targets for 2025 or 2030. In August 2024, JP Morgan insisted on a 30% female executive ratio in Japan. As Alexandra Kalev and Professor Frank Dobbin of Harvard write, however, targets only work if they are detailed, transparent, and accompanied by real action plans.
- A diverse board can change the conversation and improve performance, but not without new working norms. As Cigdem Oktem and Kris Pederson of the EY Center for Board Matters write, it’s not enough to simply bring in people with different experiences and expertise; boards need to intentionally include new directors in board decisions.
- To shift working norms, practitioners have identified key factors that need to be in place:
- Promote self-reflection and feedback. Boards should regularly reflect on how meetings can be improved. After major decisions, boards can conduct after-action reviews. Board chairs should also set aside time to reflect on their own actions and be in dialogue with new directors.
- Adopt inclusive onboarding practices. Whether it’s on corporate boards or in the company ranks, one of the most effective levers for change, Dobbin has found, is matching underrepresented leaders with mentors. When new directors join boards, ideally experienced mentors will guide new directors through a 6- or 12-month onboarding plan.
- Empower directors in decision-making. Perhaps most challenging, making this shift requires boards to have open conversations about board norms and practices. Chairs should make it clear that they want new directors to take on leadership roles and review leadership role descriptions for characteristics that favor more traditional candidates.
- Prioritize adaptability and inclusivity. No matter how diverse a board is, directors must practice active listening and respectful discussion. To help create this kind of work culture, board chairs can use annual board and director evaluations to reinforce inclusive leadership behaviors and practices.
Increasing the diversity of your board pushes everyone to bring their
A Game
- As companies wrestle with fast-changing, ambiguous business conditions across so many industries, board diversity improves leaders’ ability to make decisions in the face of increased complexity.
- In a recent panel, Harvard Business School alumni Nisha Kumar and Kris Pederson shared that boards are looking for directors who bring knowledge around a range of pressing topics, including: economic uncertainty, capital allocation, cybersecurity, digital transformation and AI, and talent / human capital.
- Modern boards tend to value diversity because this means the group will benefit from new knowledge, expertise, and perspectives. But, having a diverse board also improves the individual performance of all board members.
- In interviews with board members featured in Harvard Business Review, Margarethe Wiersema and Marie Louise Mors found that women came prepared, asked questions, and were more likely to admit where they lacked information.
- Increased diversity on boards leads to more thoughtful discussions. As Wharton Professor Mary-Hunter McDonnell has written, diverse groups improve the quality of dialogue and bring a greater divergence of ideas early in problem-solving.
Future-fit, high-performing companies are guided by diverse boards with inclusive work cultures.
- Board diversity is becoming critical in the war for talent. Diverse leadership teams attract the best talent, especially younger professionals.
- Companies that fail to diversify their boards will fall behind. Stephanie Creary highlights that companies like BlackRock, State Street, and Vanguard prioritize diversity because leadership must reflect the communities they serve.
- Through their research, Robin J. Ely and David A. Thomas show that diversity improves performance when actively leveraged. This leads to more creative, effective, and high-performing teams.