Has a greater emphasis on gender overshadowed the still-woeful lack of multicultural Boards? We examine the current situation and identify the pioneers who are redressing this often overlooked imbalance.
In 2015, a McKinsey report on 366 public companies found that those “in the top quartile for ethnic and racial diversity in management were 35% more likely to have financial returns above their industry mean”.
That’s a compelling statistic. It throws important light on the pressing issue of ensuring that a true multicultural mix in management and the boardroom yields significant benefits, not just to the bottom line, but to better and more enlightened well working.
Embracing the difference
The McKinsey report specifically found that “racial and ethnic diversity has a stronger impact on financial performance than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results”.
HBR.org echoed those sentiments, adding: “In recent years a body of research has revealed another, more nuanced benefit of workplace diversity: non-homogenous teams are simply smarter. Working with people who are different from you may challenge your brain to overcome its stale ways of thinking and sharpen its performance.”
Stuart Morton, Partner and Head of Practice, Legal & Professional Services at Odgers Berndtson, London, who also heads up the company’s Diversity Council, agrees.
“A senior management team that looks and feels more like its people will build empathy – and always have a happier, more productive workforce who will go the extra mile. Millennials, in particular, look for positive indications of empathy and a real belief in core values. So, a diverse multicultural, multi-ethnic board is not just best practice, it’s best for the business and best for employee engagement.”
The diversity imperative
Indra Nooyi, the Indian CEO and Chairperson of PepsiCo who recently announced she is stepping down, is one of the world’s most high-profile female ethnic minority business leaders. She has said that increasing the diversity of her team is a “business imperative”. Currently, 27% of senior executives at PepsiCo are women, and 36 percent are people of color.
Fortune magazine summed up the status quo with this damning indictment: “Racial diversity continues to be, at best, a challenge, and, at worst, a flat-out fiction, particularly in the Executive ranks.”
The UK recognizes the issue and is trying to do something about it. In 2017, Britain’s biggest companies were given four years to appoint one Board Director from an ethnic-minority background. This was part of a package of measures outlined in a government-backed review into the lack of diversity at the top of corporate Britain.
In Australia, according to Odgers Berndtson’s Julie Steiner, Head of the Board and CEO Practices and Chair of the Global Education Practices based in Sydney, Board diversity has primarily focused on gender diversity.
Steiner cites a number of recent pieces of research that bear this out. For example, an article by Sally Freeman, Partner at KPMG. It explores the issue of board diversity. Says Steiner: “I agree completely with Sally Freeman when she declares that having a board consist of more than one ‘type’ of person will bring greater benefits to an organization and a move away from typical ‘group think’.”
Still a long way to go
Similar stories can be told about the situation in the US. According to a 2016 Fortune study, there have been only 15 black Chief Executives in the history of the Fortune 500. A truly woeful statistic that must be changed. And changed soon.
One of them, Arnold Donald, CEO of Carnival Corporation, the world’s largest leisure travel company, was named the top-ranked global executive in last year’s ‘EMpower 100 Ethnic Minority Leaders’ list. Donald received the award for his “strong leadership and commitment to improve diversity and inclusion in the workplace and for serving as an inspiring role model”.
Donald is clear about the benefits of a multicultural board: “We are also very proud of the diversity of our workforce and believe that the power of diversity of thinking drives innovation, which is fuelled by leveraging the knowledge and creativity of our rich backgrounds, experiences, and perspectives to achieve common goals.”
List of pioneers
The pioneering work being done by Donald and the 99 other individuals on the EMpower list is heartening, and it will be interesting to see how it has evolved when the 2018 list is published.
The last word on this greatly under-discussed topic should come from HBR.org, which rightly pointed out that “although … plenty of studies demonstrate the effectiveness of diverse teams working together there’s still a long way to go before we can say that the majority of boards have a broad multicultural mix.”
This article is from the latest ‘Well Working’ edition of the Odgers Berndtson magazine, Observe. Register to download your free copy below.
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