The benefits of diversity in boards have been documented for years, and efforts to achieve greater gender and minority representation in boardrooms are beginning to pay off. However, the impact of this diversity on the performance of corporations is not well understood.
One popular argument is that a greater diversity of demographics increases the knowledge base of a board by providing it with information that isn’t available to a homogeneous set of men or women. In other words the board with more diversity is expected to have more “cognitive diversity” and consider more options when deciding how to move the business ahead than a board with less diversity.
There are other elements involved. People who are viewed as minorities or tokens of an organization may self-censor and refrain from expressing opinions and opinions that are contrary to the majority. This means that the board might not be able to fully take full benefit of the diversity of thought it has incorporated into its makeup.
Additionally, while research from academics suggests that demographic diversity could influence board decisions, it suggests that this isn’t the only thing to consider. Other factors, such as board independence and education qualifications, which are measured by the number of years of college education beyond a bachelor’s degree can be significant on performance.
Companies seeking to improve their boardroom composition need to be innovative in the search for new members. For instance, companies could consider contacting business programs and universities to identify potential candidates. They could also form task forces tasked with exploring areas where the best candidates might not be easily identified. This is a much more effective method of increasing diversity than relying on consultants who are either external or internal.