When it comes to corporate boards and diversity, the conventional wisdom is simple: Diversity is good. When directors are too alike, the thinking goes, they look at problems—and solutions—the same way. There’s no one to challenge prevailing ideas, or to speak out on issues important to certain groups of customers and employees.
By contrast, diversity leads to more innovation, more outside-the-box thinking and better governance.
Sounds great. And it is, in theory. Unfortunately, few boards that pursue diversity ever see the wished-for returns. Many report no significant change in their performance, while others bog down in conflict and gridlock.
Questions to Ask Yourself
1. Has your company’s board gone out of its way to find people with complementary—and hence different—profiles?
2. Are board members with atypical backgrounds accepted by all of their colleagues ?
3. Does your board engage productively in forceful discussions?
4. Is there a board member designated to facilitate discussions and tease out potentially controversial positions?
5. Do atypical directors get help making the transition when they join the board?
If you answered no to any of these questions, your company should consider doing more to tap into the benefits of diversity in the boardroom. The chairman especially needs to be alert to cultural differences that can lead to misunderstandings, introduce new directors in ways that are supportive of their expertise, and be careful not to limit their contributions by pigeonholing or labeling them.
Why the gap between potential and reality? Why does it appear to be a lot easier to appoint a diverse board than to make it function well?
Blame it on human nature: As much as diversity is something we prize, the truth is that people often feel baffled, threatened or even annoyed by persons with views and backgrounds very different from their own. The result is that when directors are appointed because their views or backgrounds are different, they often are isolated and ignored. Constructive disagreements spill over into personal battles.
But the solution is not to give up and avoid diversity. Rather, boards need to minimize the friction that diversity often introduces. To unlock the benefits, in short, boards must learn to work with colleagues who were selected not because they fit in—but because they don’t.
Our research sheds light on some of the hurdles that diverse boards face, and on solutions for maximizing the benefits
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Intelligent and honest article.
Your words are remedy to my heart!
Diversity is propulsive force for any group,it prepare us better for the future.But,as with evolution which happens over time it is requied the initial”puck”.
Only to lucky disruptors happens
initial favorable circumstances.
If the company is in difficulty it may happens before because if everything rules good there is no energy to change.Very intelligent leaders, with predictive capacities, accept the change as the only guarantee to survive in future.
This applies to not only board but any team.
Editors, MITSloan Management Review
The article: “Why Diversity Can Backfire on Company Boards” is as applicable to a playground sandbox as to a corporate boardroom. The authors point out potential pitfalls of any new entrant to an established power group, and suggest how a company can reap the benefit of diversity in its governance. This may be insightful for companies whose boardrooms still cling to “old boys’ rules.” But, to compete in the current environment, new firms must begin their entrepreneurial journey with a full complement of diverse minds from the start. That is the premise of the organization I chair, Golden Seeds LLC, an early stage, angel investment firm with a portfolio of dozens of companies and returns above 25 percent per annum. We believe the key reason we attract both extremely high quality deal flow and generate superior returns is that we only accept applicants whose companies embrace diversity among both management and boards as a fundamental operating premise. We see these entrepreneurial companies rapidly gain on established competitors by dint of diverse perspectives on innovation, market opportunities, and decision-making. We believe that the value added by diversity across corporate leadership will continue to be demonstrated as these firms continue to gain share and profitability in their respective business segments and markets.
Stephanie Hanbury-Brown
CEO
Golden Seeds
http://www.goldenseeds.com
New York, NY