Impact of Board Diversity on Company Performance

Diversity on the board of directors is an option that has been fought for decades. Previously, managers were exclusively men, but experience and research show that it is time to change the situation. Also, great success can be achieved by companies that assemble teams of managers of different ages.

About the principles of diversification

Although the transition to the principle of diversification is discussed almost every day in the world media, boards of directors are far from convinced of the need to revise their gender and professional composition. Only 30% of respondents believe such initiatives will increase control over risk management.

Family businesses could diversify their boards more actively. For example, only 31% of the top 500 family businesses worldwide have at least one woman on their board of directors, most European companies (54%), followed by the Americas (30%). Boards of directors should seriously review the current and future composition for compliance with the specifics of their organization and its social purpose. This will not only be ethically correct but will also lead to tremendous commercial success.

Impact of Diversity on Efficiency

According to one study, the presence of women on the board of directors leads to better financial results, as well as to better manage climate change risks and moving along the path of innovative development.

Age differences in managers

The principle of diversification implies not only gender diversity but also the absence of discrimination in several other aspects, such as age, culture, race, etc. The next generation of leaders can bring a fresh spirit to the life of their organization by sharing professional experience, valuable technological and digital knowledge, and understanding the behavior of consumers and employees from among their peers. Thus, people of different ages perceive the problem of sustainable development differently. Gen Z and millennials are more inclined than older generations to be sustainable in their lives and share information about sustainable products with their peers.

Suppose the average age of board members of family businesses is 61 years old, and only one in five have a next-generation representative (under 40 years of age) on their management team or board of directors. In that case, it is time to think about how their current skill set meets the needs of tomorrow. Looking to the future with confidence requires equal opportunities regardless of gender, age, race, or culture. They are addressing diversity in ways that are not obvious, such as stimulating collaboration, creativity, and constructive criticism so everyone can contribute.

Recommendation for managers

Assess the current composition of the board of directors and potential candidates for its members in terms of their skills and knowledge that may be in demand in the future (technological transformation, changing consumer behavior across generations, the ability to think outside the box, etc.). In addition, learn about the mechanisms and processes that the board of directors and the nominating committee have to ensure diversity is a guiding principle when appointing new members.

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