Unlocking Success: The Competitive Advantage of Diverse Boards

By Christine Miller

In the 2020s, the vast majority of corporations are at least talking the right talk when it comes to the importance of diversity.

But we still don’t always see that reflected on corporate boards and in the rooms where the major decisions are made. That’s my take-away from a recent study that found a marked decline in the number of Fortune 500 board seats going to underrepresented groups like African-Americans and women. Only 34% of such appointments last year went to someone from an ethnic or racial minority – a steep drop from 41% in the prior year. This decline was largely driven by a significant drop in the percentage of black appointees.

So what gives?

One Step Forward, Two Steps Back

It feels like a true “one step forward, two steps back” moment after the steady progress of recent years in Corporate America, slowly but surely looking and functioning more like, well, America. This means we need to prioritize the full scope of what it means to be diverse – yes, that includes ensuring your team is balanced with respect to gender and color. But it also encompasses so much more – identities, age, race, culture, beliefs, personal and professional backgrounds, etc. The most far-sighted and strategic leaders that I have worked with recognize that diversity is not a narrowly defined box to be checked but the key to gaining a competitive advantage.

I have seen it myself in my time as a board member for organizations like the biopharmaceutical innovator Iveric Bio. As a black female executive, I brought a variety of different perspectives to the table, extending well beyond my race and gender. While my deep healthcare experience played a role in my appointment, I wasn’t an ophthalmology expert – and perhaps someone who would not naturally hit their radar. But our board was fortunate to benefit from a forward-thinking chair who made it a priority to push recruiters to seek out diverse candidates. A very real benefit to considering someone like me is because of my nonlinear healthcare background, which included experience in very different functions like commercial and launch expertise, as well as R&D and supply chain. It’s because of her stepping up and identifying this as top-of-mind that my candidacy surfaced.

She understood that more diverse teams could see around corners that others can’t. They are more in touch with consumer segments that may have gone ignored for too long. They influence, challenge, and help push teams to new heights – leaving behind competitors where everyone looks the same, lives in the same zip codes, and brings the same type of experience to the table.

The Power of Cross-Pollination and Wide-Ranging Viewpoints

This shouldn’t be news to anyone. By bringing in new directors with different backgrounds and unique insights outside their verticals, companies can take advantage of leadership who are asking a different set of questions and who are offering a wider range of ideas and uncommon approaches that can help them tackle problems more effectively. Companies are starting to see why they benefit from this approach. A 2023 Heidrick & Struggles survey showed 77% of board seats were being filled by individuals who come from outside the same industry. By bringing in directors with different backgrounds and unique insights outside an organizations’ primary verticals, companies can take advantage of leadership that asks a different set of questions and offers a wider range of ideas and uncommon approaches. This approach can help companies tackle problems more effectively, and despite the recent numbers, I know more organizations are starting to recognize these benefits.

Achieving diversity on a board requires that we consider the most important element: being innovative and open-minded in our thinking. While we may have a profile and criteria for narrowing down candidates, it’s essential to be creative in evaluating them. We shouldn’t just engage in “checking the box,” instead, we should prioritize a broader, more complete definition of diversity, which includes breadth of experiences, backgrounds, and seek differentiated perspectives compared to existing board members.

When leaders from various genders, cultures, ages, backgrounds, and experiences come together, they bring a comprehensive view to strategic decision-making. This breadth of knowledge and insight fosters innovation and creativity, leading to better problem-solving and strategic planning. By challenging the status quo and encouraging new ways of thinking, diverse boards can propel companies forward in today’s rapidly evolving business landscape. Not always easy to do, especially in the boardroom where there may be a natural inclination toward caution and approaches steeped in long-standing board traditions.

Evolving Culture

How do we push past those traditions that serve to effectively gatekeep new voices from being amplified? To ensure diverse voices are heard in the boardroom, boards need to evolve their board culture.

On a personal level, I know my expertise adds value, but I know firsthand that it can be an intimidating prospect to be an “only,” to look around a room and not see anyone else that looks like you. A big piece of the board diversity challenge is that many accomplished and talented black women self-select out of contention for board seats simply because of a sheer lack of role models to emulate who look like them. At least, that’s the perception, notwithstanding powerhouses like Mellody Hobson – chair of the Starbucks board – and other inspiring examples who should get a lot more attention. All the more reason for organizations to cultivate cultures that emphasize openness, tolerance of dissent, and a broadminded spirit to hearing one another out. One of the things that attracted me to the Iveric board from the beginning stemmed from my initial interviews with the company’s CEO. I could tell that he cared about fostering an environment where people (and diversity) could thrive. The company culture he built resonated with my own personal values. It’s important to consider a board that aligns with and embraces diversity as a core value throughout its organization.

Let’s be clear: we have seen steps forward. There is definitely more diversity overall, and many more women now at the table in most boardrooms I walk into, which is a positive development. We’ve also made progress in increasing the representation of people of color over the long run, notwithstanding the setbacks we have seen this year. But this progress has come far too slow, perhaps a testament to the cautious, “slow and steady” approach many enterprises adopt. Companies often struggle with change, particularly when it disrupts established power dynamics. But it shouldn’t be seen as a disruption. In fact, it’s a necessary transformation if companies want a sustainable future.

There are clear differences between boards that embrace diversity and those that do not, and those disparities only grow clearer over time. From the outside looking in, diverse boards often exhibit a broader range of perspectives and a more comprehensive understanding of the market and customer base. From the inside looking out, diverse boards benefit from increased creativity, innovative problem-solving, and more robust discussions.

The Path Forward

It’s true that introducing greater diversity to company boards comes with its own set of challenges. It can mean a significant culture shift to not only invite new perspectives into the room but guarantee they feel heard and included.

• Leaders need to ensure that everyone’s POV is fully solicited and considered. Companies often have long-standing traditions and a prevailing mindset that can be resistant to embracing new voices and perspectives.
• It’s important to have a well-defined decision-making process in place. As with any executive management decision, having a clear process ensures that all perspectives are considered and the best decisions can be made collectively.
• By fostering a culture of open dialogue, mutual respect, and active listening, boards can create an environment where diverse voices are encouraged and valued.
• Finally, don’t neglect the committee level as well. Getting a diverse candidate on a board is a crucial first step, but it falls short without extending diversity to key sub-committees such as audit, executive, governance, and others. True progress happens when diverse representation permeates all decision-making levels.

Having a more diverse board has greatly improved decision-making for me and the other businesses I’ve worked with. In my own board service, we have faced numerous difficult decisions and tough calls, but with diversity around the table, we have ensured that everyone was heard. We engaged in robust discussions, considering each person’s point of view. This healthy debate allowed us to weigh different perspectives and make well-informed decisions.

I think of an instance in which we had to make a significant decision regarding the future of the company. The goal was to ensure a successful product launch, and we debated whether to go at it alone, seek a partnership, or transact with the company. Throughout the process, the board stayed open to different possibilities and engaged in continuous debate. The decision was never preordained and was made through diverse viewpoints and careful consideration, arriving at the best path forward with the information available to us, resulting in a hugely successful strategy and outcome.

Diversity on company boards is not only a matter of social responsibility but also a strategic imperative for success. The organizations that succeed will be those that recognize diversity as a key enabler of success, not simply a box to check.