Numerous studies show that diversity can have an impact on the performance of boards. Diverse board members can bring different perspectives as well as experiences and angles of tackling a challenge. This can lead to solutions that are otherwise missed by an homogenous board. This is particularly relevant for boards that comprise members of groups that are not represented. They will gain insights into the preferences and habits of these groups which can assist them in better serving these groups as clients.
Additionally, having a variety of backgrounds and experiences on a board can increase morale and trust. If board members feel that their views and opinions are heard and valued, they are more devoted to the success of the business. It is essential to keep track of the progress of your board in promoting diversity, and identify any barriers.
Diversification is also a method to decrease risk. A recent study by Berger et al. The study revealed that a greater gender and age diversity on the board resulted in more effective risk management, as well as less risk of exposure to market risks. It is important to note however, that the same study indicates that a high degree of diversity on the board could cause issues with cohesion and communication.
Finally, boards that have a diverse composition are more observant and aware of the particular challenges faced by underrepresented communities. This could encourage them to take steps to promote social responsibility in their businesses. This is why it’s essential to continue to identify and recruit skilled women or people of color and LGBTQ candidates for board positions.
