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Why A More Diverse Board Means a More Profitable Business

Having a diverse board is important for many reasons – it’s the right thing to do, for starters. But one benefit that often goes unnoticed is that it can actually increase your company’s profits. When doing the right thing also produces better results, everybody wins. Here’s the breakdown of how a diverse board increases profitability, and a few others benefits it brings as well.  

The Business Case for a Diverse Board

It’s clear from the research that diverse boards lead to stronger performance and profits. McKinsey found that the companies with the most gender diversity in their executive teams were 48% more likely to outperform financially, and the companies with the most ethnic and culturally diverse executive teams outperformed those in the fourth one by 36% in profitability. 

And the benefits of diversity in company leadership in general are also well-established. The benefits of diverse boards can be summarized in having more perspectives, experiences, skills, and opinions considered at a high level, which leads to more creativity and stronger decision-making. 

With such a clear impact on profitability, it’s no wonder diversity has become such a high priority for businesses these days. And diverse boards have further benefits as well that make them a smart priority, as well as being the right thing to do. 

Ensures Organizational Diversity 

Creating a diverse board helps your organization to build a truly diverse culture – one with the social support and structure to make real and lasting changes for the better. 

If your company talks frequently about the importance of diversity but the top echelons are still filled with people who fit the same narrow profile, your employees and customers aren’t likely to believe you’re sincerely committed to change. 

But if your board reflects a genuine focus on diversity, your entire organization is likely to make the same commitment and see diversity as a true value of the company. That can help increase retention – 78% of employees say it’s important for them to work for a company that makes diversity and inclusion a priority. 

Access to More Connections

If your board is made up of people who are very similar to each other, it’s likely that they have access to the same networks and information, and that can stifle creativity and innovation. 

If most of your board members attended the same universities and business schools, it’s natural that they will tend to know the same people and move in the same circles. 

Increasing the diversity of your board, on the other hand, gives the whole board access to broader networks and more connections. Broader leadership teams tend to avoid falling into cliques and can access knowledge from more connections inside and outside of the company, offering more opportunities to problem-solve in creative ways. 

Offers Broader Insights

Having a diverse board means that the status quo will be challenged and groupthink will be called out. This puts your company in a better position to understand all of your customers, your markets, and your risks and opportunities. 

But to reap the benefit of these insights, every member of your board must be encouraged to share their opinions, and their perspectives must be treated as valuable. Otherwise, you risk creating token seats on your board, where some members are recruited simply so your board will appear more diverse. 

Creating an open and egalitarian board culture can help ensure everyone’s perspectives are solicited and valued, according to Harvard Business Review. That’s why diversity and inclusion go hand-in-hand – you must actively include everyone on your board to reap the real benefits of diversity. 

See how Cangrade can support your quest for increased diversity in leadership. Find out more today.