As UK boards grapple with the implications of global and regional volatility, along with persistent social, economic and geopolitical uncertainty, it appears that progress on diversity and inclusion within these decision-making ranks is taking a hit. That’s one of the findings from the Heidrick & Struggles 2023 Board Monitor UK Report, pointing to a greater need to renew focus on the value of diverse perspectives at board meetings.
This year’s report suggests that boards tend to retreat to the familiar when faced with significant geopolitical and macro-economic challenges—turning to former or sitting CEOs and CFOs who have seen it all before. And while this is all part of the careful, shareholder-assuring, risk-management remit of a board, it can significantly narrow the potential benefits of those who represent a more diverse and inclusive perspective on society. By doubling-down on the seemingly ‘sure thing’, many boards are taking their eye off the long term benefits of DEI progress.
The data points to slower progress on a number of diversity-related metrics. In general, ethnic diversity hiring saw little progress and was largely flat on the previous year. Nationality trends also appeared to have moved backwards in the UK: there was a decrease in the share of seats going to directors who were not British citizens. Age diversity on boards also took a hit, with far fewer seats going to directors under 55 than in previous years.
Take the broader view
Despite the economic climate, there is a proven need for increased diversity to solve the system-wide problems facing businesses today. It is important that we continue to encourage boards to seek a wide range of backgrounds, experiences, knowledge, age and capabilities to make them less homogeneous and ensure they are future-proofing the organisations they serve.
We know that legislation can help spur on this change across the market. Thankfully, we are seeing improvements in gender balance on boards, with the data showing that the share of seats going to women hit a record high in 2022, at 58%, no doubt at least in part due to the Financial Conduct Authority (FCA) target that at least 40% of all board members are women by end of 2025.
In terms of wider diversity and inclusion, there is a long way to go to reach the FCA target of having the presence of a director of an ethnicity other than white on each board.
It is important to keep the conversations about diversity on the table to ensure that we don’t miss out on the opportunities that having diverse views and opinions can bring to a board and, by extension, to a business.
So what can be done in the near term? A good place to start would be to recognise the talent already within the organisation. Instilling a sense of ‘belonging’ and really focusing on developing senior people to improve diversity ratios from within are recommended. Looking outside the more traditional pool of talent and being open to looking at candidates that perhaps don’t have prior board experience is also a good habit to form.
Boards can look to identify senior employees that they believe might have the right diverse skillset to become a valuable non-executive director—work with them and mentor them to help them develop the skills needed.
Another option that is gaining traction in order to improve diversity levels is the concept of sub-committees or ‘shadow boards’. The shadow board comprises usually a younger, more diverse non-executive cohort of employees from across a business, with an aim of giving visibility and a voice to a new generation of employees.
The group mirrors the traditional board of directors and can act as a safe space for airing fresh perspectives, and allowing the members to gain valuable experience, which can lead to career advancement. For the board, it is an opportunity to develop a system to mentor a new diverse generation of potential directors.
The ideal board
Undoubtedly, the role of the board is evolving, and purpose, sustainability, culture shaping, and safeguarding reputation are at the top of the agenda. Yes, they must continue to look to add members with skills that can help them steer their companies through current challenges but they must understand the importance of long term thinking—keeping focused on future challenges such as digital transformation, the drive for more sustainable business practices, and the climate crisis.
Keeping a diverse talent pipeline in the mind’s eye is important—and will facilitate an easier change over on the board when that time comes.
So what does the ideal board look like? In short, it looks more like the world we live in and, most importantly, the society in which your business operates. It is a blend of extensive executive experience and the newer, more diverse perspectives of people of different genders, ethnicities, races, ages, sexual orientations, socioeconomic backgrounds, or disability statuses. This level of diversity can bring changes and challenges—new and diverse voices can lead to more prolonged decision making, for example, but there are benefits for all involved here—including for more experienced board members.
When the benefits of diversity and inclusion become recognised and accepted as key ingredients in future-proofing—that is when we will see real success and a step in the right direction to solving the system-wide problems facing businesses.