At a time when diversity, equity and inclusion (DEI) initiatives are facing a backlash, it is crucial to refocus the conversation on board diversity not as a matter of compliance or political correctness, but as a strategic imperative for business success.

While critics argue that DEI efforts prioritise tokenism over merit, they overlook the substantial body of evidence demonstrating that diverse boards drive innovation, enhance decision-making, and ultimately improve financial performance.

As we navigate these contentious times, forward-thinking companies must resist the temptation to retreat from diversity goals and instead double down on building boards that reflect the varied perspectives of their customers, employees and stakeholders.

The need for meaningful diversity

New research, by professional services firms Norman Broadbent Plc and BDO, among 200 UK board directors, reveals both progress and persistent challenges in achieving meaningful diversity at the highest levels of corporate leadership. This complex picture demands a nuanced understanding of the current state of board diversity and a strategic approach to overcoming obstacles.

The benefits of board diversity are well-documented. Our research report, Navigating a New Era for the Non-Executive Director, reveals that an overwhelming 89% of respondents view diversity as critical, highly important, or important in board hiring and succession planning. This recognition is particularly strong in customer-facing industries such as retail, leisure and hospitality. These sectors understand that diverse boards are more innovative, responsive to change, and better equipped to navigate competitive environments and talent retention challenges.

However, the path to achieving diversity is fraught with challenges. One in seven (14%) organisations report difficulty in finding diverse voices across various categories, including gender, ethnicity, age, socio-economic background, and disability. This statistic underscores the complexity of the task at hand—it’s not merely about recognising the importance of diversity, but about actively investing in and implementing strategies to achieve it.

The progress in gender diversity, particularly among FTSE 350 companies, is a testament to the effectiveness of targeted initiatives, such as the FTSE Women Leaders Review. However, this progress is not uniform across all sectors and company types. For instance, the Alternative Investment Market (AIM) lags significantly, with 73% of boards still all-male, according to Women on Boards UK. This disparity highlights the need for broader, more inclusive initiatives that reach beyond the largest listed companies.

Ethnic diversity

Ethnic diversity has seen notable improvements, largely due to the Parker Review’s targets. With 96 of the FTSE 100 companies now having at least one ethnic minority director, and FTSE 250 companies progressing towards their 2024 deadline, the corporate landscape is (very slowly) becoming more representative but again only in relation to the UK’s largest company boards.

The recent extension of these targets to large private companies, encouraging them to appoint at least one ethnic minority director by 2027, signals a positive trend towards more comprehensive ethnic diversity efforts.

However, these statistics, while encouraging, mask deeper issues of intersectionality and cognitive diversity. The Hidden Truth report 2024 by Women on Boards UK reveals a stark reality: less than 1% of board roles are held by women of colour, and only 13% by women overall. This data points to the critical need for a more nuanced approach to diversity that considers multiple dimensions of identity and experience.

The backlash against DEI initiatives, particularly pronounced in the US but also present in the UK, adds another layer of complexity. Critics argue that such initiatives prioritise tokenism over merit, potentially compromising organisational effectiveness and distracting from other priorities. This resistance often stems from misunderstandings about the true nature and goals of diversity efforts.

To address these challenges and continue making meaningful progress, here are 10 crucial strategies:

1. Reframing the narrative: Instead of presenting diversity as a compliance issue, advocates should emphasise the tangible benefits that diverse perspectives bring to corporate governance, including improved risk management, enhanced innovation, and better alignment with customers.

2. Broadening the scope: While gender and ethnic diversity remain critical, boards should consider a wider range of diversity factors, including age, socio-economic background, disability, and cognitive diversity. While there is a growing awareness that a broader range of factors and life experiences may benefit board composition, there’s still some way to go. Our research shows that nearly a quarter of boards are not concerned with hearing generational voices.

3. Transparency and measurable outcomes: To counter accusations of tokenism, organisations should communicate the rationale behind their diversity initiatives and demonstrate their positive impact on business performance through measurable outcomes.

4. Education and awareness: Promoting open dialogues about diversity and inclusion and providing training can foster a culture where diversity is valued in practice, not just in principle.

5. Ongoing assessment: Regularly evaluating board composition and skills can ensure that diversity efforts evolve alongside changing business needs and societal expectations.

6. Creating inclusive environments: It’s not enough to have diverse board members; organisations must foster cultures where all voices are heard and valued, encouraging respectful dissent and equal contribution opportunities.

7. Addressing intersectionality: Efforts should be made to increase representation of individuals who bring multiple diverse perspectives, such as women of colour, to truly enrich decision-making.

8. Sector-specific approaches: Tailored strategies may be needed for sectors lagging in diversity, such as STEM or AIM-listed companies.

9. Expanding the talent pool: Organisations should broaden their search criteria and look beyond traditional networks to find diverse, qualified candidates for board positions.

10. Better succession planning: finding diverse talent may take more time and thought than boards are allocating currently. According to our research, 65% said their succession planning needed improvement, was limited or ad hoc.

While significant strides have been made in board diversity, particularly among large listed companies, much work remains. The challenge lies not just in meeting targets but in creating truly inclusive board cultures that leverage diverse perspectives for better corporate governance.

By adopting a more nuanced approach to diversity and actively working to overcome resistance and misconceptions, organisations can create boards that are not only more representative but also more effective in navigating the complexities of modern business. This evolution is essential for long-term success in an increasingly diverse and interconnected world.

Tanya Gass is a partner in the board practice at professional services firm Norman Broadbent.