Whether you believe that diversity leads to better decision-making or not, we’ve reached a point in time where the importance of gender balance at the board level cannot be overstated. As the EY Center for Boards Matters Global Leader, I’ve observed that organizations with the ability to innovate quickly and reach new customer bases faster have one thing in common; their board reflects the world around them. These organizations tend to be few and far between. A case in point; despite making up half the population, women continue to be poorly represented in the boardroom. As a result, we are finding that organizations and their boards are overlooking a strategic opportunity to drive value.
1. Women make up a large consumer market.
It has been estimated that women constitute a larger consumer market than both China and India combined and yet, in that context, you have to question how much focus is being placed on women and their purchasing power. A study from the Center for Talent Innovation found that teams that had one or more members who represented a target end user were up to 158% more likely to understand their end users and innovate accordingly. The findings showed that “homogeneity stifles innovation” — most people don’t value ideas they don’t relate to. Customer research and data are still critical sources of management information; increasing the gender diversity of your board doesn’t replace this, but it does allow you to become more in tune, agile and effective in your ability to interpret and act on that information.
2. Having a minimum of 30% women on your board will improve your profit margin.
Globally, while nearly 75% of boards have at least one female board member, research from EY shows that if boards truly want the benefits of gender diversity, then at least 30% of board members should be female. However, in order for diversity to truly work, it cannot simply be an exercise of checking a box. The fact that the percentage of women on boards has progressed for seven straight years illustrates that organizations are taking action because they can see that it’s good for business. Improving diversity at the top can enhance an organization’s ability to innovate and develop a vision that appeals to its inherently diverse market.
3. Boards must show that they walk the talk.
Just like other customers around the world, when I purchase a product, I want to feel that the brand I’m buying from reflects my own purpose and values. If you claim to be a brand that supports women, for example, and yet you don’t have any on your board, you run the risk of alienating your customer. Valuing diversity is not just about what you say but about what you do, and if boards can’t answer how they’re addressing that, they could be putting their reputation at risk.
To support the advance of women, organizations must also look for ways to sponsor, mentor and advocate for high-potential women to ascend through the ranks.
What about your board?
Here are some questions that you might like to consider when thinking about improving diversity at the highest level:
- Does the culture of your organization promote and support diversity and inclusion? If yes, what are the measures of success?
- Does the board have sufficient diversity of experience and thinking around the board table (and if not, how and from where does it access different perspectives) to inform better decision-making?
- Is the board sufficiently tuned in to the issues and societal trends and how these might impact their organization’s strategy? In that context, where do the risks and opportunities lie?
- How is your organization creating opportunities for qualified women to be identified early in their career for sponsorship, mentoring and advancement?
Boards who choose to stick with the status quo simply risk being outpaced by their competitors. If your board still looks today as it did even 20 years ago, then you should question where else in your organization you may have failed to keep pace with the changing times, and what else is at risk as a consequence.
EY’s latest report, Where do women sit if all board seats are taken? provides insights on the impact of gender diversity at the board level. Find it at ey.com/boardmatters.