I have long argued that the most important aspect of board diversity is ensuring diversity of thinking around the board table. The public debate about DEI in the United States (Diversity, Equity and Inclusion) and EDI in the United Kingdom (Equality, Diversity and Inclusion) is much more about the optics of the mix of people around the table.
The message communicated to an organisation’s stakeholders by a visibly heterogenous leadership roster is important. This demonstrates the commitment of the organisation to being inclusive, treating people equitably and equally. I have assembled boards that have been broadly representative, in terms of gender, sexual orientation, ethnicity and disability, both of the customers we served and the people we employed. This has to be more than cosmetic and must be carried through into the way that the organisation conducts itself.
Important though the optics and the carry through into corporate conduct are for an organisation’s marketing to all its stakeholders and for its internal operation, this aspect of DEI/EDI is not enough to ensure the diversity of thinking required for high quality governance. Three of the four major officeholders in UK government are from ethnic minorities and the 30% female representation of women in the cabinet is broadly in line with 34% for the House of Commons as a whole. But the cabinet is remarkably homogenous in terms of experience and academic background, with a predominance of lawyers and graduates in PPE or one of its constituent subjects, and only two (Kemi Badenoch and Thérèse Coffey) with degrees in STEM subjects. A prime minister will always face the challenge of balancing the opinions from different wings in his party, but does Rishi Sunak have enough cognitive diversity within his cabinet (allowing for them all being from the same political party) for good quality decision taking?
Two emails appeared in my inbox calling for divergent thinking on boards. One was from the Good Governance Institute (a consultancy that works with boards in the National Health Service). The other was a first-class thought piece from the KPMG Board Leadership Centre (KPMG Embracing Cognitive Diversity in the Board Room) that reminds us of the UK Corporate Governance Code stipulation appointments should “promote diversity of gender, social backgrounds, cognitive and personal strengths”. Its authors observe:
“Perhaps the benefits of diversity have been somewhat ‘mis-sold’ with the presumption that hiring people from historically excluded groups will automatically result in increased performance. But for these efforts to be truly effective and ‘bear fruit’, board diversity will require a different approach and skillset.”
KPMG commissioned Leeds University to undertake a literate review of cognitive diversity and concluded that recruiting for diversity based on protected characteristics alone is not enough and, furthermore, that chairs have a critical role in ensuring that the benefits of cognitive diversity are realised. The KPMG report’s authors argue for personality profiling to inform recruitment for diversity, for example, to actively develop a mix in terms of risk appetite, ability to focus on big picture or detail, be informed by heart or head, and be task-oriented of people-oriented – albeit (thinking about this from the perspective of a serial chair) recognising the management challenge that this creates for the person chairing such a board.
I’m inclined to take this further, and actively seek diversity of experience, professional background and academic training, which provide proxies for cognitive approach. Back in the 1990s, I undertook research with the Ashridge Strategic Management Centre into the strategy development processes of 30 companies in the FTSE 100 and was struck by comments from consultants and planning directors working with some of the chief executives about the different styles of thinking of their clients and bosses, and how this appeared to reflect their academic backgrounds. This resonates with me at a personal level – my wife, a former general counsel, approaches problems in ways that reflect her legal training and are completely different to me with an academic background as historian and business economist. With many years’ experience of boards in healthcare organisations, I have observed the variation in the thinking styles of different health professions and, among doctors, how within the specialities within medicine.