The concept of Diversity, Equity, and Inclusion (DEI) is now recognised as essential to foster innovation, resilience and employee engagement across all levels of an organisation. As explained in McKinsey’s DEI Lighthouses report, deep commitment from executive management can help set equality and diversity-related initiatives up for success by signalling the importance of DEI and making sure initiatives are adequately resourced.
Why diversity at the board level matters?
DEI is most effective when fully integrated into an organisation’s vision and strategy. As Diversity Australia explains, it empowers organisations to leverage the unique perspectives and experiences of employees. DEI also equips team members to drive innovation, spark creativity and meet the ever-changing demands of customers.
According to research by McKinsey & Company, diverse boards are not only more innovative but are also linked to greater financial performance. Their study found that organisations with high ethnic and cultural diversity on their executive teams were 33% more likely to outperform on profitability than their peers. Results like this prove that board leaders play a pivotal role in steering an organisation’s DEI efforts in the right direction.
Employees who come from diverse backgrounds are able to understand the needs of a wider audience. They apply different perspectives to solve problems more effectively, create more thorough processes and improve customer experience. Diversity in the workplace can also overcome the ‘groupthink’ phenomenon, which prevents ideas from being challenged.
Research consistently links diverse and inclusive workplaces with improved profit and performance, innovation, creativity, talent and wellbeing. – Diversity Council of Australia
There are proven benefits to developing a DEI workplace, but it doesn’t happen overnight. In some organisations, for example, the entire talent-sourcing process may need to be updated to eliminate the threat of unconscious bias and widen the talent pool beyond the local market.
DEI also applies at board level. When board members reflect the diversity of the workplace, the board will have a better understanding of the operating environment.
As the Board Diversity Index of 2024 shows, while positive progress is being made, only a sixth (16%) of boards have at least 50% women directors. Consider an industry like aged care, where front line workers are from very diverse backgrounds and are often largely female; a board which does not include a range of representation will struggle to relate to the workforce and may have problems with retention.
It’s important to consider customers and clients as well. If buyers come from a minority demographic or specific socio-economic background, having board members with similar lived experiences can help ensure their needs are well understood and addressed.
The need for responsible diversity
Onboarding individuals from different backgrounds in order to tick a box is not enough. It is important to take a holistic approach to foster inclusion and onboard individuals who are aligned with the organisation, its audience and its stakeholders.
The role of the board should be to champion DEI initiatives by defining what the concept means to the organisation, identifying existing inequities, reviewing existing policies and updating or creating KPIs. Meetings with stakeholders may be required to set new targets and come up with new mandates that promote inclusion and equity at every level of the business.
A refreshed policy should be communicated with the entire team and have the genuine backing of each member of the board. It should be clear and relevant to the organisation and its goals.
- An aged care organisation board may feel the senior management team could be more reflective of the demographics of residents and their families, especially if they have a multi-cultural client base.
- A retailer looking to expand to international markets may wish to bring in representatives from its target countries.
Once an updated DEI policy is in place, it needs to be implemented. Human Resources, for example, may work with leaders and hiring managers to review whether sourcing talent internationally can help meet DEI-based KPIs while also filling skills shortages.
Practical Steps to take: How boards can drive DEI
In today’s globalised economy, international talent mobility has become a critical strategy for building a diverse and future-ready organisation. For many companies, hiring internationally can fill critical skills gaps and bring fresh perspectives that are crucial for staying competitive in a global marketplace. The board’s role is to ensure that the right policies are in place to attract, onboard, and retain diverse talent, including those from different cultural and national backgrounds.
For boards aiming to lead DEI initiatives effectively, the following steps are critical:
- Define DEI Goals: Establish a clear definition of what diversity means to the organisation and identify specific areas of inequality that can be improved.
- Update policies and KPIs: Existing policies may require a review, and new Key Performance Indicators (KPIs) should be developed to track progress on DEI metrics.
- Engage Stakeholders: Consult with internal and external stakeholders to set new targets and ensure that DEI initiatives are aligned with broader business goals.
- Communicate Clearly: A transparent and actionable DEI policy should be communicated to the entire organisation, with board members actively endorsing and promoting the strategy.
Positive outcomes
When a board champions diversity and is transparent about its efforts, it sends a clear signal that DEI is a priority for the entire organisation, from top to bottom. This can make a positive difference to outcomes and overall results because:
- Skilled migrants are more likely to join organisations with more diversity at the top levels.
- An ethnically diverse board can help attract global talent and reduce turnover as staff from diverse backgrounds feel more valued.
- Organisations with an ethnically diverse board demonstrate their commitment to diversity at all levels.
- Cross-cultural competence on boards sets the bar for inclusive workplace policies
- Boards with ethnic diversity are better positioned to navigate nuances and prevent potentially mis-steps with a diverse workforce.
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