To protect against this, boards need to have the right culture and need to foster an understanding among board members regarding the importance of diversity as a whole. Nonprofit board diversity and inclusion strategies often fail.
At best, many institutions find that their diversity protocols do very little. Just remember that a diversity of experience and expertise brings with it a diversity of perspectives, and that positions your nonprofit to be stronger.
It will be better at risk management, and better in making decisions for the future. It also can lead you to more opportunities that you are poised to take full advantage of. When your board is more diverse, board discussions evolve. What do we mean? Ask what it would look like to have a truly diverse and inclusive board. As you search for new board members, assess your current board culture. Have you created a welcoming environment for diverse backgrounds? Set goals for attracting new board members in your deficient areas, and evaluate potential candidates according to these new goals.
Consider non-traditional board members—people in the community who have demonstrated leadership. With a bit of focused training, there are likely many individuals who could make fantastic board members. Make sure your entire board has marching orders and is in agreement regarding what to look for when cultivating new prospects. When you do select a new board member, he or she will be more likely to be immediately valued.
Furthermore, he or she is much more likely to engage—and stay engaged. As you conduct your search, turn the tables.
What is his or her impression likely to be? To make diverse boards more effective, boards need to have a more egalitarian culture — one that elevates different voices, integrates contrasting insights, and welcomes conversations about diversity. Some boards are more hierarchical in their communication orientation while others are more egalitarian.
On more hierarchical boards, the CEO, Chairman, or lead independent director tends to dominate board meetings. The CEO tended to dominate the conversation.
But even in hierarchical cultures, the CEO, Chairman, or lead director can help to create a more open communication environment.
The CEO would pick up the phone frequently and connect us. Whoever is leading the board also has the responsibility of ensuring that quieter board members speak up in board meetings. Interviewees who felt that their boards reflected this quality explained how all board members were able to speak openly and ask questions at meetings and, in doing so, they felt that all opinions were respected.
Collegial boards are more likely to accept and integrate differences of opinion. You know people listen. When they argue, they do it in a pretty much respectful way. Several interviewees told us that boards that value open communication are more likely to engage in conversations about diversity — even those that believe they still have a long way to go. Quoting a Jan. As when hiring employees, the goal is to create a diverse pool of candidates. From that pool, the best person should be selected for the job and that person should not feel they were a token hire.
I have served on public, private, private equity, trade association and nonprofit boards, and I have seen the benefits of board diversity. When joining a board, I often wondered why the incumbent directors had exercised tunnel vision and ignored an issue.
I use these experiences to assess my own performance as a director. A diverse board will lessen the likelihood of this occurring. This indicates clearly that the top 10 most innovative companies are seemingly more ethnically diverse than the pulp and paper companies. In addition, there are bioeconomy companies that have no ethnic diversity compared to the most innovative companies. Not only does this reduce the average for the bioeconomy companies, the outliers also skew the data negatively.
Ethnic diversity in bioeconomy dotted line versus the most innovative companies solid line. Data shows more disperse ethnic diversity for bioeconomy companies and more bioeconomy companies having boards with no ethnic diversity. Interestingly, the gender diversity between the two groups is identical Table 4 and Fig. The normal distribution of the data also illustrates that not only is the average the same, but the diversity of the genders in the other companies is similar as well.
The only company that approaches that number is Amazon. Further, there was no director on a board who did not fall into the categories male or female gender neutral , and thus the categories included in the table are only male and female. Gender diversity in bioeconomy dotted line versus the most innovative companies solid line. The data depicts greater age spread for the most innovative companies. Figure 5 illustrates the dispersion of their ages in the normal distribution.
Age diversity in bioeconomy dotted line versus the most innovative companies solid line. More narrow age spread is observed in case of the bioeconomy companies. Our research gives insight into the existing discussion on the impact of board diversity by using innovation as the dependent variable to compare two different company groups.
Existing research has analyzed the effect of board composition by focusing either on gender or age diversity. In this article, multiple independent variables were addressed to determine which ones correlated most with innovativeness. Furthermore, we examined diversity in an industry that is not well known for its innovativeness and compared it to the underlying differences in the most innovative companies from the perspective of board diversity.
The composition of the board is an important variable in determining firm performance related to innovativeness. Interestingly, the same study also stated that boards with a large number of directors may not make effective strategic plans and decisions because of the many differences in ideas.
However, in our study, diversity of thought was demonstrated from several perspectives age, ethnicity, education that create a distinct character for each group of companies to promote innovativeness. It should be noted that in our study the average number of board members eleven represented a relatively small board size.
We assessed global corporations with a variety of different governance models and structures. The most innovative companies are dominantly US-based and therefore, use the one-tier-system.
However, bioeconomy companies are a mix of one-tier, two-tier, and Nordic systems. However, the board of directors can determine some of the key issues that drive innovation, including the ability to identify new business and value creation opportunities and react to them, regardless of the governance structure. In addition, some differences in the governance structures were diluted because of the large number of companies compared and the diversity metrics that were used.
We argue that because diversity attributes combined with education are considered some of the fundamental aspects that influence the assortment of human ideas, opinions and team dynamics, the greater the diversity in these observed characteristics, the higher the likelihood for diversity of thought Ely et al. Gender diversity was the only diversity-related attribute examined that did not differ between the bioeconomy and top ten most innovative companies. Prior research on this subject has shown that boards with a higher percentage of women have higher stock liquidity through better monitoring and oversight abilities and more stock price informativeness of their respective companies Ahmed and Ali, ; Gul et al.
It should be stated also that all companies analyzed were largely global, which should offset some of the differences in their home locations. While gender diversity is related positively to company performance, it has been shown that there must be at least three female directors on a board to have any positive influence Liu et al.
Gender diversity is limited not only to the influence on innovativeness performance. It can be also stated that continuous development of organizational capabilities increases its innovation capabilities. However, this figure is slightly, but clearly higher than the average age for the top ten innovative companies. As bioeconomy companies have been established for longer than the top ten most innovative companies, this could mean that there is less board turnover in bioeconomy companies, which makes it more difficult to recruit from a more diverse group of leaders.
The most significant difference between the company groups was their ethnic diversity. Racial diversity contributes significantly to diversity in thought and decision-making Galinsky et al. The large difference observed may be attributable to the market area in which they operate and their extent of global business operations. In addition, newer companies were founded in a time when the importance of ethnic diversity had been established, while the boards of bioeconomy companies were founded in an era that respected local cultural homogeneity over diversity as a success factor.
With respect to education, it was found specifically that the board members of the most innovative companies have higher levels of education than do those in bioeconomy companies. A higher level of education can sometimes increase innovation activities, particularly in high tech sectors Wincent et al. This is an interesting finding, as over a decade ago, bioeconomy companies focused more on technology-driven innovation.
This has changed, and today these companies are recognized increasingly for developing new business models including services, in addition to brand owner, and consumer understanding Berg and Lingqvist, ; Wessel, In contrast, the top ten most innovative companies are interested in developing uniquely differentiated products and services, not just their business models Kerr, The correlation between a larger number of engineering majors and innovativeness is a testament to how important it is to continue to focus on core competencies and internal innovation and not just external business expansion.
Lastly, it must be stated that the board members are not chosen solely because of broad diversity arguments. Each member must understand the earning logic, market dynamics, and the corporate governance model. All data generated or analyzed during this study are included in this published article. Raw data in Excel format are available from the corresponding author upon reasonable request.
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J Public Admin Res Theory — Director Board 43 5 Chan K, Mauborgne R How strategy shapes structure. Harvard Business Review. Accessed July 31 Manag Decision 57 7 — J Empir Finan — Collins L Environmental performance and technological innovation: the pulp and paper industry as a case in point.
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