Numerous studies show the positive impact of diversity on board performance. A diverse group of individuals has different perspectives, experiences, and angles to approach problems, which can lead to solutions that would otherwise be missed by a board that is more homogenous. This is especially applicable to boards that have representatives of underrepresented groups. They will have insights into the preferences and habits of these groups which can help them better serve those groups as clients.
Additionally, having diverse backgrounds and experiences in the board can boost confidence and morale. When board members feel their voice and experience are heard and they feel more committed to the success of the organization. This is why it is important to keep track of your board’s progress in promoting diversity and identifying any issues that have to be resolved.
Another area in which diversity can help is in mitigating risk. A recent study by Berger et al. The study found that a greater gender and age diversity on the board resulted in more effective risk management, as well as an lowered risk of exposure to market risks. The same study reveals, however, that a high degree of diversity in the board can cause issues with communication and cohesion.
Additionally, boards with a diverse makeup are more aware of the particular challenges faced by the underrepresented communities. This can force them to take action to promote ethics and social responsibility in their business. It is important to continue to look for talented women, people with diverse backgrounds, and LGBTQ candidates for the board positions.
