Board diversity and di-worsity On board podcast, Enter the Boardroom, an experienced chair observed boards typically go wrong for three reasons: Purpose (no alignment around the role of the board), Process (examples include bad board papers or decision-making structures) and People (competency mix, chemistry or Chair).
The best boards begin by working out what kind of diversity is relevant to their situation before they start meeting people (whereas less good boards meet people they like and then work out how they will fit in). At a base experiential level, Reid Hoffman, the founder of LinkedIn, argues boards need diverse archetypes: some combination of a CEO whisperer, alongside a combination of functional, sector, stage, geographic and stakeholder experience. Beyond this, diversity has a myriad of relevant dimensions. Consider age diversity: if most of your stakeholders are millennials, should you have that perspective at the table? Consider diversity of tenure: is someone who has been on the board one year (versus ten) more likely to ask the “outsider question” that makes you re-evaluate? Other key considerations include diversity of values, personality types, demographics and conflict resolution styles. A final thought - McKinsey research suggests the highest-performing CEOs have one independent board role. Encourage your CEO to take one on - they will bring a different perspective back into the business.
Family business boards are usually good on Purpose. Process is typically straightforward to address unless the underlying issue is people - for example, bad papers reflecting absence of executive critical thinking skills. So, the key challenge is People. The People problem is particularly relevant to family businesses. The characteristics that are our greatest strengths - such as shared values or a willingness to make personal sacrifice - are also our greatest risks. As a family business with three senior executives who share a surname, we inevitably suffer from the risks of: groupthink, lack of executive challenge, perceptions of favouritism, family tensions and more. Increasing diversity on family business boards can be an antidote. Having an outsider in the room changes the family dynamic and individual behaviour, for instance. But diversity is often misunderstood. Indeed, the dominant definition of diversity is too narrow. Visible diversity trumps invisible. Ideology obscures data. And most ironically, fear stifles dissenting opinion. Diversity for its own sake can render a group dysfunctional, becoming “diworsification” as Peter Lynch put it. So, balance is key.
Oliver Cummings CEO, Nurole
Find your next family business board member with Nurole. Find your next family business board member with Nurole.
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