UK companies have made gains on gender and ethnic diversity, but through our work with clients we’re consistently finding that companies are struggling to gather diversity at board level in the broadest sense. The solutions are often hidden in plain sight.
The fog of uncertainty that has clouded the UK economic outlook is clearing. UK inflation is now falling meaningfully and the Bank of England base rate may well have already peaked.
A few lean years lie ahead. The Bank’s latest forecasts suggest that the economy will grow just 0.5% this year and next, before growth eases to just 0.25% in 2025. Companies are increasingly managing costs and focusing on building resilience in order to navigate a difficult period and position themselves for the next economic cycle.
Research consistently shows that diversity of people, thought and backgrounds drives profits and builds resilient businesses – you can read the latest from the Corporate Governance institute (CGI) here. The push should start at board level: higher levels of gender diversity of FTSE350 boards, for example, positively correlate with better future financial performance as measured by EBITDA margin.
UK companies have made gains on gender and ethnic diversity, but through our work with clients we’re consistently finding that companies are struggling to gather diversity at board level in the broadest sense. By that I mean talented individuals from complimentary industries, younger leaders, those with a more diverse education, and more – all without dropping the ball on vital DE&I initiatives.
Too many board members continue to be drawn from a narrow band of industries and age groups, which stifles innovation. Recent research from EY found that a third of UK financial services directors sit on at least four boards, for example. The need for fresh perspectives is getting urgent.
Seeking out individuals from parallel industries – other regulated environments, for example – or dynamic leaders with less board-level experience would be a good start. Granted, demand for candidates from complimentary industries is already rising, albeit slowly, but bringing in people at board level with little experience is still considered risky. Yet, we know that youth injects dynamism and differing viewpoints that are underpinned by a deeper knowledge of important emerging trends.
Education, too, is often neglected. Just 7% of the British population are privately educated yet they hold two fifths of top positions across politics, business and media. Data isn’t easy to come by but it’s reasonable to expect these figures hold across UK boards. Much of this comes down to varying cognitive styles, which is central to building resilient boards capable of innovative problem-solving.
Conscious recruitment strategies that aim to bring in individuals with a diverse range of competencies and viewpoints will enable us to cultivate new voices and expertise, but it must start with open minds at board level. A change in the make-up of boards will lead to more robust, progressive governance, which builds resilience – particularly as factors like financing are increasingly linked to performance on ESG.
Success shouldn’t require huge, costly searches either. Often the most talented individuals are hidden in plain sight. UK companies are brimming with ambitious people that are overlooked because they don’t fit the narrow dimensions that boards believe they need.
Comparable data is patchy at best – particularly when it comes to diversity of thought – but anecdotally we see that US companies are leading on this issue. We think it’s one of the many reasons that US companies are more productive: the United States had almost 1.5 times higher output per worker in 2021, for example.
A more integrated approach will be vital in steering UK companies towards a more sustainable kind of success, however sluggish the years ahead may be.