Diversity Health Check

Diversity at the top is an ongoing issue that Boards and Executive Management of companies need to address. Lack of diversity on boards and in executive management is a business imperative. Companies lacking diversity should ensure they have it sufficiently logged and measured as a risk in many areas such as talent attraction and retention, client dissatisfaction, shareholder activism, breach of equality law etc.  

This diversity health check is covering areas of Succession Planning, The Appointment Process, Use of Advertising and Executive Search Firms and Measures to Attract a Wider Pool of Applicants.

The health check describes issues for Boards to discuss and will make it clearer to the Board and Executive Management what they should be considering with regards to Diversity and Equality. It has a number of recommendations that will reduce risks within Diversity and Inclusion and make attraction and retention of diverse individuals easier. 

Succession Planning:

In addition to succession planning, where diversity should be considered, the Board should ensure that a diversity policy for the board and the company is in place. The policy could include considerations of diversity KPIs for senior management, pay gap reporting (gender and ethnicity as a minimum). The directors should ensure they are given assurances that the policy is being adhered to. 

Does the company have clear and transparent succession planning in place?

Does the company have a policy on Board and senior management diversity?

If not, why not?

If yes, does it include objectives and/or targets for gender and ethnic diversity?

If the board has not agreed specific objectives or targets, why is that?

If it does have agreed objectives and/or targets, how it is measured? 

Conduct a skills/competency audit annually taking into account the diversity of the board and senior management and use this to inform the specification for new board director and senior appointments. Be able to document how the audit has been done.

Appointment Process: 

Make sure the Board has a clear process on appointing and rotating directors of the Board and Executive Management. The Nomination committee (if any) should have clearly written up procedures covering all aspects of the process.

Ensure that the people involved in each stage of the board and senior management appointment process are aware of the requirements of the Equality laws and the Corporate Governance Code of the country the company is domiciled in.

Measures that can be taken for that are:

• A specialist member of HR oversees each stage
• A specialist board governance role advices on appropriate application of requirements
• Corporate lawyers advice at each stage
• Training and guidance in the avoidance of discriminatory practices is implemented
• Training and guidance in the avoidance of unconscious bias is implemented

Use of Advertising and Executive Search Firms:

Be clear on how board and senior management vacancies are advertised:

• Internal corporate website
• External corporate website
• Online vacancy platform
• Newspapers
• Social Media
• Networks of current and recent board members and senior executives

When instructing Executive Search Firms to search for board director and senior management candidates, make sure to specify your diversity aspirations of the board and the company. Also ensure the candidate brief and advertising is in neutral language to appeal to as wide a group of people as possible.

When interviewing candidates for board director and senior management appointments be clear on how the interviews are conducted and ensure that they are the same for all applicants:

• Competency and skills-based interview approach
• Same questions for each candidate
• Different questions for each candidate
• Formal assessment
• Questionnaires

Have full clarity at Board level of what activities the Board and Company have to specifically encourage applications from women and minority groups to senior and board appointments. 

Measures to Attract a Wider Pool of Applicants:

To improve the representation and retention of specifically women, ethnic minority and other minority groups at senior management and Board levels, does the company carry out any of the following activities:

• Offer training courses in governance and board leadership 
• Provide networking opportunities
• Provide mentoring and sponsor programmes
• Offer opportunities to shadow existing board members and/or observe board proceedings
• Target advertising to attract more diverse candidates at senior levels
• Internal promotions considered at senior management/executive level
• Flexible and part time working at senior levels
• Flexible career paths to complement life cycle choices
• Ensure Inclusion strategies are in place for women and minority groups
• Ensure the culture of the company is inclusive (conduct inclusivity surveys)

The above recommendations, if implemented, will help companies be sufficiently diverse throughout the organisation. However, if the board and executive management themselves are not diverse groups, it is unlikely that diversity throughout the organisation will be successful.

The tone from the top within D&I is absolutely key for a company-wide balance in diversity. Today’s talent will positively avoid companies that are not diverse throughout the organisation and seek out the companies that are. Companies who put diversity and inclusion at the top of the HR and talent agenda will attract not only the top diverse talent but the top talent across the board. 

Committing to diversity with measurable overall targets and individual KPIs makes for more successful companies who have the eyes to see more opportunities and risks. High diversity in companies has shown to improve employee morale and happiness and inclusion fosters more positive behaviors at work. 

WHAT’S NOT TO LIKE?

Global Governance Group conduct Board Diversity and Inclusion reviews and advice, contact us if you would like to know more.