Why cognitive diversity is set to be a major driver of boardroom capability and business performance

Cognitive diversity within the boardroom is increasingly in focus following its inclusion in the 2018 UK Corporate Governance Code

Cognitive diversity within the boardroom is increasingly in focus following its inclusion in the 2018 UK Corporate Governance Code in Principle J, which states that appointments ‘should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.’

Whether you understand diversity in terms of equality, fairness, capability, performance, or a blend of all four, this new term turns attention squarely on boardroom capability and business performance.

Academic literature has failed to make clear, unambiguous connections between business performance and conventional ways of viewing boardroom diversity (for example, inclusiveness, gender, age, ethnicity etc.). Indeed, academics complain that business and the media habitually misapply and oversimplify their research findings to give a misleading picture of the benefits of boardroom diversity in terms of tangible business performance.

While the wealth of studies does evidence effects on specific boardroom behaviours, including shifts in risk appetite, stronger board independence and holding poorly performing CEOs to account, a wide range of other factors have bigger impacts on business performance. These factors mask the effects of diversity both positively and negatively. Product mix, market position, competitiveness, and brand strength highlight just four of them.

Cognitive diversity is a significant forward step in the debate about boardroom diversity. demyst defines cognitive diversity as: 'The range of dissimilar ways of interpreting and understanding information, reasoning and reaching decisions which are capable of expression and application.'

So how is cognitive diversity defined as such more relevant for board capability and business performance than conventional ways of viewing diversity?

Firstly, conventional ideas of diversity are often expressed in the same sentence as inclusion, which confuses and erodes their different meanings. Secondly, other significant but subtle forces at work with conventional diversity limit its impact on boardroom capability and business performance. These include boardroom etiquette, business culture and processes, and the hidden biases that constrain thinking.

Conversely, cognitive diversity has been shown to have a direct impact on team performance with clear business benefits. Cognitively diverse teams solve complex problems more effectively and innovate more. The wider capability that naturally follows also fosters the essential dynamics needed to succeed in a people-planet centric future.

The demyst article Cognitive Diversity: A Difference Future in the May edition of Governance and Compliance magazine explores and expands on these issues.

The Institute is also hosting a lunchtime webinar of the same title on 8 June 12.30-13.30 BST to accompany the article. The webinar draws from notable experts and boardroom practitioners to explore how the boardroom is failing to grasp the opportunities from truly diverse thought, why actively seeking ‘difference’ is essential for innovation and the evolution of people-planet centric business, and how cognitive diversity can be made to work successfully.

You can watch the webinar here.

We welcome debate on the article and advance questions for the webinar panel, so please express your views and post your questions by emailing info@demyst.co.uk

Demyst provides tailored board development services including high-quality board evaluations and board performance advice. Learn more at demyst.co.uk.

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