Johanne Grosvold, PhD, SFHEA, Associate Professor, Corporate Governance and CSR, School of Management, University of Bath explains how cognitive diversity can only be achieved by casting the net wider to find those with a truly different perspective.

How diverse are corporate boards? The question – and its associated ramifications for board selection, executive search firms, CEOs, board chairs, shareholders and other stakeholders – has rarely been out of the business headlines over the last decade. The persistent attention to the issue has borne fruits; the last FTSE report showed that the boards of UK publicly listed firms have never been more gender diverse, with women occupying more than 30% of board seats. Women can now be said to hold a criti-cal mass of board positions in UK’s largest firms. A critical mass is achieved when women occupy 30% or more of the available seats; any fewer than this and research suggests they will be marginalised, not listened to and viewed as tokens or outgroup members. Given that the latest report indicates that women are now well over the 30% threshold, you’d think we would be able to say confidently that boards are now diverse and we can move on. In some sense, yes, we can. There is no denying that boards are now gender diverse, but how different are the women from the men?

Boards are elite institutions and to join you need the right credentials. These credentials are often specific and can be relatively narrow. For example, to get on an executive recruiter‘s radar, board candidates are often required to have previous PLC board experience, have worked for large City institutions and have chartered status in their chosen profession or other marks of competence such as prior profit and loss (P&L) responsibility or a Master of Business Administration (MBA). While there are good reasons why these experiences and competencies are viewed as necessary, such specific criteria can radically narrow the pool of talent available for board roles. These specific criteria also beg the question of whether two candidates who are both chartered accountants with MBAs from Ivy League universities and prior board experience and who climbed the ladder at a big city firm are really different from one another – even if one is male and one is female. A central argument in favour of having a critical mass of women at board level is that women view things differently, have different experiences to men and are less afraid of asking difficult questions. Often these differences have been used interchangeably with the view that women – simply by being women – bring cognitive diversity to the board and, through their inclusion, the board’s collective cognitive capacity is enhanced, improving both the board and, by extension, the firm’s performance.

There are two potential challenges to this line of argument. First, some organisational psychologists state that cognitive diversity is not the same as gender diversity. They argue that cognitive diversity is reflected in how someone processes knowledge, solves problems and learns, and what norms, experiences and values shape their decision-making and information processing. Cognitive diversity is therefore driven more by educational experiences, generational differences, cultural norms, industry experiences and socio-economic background – not primarily by gender. Second, given the specificity of credentials required for board roles and the limitations these place on the pool of available board candidates, it may not always follow that recruiting more women will significantly shift the dial on the board’s collective cognitive diversity. This is not to say that recruiting a critical mass of women to serve on corporate boards is not important; it is. A debate on cognitive diversity should not be seen as an excuse to ignore other forms of diversity, rather it should open a broader debate about how we can make boards more inclusive, more equitable and more diverse in the broadest sense.

Better decision-making

Cognitive diversity takes on a particularly acute salience in the context of corporate boards since their entire output is cognitive. Whereas the CEO and their executive team are responsible for delivering on corporate strategy, non-executive directors have no day-to-day responsibility for production or delivery of the firm’s goods and services. Rather, non-executive directors are there to debate, advise, monitor, make recommendations and support decision-making. Research suggests that groups with cognitively diverse input make better and more robust decisions, engage in less groupthink and reach the right conclusions more often than homogenous groups – all compelling reasons for cognitive diversity.

However, there are some significant structural challenges to achieving cognitive diversity in a board setting. First, boards are finite in size, so there are limits on the number of diverse facets that can be captured. Second, boards have limited time together, so it is important to have a common language and a sense of collective purpose to get through the board agenda. Recruiting more diverse candidates can mean more time is taken up creating, sustaining and building a common identity. Third, cognitively diverse candidates who are not currently in the broader pool of board talent may struggle to get on CEO and board recruiters’ radars. Cognitively diverse candidates that are radically different to incumbents may be keyed into alternate professional networks and have a differing set of personal connections to draw on. Struggling to get onto the right people’s radar may make recruitment of a cognitively diverse board member more difficult. Overcoming these challenges is not a trivial matter, but there are things that boards, executive teams and board recruiters can do to start thinking more strategically about cognitive diversity.

A different perspective

Arguably one of the first steps a board needs to take to address the topic of cognitive diversity more strategically is to assess the current composition of the board. Board reviews can be a useful starting point in assessing the board’s collective cognitive wealth. An outsider’s view of the board may be helpful, so board consultants can play a role in facilitating directed work to understand cognitive diversity issues. Another powerful way that the board can explore their cognitive diversity is to try to adopt an opposing view or play devil’s advocate. Forcing yourself to think as someone else with a different perspective can be illuminating and can reveal gaps in experiences, views and knowledge. For example, if you are a board director of a high-street fashion chain, trying to take the view of a labour union leader representing garment workers in India or Bangladesh may reveal a lack of perspective, insight or understanding of supply-chain transparency, compliance with local laws, reputational risks and social justice. Such insight can help to shape the board’s outlook on its own composition and to evaluate whether they need more input from diverse groups on a regular basis, without necessarily changing the composition of the board. External events, social movements and corporate governance initiatives can all play a role in alerting boards to cognitive diversity issues that they may not have thought of or addressed as fully as they should.

Dimensions of diversity

Social movements such as Black Lives Matter (BLM) shone a clear light on the structural impediments ethnic minorities face in acquiring skills and knowledge, pursuing an education and building their careers. From a corporate governance perspective, there has been a sustained focus on the relative lack of ethnic minorities across UK board rooms for some time. Notably the Parker Review, which investigated the issue of ethnic diversity on UK boards, concluded that at the end of 2020, 74 out of 100 FTSE 100 boards had ethnic minority representation on their boards. This was a marked improvement on the start of the year, but some firms fell short of the target of one ethnic minority director by 2021. A renewed and sustained focus on ethnic minority board recruitment – and in particular ethnic minority women – may be a way to encourage more cognitive diversity. This is because, while ethnicity does not necessarily equate to cognitive diversity, the differing experiences of education, career progression and skills development experienced by ethnic minorities may have shaped their decision-making, knowledge processing and problem-solving skills in a different way from their majority-ethnic-group peers. Therefore, focusing on ethnic minority recruitment can support the board not only in building their collective cognitive capacity, but also in reaching diversity targets.

Another way to support more cognitively diverse board recruitment is to review where candidates have gained their professional experience. For example, although prior City experience may be a useful hallmark of competencies, these same competencies may well be present in leaders in the public or not-for-profit sector. By actively seeking board talent from organisations beyond the FTSE and their non-UK equivalents, firms can begin to tap into a relevant yet novel group of candidates who may bring something different to the table.

There is evidence that generational differences shape cognition, for example, the generation that grew up as digital natives view the world differently from those who did not. To capture these differences and insights, some boards have sought the input of younger stakeholders through initiatives such as shadow boards. These boards are comprised of a younger generation of professionals than those who typically serve on the board. While shadow boards have no formal power, they are designed to challenge the corporate board to think differently about strategic decisions and help firms realise the cognitive potential that is latent in the younger generation without necessitating a board restructure. Creating opportunities for the views of younger employees and stakeholders to be heard and listened to can shape board thinking in important ways and realise the benefits of cognitive difference. Reverse mentoring – where a younger employee ‘mentors’ a board director on differences in experience, knowledge processes and world views – can also provide key insights for boards.

The future of diversity

The next chapter in corporate board diversity is being written as I write. Calls for greater LGBTQ+ representation, neurodiversity and ethnic diversity are increasing, bringing exciting potential for debate, new insights and better decisions and corporate governance. The momentum around corporate board gender diversity was not build overnight, but it is now accelerating the demand for greater inclusivity, equity and social justice on boards and in corporate governance in general, for the benefit of shareholders, firms, leaders, stakeholders and future generations. That is not to say that we can forget about gender diversity. The COVID-19 pandemic has laid bare the continued pervasive gender inequality that exists across much of society. The pandemic in the UK briefly saw a return to some all-male boards on the FTSE and women have been impacted more negatively professionally by the pandemic. Remote working, online meetings and an increased reliance on technology have, on the surface, made it easier for women to work and manage childcare. However, there are real and sustained concerns about the negative impact of the lack of in-person interactions on networking, career progression and women’s professional profiles.

As we recover from the pandemic, corporate governance has a key role to play in building resilient boards that can support firms in returning to profit, create jobs and provide a return to shareholders. These are big and fast-moving challenges and to overcome them successfully we need diverse and inclusive boards in the broadest and truest sense of these words.

Johanne is a co-author of the Scottish Widows report Great Minds Don’t Think Alike: Cognitive Diversity In The Boardroom and is speaking at the CGIUKI Diversity & Inclusion Summit

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