Diversity of thought

Delivering diversity of thought in the boardroom

Diversity is now rightly recognised as an important issue for business, with proactive measures helping to boost representation across the workforce and into the boardroom. Against that backdrop, Ryan McCarthy, Board Leadership Centre (BLC) Lead, says it is the right time for a deeper discussion that recognises the value of diversity of thought around the boardroom table.

In his work with a range of boards, both in his BLC capacity and as KPMG Ireland Audit Partner, Ryan McCarthy sees first-hand evidence that companies are taking diversity seriously. The actions of individual companies, allied to initiatives like the 30% Club and Balance for Better Business, have clearly made an impact in terms of getting diversity on the agenda.

“We have come a long way, particularly in the last ten years, in terms of boardroom diversity from a gender, and to some extent, an ethnicity point-of-view”, says Ryan. “Though there’s more to be done, it’s clear that the issue is a bigger priority.”

The progress is welcome, but Ryan believes there is a deeper layer to diversity that is increasingly being exposed at board level, diversity of thought. “Do we have young people on boards? Do we have people from different educational backgrounds, different backgrounds in terms of skills, particularly around emerging areas of technology and innovation?” he asks.

“And I would say the answer is No. That’s something we really have to challenge ourselves on.”

Do we have young people on boards? Do we have people from different educational backgrounds, different backgrounds in terms of skills, particularly around emerging areas of technology and innovation?

Ryan McCarthy

Managing Partner

KPMG in Ireland

Beyond the definition of diversity

Ryan offers a compelling example to show why diversity should go beyond the obvious categories: the recently departed Conservative Party government in the UK. “In one sense, the Tories had the most diverse cabinet ever, in terms of gender and ethnicity,” he says.

“Yet they were predominantly all educated through the same system, went to the same schools and universities, and generally had the same world view. At one level it looked incredibly diverse; at another level, it possibly wasn’t diverse at all. It brings up a really interesting philosophical debate: what is diversity?”

Ryan acknowledges it can be difficult to identify and even define diversity of thought. “Obviously, thoughts aren’t visible so it’s really hard to draw that out,” he says. “When you’re recruiting a new board member, you’re effectively saying, ‘I’m looking for diversity of thought but I really don’t know how I’m going to get there’. It is challenging.”

He refers back to Alastair Campbell, former journalist and long-time media strategist to former British Prime Minister, Tony Blair and New Labour, who told the BLC’s inaugural event: “It’s not just a question of saying ‘we need more women, we need more people of colour’, but asking ‘what mindset have they got, what perspective have they got?’”

An age-old question

Ryan acknowledges important progress in how boards are put together, noting that the days of boardroom grandees are generally gone. “When I think back to the earlier part of my career in KPMG, you had the impression that people were on boards because of their previous achievements and perhaps didn’t contribute a lot,” he notes.

“It was a branding exercise for companies in terms of having the right sort of name on their board. Now, I think people generally get on boards based on merit.”

However, that doesn’t mean the board-building job is complete, according to Ryan. “Diversity should be young and old but I have never been party to any sort of discussion around a boardroom table saying ‘we’re too old’ or ‘we need more youth’,” he says.

“I definitely think there is a challenge to ensuring a balance of old-versus-young. In the traditional sort of corporates in this part of the world, we don’t tend to see young people on boards.” Given the viewpoints of younger people as citizens and stakeholders, that “seems like a miss”, says Ryan.

Younger board members can bring insights that are not obvious to older directors, whether they are on emerging technologies, new markets, employment practices or customer expectations. There is an argument that young people are more in tune with trends such as ESG and AI, for example.

Ryan poses a provocative question: should every board have someone under 40 – or even 30 - on it?

Going beyond the board pack

One reason youth gets excluded is because board composition tended to focus on ‘fit’ in the past. There was a tendency to recruit board members who already knew the business involved, and its industry – and perhaps even knew each other.

“Now we know we need diverse types of people in the room, and we can work on the fit,” says Ryan. In that regard, the value of generalists – and not just specialists – should be recognised.

“You obviously need some people with the industry experience, people who are a mile deep and six inches wide in the industry. But you also need people around the table who are six miles wide and two feet deep, just so that you can get that balance of perspectives.”

Ryan adds: “Some of the best challenges I have witnessed in a boardroom is a board member coming in, saying, ‘I spotted this thing over here, have we thought about that?’ It might be a different jurisdiction, a different industry, miles away. That’s where you really get value, going beyond the board pack.”

Expertise in other sectors can be complementary, says Ryan. For example, large corporates tend to have debt on their balance sheets, but it’s not clear which companies actively seek banking expertise on the board. “If I was a corporate with debt, I’d be interested to have someone on my board who thinks banking from a banking point of view,” says Ryan.

On the flipside, banks and financial services companies tend to lean heavily on board members with financial, regulatory and professional services training. That can come at the expense of recruiting board members with experience of operating large trading businesses.

Moreover, Ryan flags the challenge of more mature board members being blind sided by the adoption of tech, by younger consumers, and being oblivious to existential threats and opportunities.

"Now we know we need diverse types of people in the room, and we can work on the fit."

Adding the overseas outlook

The diversity discussion also applies to expertise from different geographies and jurisdictions, such as adding non-Irish directors onto Irish PLCs. The financial crisis highlighted the risks of groupthink that arise when board members are all largely from the same geography or gene pool.

“I know from speaking to some board chairs, that getting board representation from people outside the Irish business community – or even outside the Dublin business community – is a key thing for them,” says Ryan. “While I think that ambition is happening, I’m not sure the practice is happening to the extent we might want.”

He believes the best Irish boards do cast their nets widely for new members but flags a scale issue for Irish companies. A high-powered non-executive director on the international stage can only manage a small number of board positions; in terms of scale and value. Even Ireland’s biggest companies would find it hard to compete with a boardroom offer from a Fortune 500 firm.

“It is an issue for Irish PLCs in terms of attracting that sort of international talent,” says Ryan. “The UK are probably a bit ahead, given they are a larger and probably more diverse society and business community. We are only catching up in some respects.”

It is clearly worth persevering, however. People from alternative backgrounds bring alternative perspectives. In a boardroom, that leads to better quality of discussion and, ultimately, better outcomes for all stakeholders.

Expand the diversity agenda

Ryan recognises there may be some resistance to shaking up boardrooms with radical thinkers. “You can understand why, when assembling boards, companies are probably a little wary of going too far from convention in terms of what they try to do,” he says.

“Challenge and rigour are good things but, naturally, chairs will be wary of having someone on a board that will hold things up. It is matter of striking that balance.”

In any case, he is keen to kick-start the conversation with some questions for chairs and board members: “Is the awareness there to really look for diversity of thought? Is the intention and process there? Next time you talk about diversity, add diversity of thought to the agenda.”

"When assembling boards, companies are probably a little wary of going too far from convention."