Diversity in Leadership – are we slipping up?

Diversity in leadership has emerged as a critical issue in contemporary business environments and over the past few years, there has been substantial success in improving diversity in boards and leadership teams.

However, in recent times – during perhaps our toughest economic tests – ED&I is seemingly becoming lost amongst other “important” issues and therefore priorities are shifting.

In this piece, Joelle Warren of Warren Partners and Justine Ball of Shakespeare Martineau explore whether diversity in leadership is slipping down the priority list and whether real progress is continuing to be made to create and achieve greater diversity in leadership positions.

Have we forgotten the importance of Diversity in leadership?

The leadership team of a business is a reflection of the business it operates – and having a team which is rich with cultural, colour and gender diversity denotes a forward thinking and progressive business.

As a reminder – this is why diversity in leadership is a huge plus for businesses:

• Innovation and Creativity: Diverse groups foster innovation and creativity – they generate new ideas and solutions that may not have otherwise come about. This innovative thinking is crucial for staying competitive in today’s rapidly changing business landscape.
• Better Decision-Making: Multiple studies have shown that diverse groups are more effective at problem-solving and decision-making as different perspectives lead to more robust discussions. This diversity of thought also leads to a broader perspectives which can anticipate wider challenges and opportunities.
• Talent Attraction and Retention: A commitment to diversity in leadership can attract top talent as individuals are more likely to join a business that values diversity and inclusion as this signifies a business which offers equal opportunities to all of their people. A business is also likely to have higher morale and satisfaction rates given that such a business is likely to have a more inclusive workplace culture and they can more readily identify with the leaders of that company.

So naturally, you would think that the evident benefits of having a diverse leadership would lead to businesses treating this as a priority, particularly in these challenging economic times.

Is progress in achieving diversity in leadership slowing?

Whilst significant strides have been made in recent years toward achieving greater diversity in leadership roles (which we applaud), it seems to be slowing.

We have seen a marked shift in our economy over the last 18 months – inflation at its highest rate in decades, supply chain interruptions, energy crises and cost of living pressures.

Given these additional pressures (and priorities), ED&I has fallen somewhat off the radar and does not feature as highly on our agendas as they once did. We have seen evidence of some businesses reverting to what and who they know – rather than thoughtfully considering their recruitment strategy to achieve difference and the mountain of benefits which can be reaped from having a more diverse workforce.

We are hearing from Chairs, CEOs and CFOs that they are facing fewer questions on all aspects of the ESG agenda from investors and clients than they were last year. This is worrying on all fronts – not least due to the climate crisis which is evidently worsening around the world, but for the ED&I agenda which businesses have worked hard to promote for many years now – we can’t now take our foot off this ED&I pedal.

Third party investors, clients and customers have played an important role in holding businesses to account and without this accountability there a risk that we could see a reversal of the good progress business has made – unless we can re-focus on these crucial issues.

Looking at FTSE 100 firms, in the last 12 years there has been a substantial increase in women on their boards. At that time, the Davies Review for Women on Boards had been commissioned which aimed at increasing the representation of women on corporate boards. That review presented practical, business-led recommendations to address the gender imbalance with actions from all stakeholders. In 2023, women now represent 40% of the FTSE 100 boardroom. The UK being second only to France and above Norway in the international rankings.

Further, there are now no All-Male Boards in the FTSE 350 and the majority of FTSE 350 companies now have 3 or more women on their board. This is a testament to the power and impact of the UK’s unique voluntary approach to the ED&I agenda. But, we cannot stop there.

Unfortunately, we have not seen the same results when seeking to achieve balance on racial and ethnic representation in leadership positions. The Parker Review, which published its final report in 2017, was aimed at promoting ethnic diversity on corporate boards and its main target was by 2021, no FTSE 100 board should be exclusively white.

This target was not achieved, and whilst 89% of the FTSE100 companies were able to achieve this in 2021, the figures are even lower for women from ethnically diverse groups. There are also social mobility considerations as well as LGBTQ+ and other diversity dimensions.

Whilst the UK has shown that we can make seismic progress when we have focus and drive from all stakeholders, what the Parker Review indicates, is that these issues can fall off the radar when other considerations take priority (such as profits and growth) just when the business-benefits of diversity are most needed .

Diversity in leadership is not just a buzzword or fad, it is an essential element of modern business success and of great social importance. We cannot rest on our laurels or on the successes achieved to date – we need to go further and whilst things are moving in the right direction, it is up to all of us to make sure progress continues by championing diversity, expressly encouraging equity and improving our own businesses where we can.

By Justine Ball and Joëlle Warren