New Article Shines a Light on the Importance of Diversity in Leadership

board of directors

A recent article by Ashley Sharp, Executive Director of nonprofit Dwell with Dignity, explains the importance of having a diverse leadership team at the helm of an organization. She highlights the multiple benefits that having a diverse group of leaders provides, which span from improved problem-solving abilities to revenue growth. Sharp also questions what corporations, nonprofits and other groups could achieve if they made a more significant investment in increasing diversity in their leadership team. 

Increased diversity in leadership has long been a topic of discussion for nonprofits and corporations. Within the last year, there have been significant efforts to increase diversity within organizations, especially in regard to their leadership boards. However, there is still much more to be done.

A Persisting Lack of Diversity in Leadership Teams

A recent study published by Institutional Shareholder Services found that only 12.5% of board directors in the US are members of underrepresented racial and ethnic groups – an increase of only 10% over the last five years. This is despite the pledges that many corporations have made to increase diversity in leadership during that time period. Moreover, certain communities are disproportionately underrepresented in leadership: for example, currently, Black board directors constitute only 4% of the total group. 

Racial disparities within leadership constitute one key example of a lack of diversity at the top of organizations. Gender disparity is another crucial factor: from 2015 to 2020, the number of women in the C-suite crept from 17% to 21%, a very moderate increase in proportion to the number of women within these organizations. It should be noted that within these groups, white women were elevated at far higher rates than women of color.

It is clear that organizations in the US still have a significant lack of diversity in their leadership teams and despite the recent attention that this issue has been paid, progress has been slow. The Alliance for Board Diversity has set a goal for all Fortune 500 company boards to be at least 40% diverse in regard to women and minority communities. At the current rate, that goal will not be achieved until 2074

Certain leaders have been calling for more significant efforts to be made. Philanthropist and Founder, Chairman and CEO of Vista Equity Partners Robert F. Smith, addressed the “Four Percent Problem” — which the issue of the lack of Black representation in leadership has been dubbed. Smith argued on Twitter that in 2021, blaming “the pipeline” for low diversity is not enough. A holistic solution means aiming higher, holding organizations accountable, and truly empowering Black institutions to achieve excellence.

The Significant Benefits of a Diverse Leadership Team

Having a diverse leadership team has an immensely positive impact on an organization in a variety of ways. For example, when different groups and identities are represented, organizations are much less likely to fall victim to “groupthink”, a phenomenon in which a homogenous group might not be able to recognize a bad idea if none of its members have unique or differing experiences. “Groupthink” can have significant ramifications when a board is making a major decision for the company. 

Diversity in leadership can also indicate the organization’s values and aspirations, which can boost an organization’s reputation both within its walls and to the public. In addition to the mental benefits employees receive when they feel aligned with and proud of the morals of their workplace, it also increases their capacity to be productive and successful workers

These positive effects of diversity in leadership also translate to tangible success in an organization’s performance. A 2015 McKinsey study of more than 1,000 companies found that there was a strong increase in both profitability and long-term value creation when a company increased diversity in its leadership team. In 2018, another McKinsey survey found that companies with more diversity in their board of directors were 35% more likely to see increased profits above their national industry median than those who did not. Evidently, greater diversity in leadership is a tremendous benefit to any organization.

Increasing Diversity in Leadership 

While progress to address this issue has been relatively slow, there are many leaders who are working hard to make positive change. For instance, Vista Equity Partners  has been a longtime supporter of initiatives to bring more diversity into leadership, like the Thirty Percent Coalition and the Diligent Corporation, which work with 700,000 leadership teams and aim to provide them with tools to increase diversity within their boards.  

Smith stated, “We’re proud of the work Vista Equity Partners’ portfolio companies are doing to address access, equality, and building the talent pipeline, and we’re thrilled to also join Diligent’s smart and scalable initiative to increase board diversity. This is the right way to empower corporations to make strides towards equality of opportunity. Vista proudly joins Diligent and its partners in taking this critical step along the path toward a more just and equitable future.”