South Africa has achieved impressive statistics over the last decade regarding board diversity. On various measures such as gender, ethnicity, and age, the nation ranks highly compared to global averages. Diversity and inclusion have been dominant themes in building a more cohesive and unified country. However, challenges in achieving board diversity remain, including low turnover, high inertia, limited candidate pools, and inadequate succession planning.
Today, we will explore why these challenges persist and their impact on board composition. We will also explain how Search Partners International (SPi) can aid your company in overcoming these obstacles. By the end of this article, you will have the information you need to elevate your board.
Key Takeaways
Board Diversity Challenges – South Africa faces low turnover, high inertia, limited candidate pools, and inadequate succession planning impeding board diversity.
Impact of Diversity – Companies with diverse boards report significantly higher revenue from innovation, yet many businesses treat diversity mandates as mere formalities.
Solutions with SPi – Search Partners International provides expertise in executive recruitment and succession planning, helping companies overcome diversity challenges.
For an in-depth overview of approaches to board diversity, read: Navigating Board Diversity: Best Practices and Strategies.
Common Challenges in Achieving Board Diversity
Here are a few key factors that can make achieving a diverse board challenging:
Low Turnover
One hindrance to optimal board diversity is low executive turnover. Research by a global leadership advisory firm has shown a strong and positive correlation between board turnover and overall diversity. The King Committee on Corporate Governance in South Africa (prescribed in the King IV report) suggests that an independent, non-executive director’s position on the board should not exceed nine years.
While short board service can create the risk of missing out on valuable and informed member insights, lengthy tenure can lead to staleness of ideas and slow decision-making. According to the Global Board Diversity Tracker’s 2022 report, 20% of South Africa’s largest top 40 organisations have long average tenures, with the issue most prevalent in South Africa’s consumer sector.
High Inertia
A Boston Consulting Group Henderson Institute study on diversity in SA boards indicated that “companies with above-average diversity scores report an average of 45% of revenue coming from innovation, as opposed to 26% at companies with below-average diversity scores.” Innovative ideology has never been more important in an ever-evolving modern industrial climate, facilitating continuity through unique challenges like pandemics and disruptive technologies.
Despite these findings, many businesses see the stipulations in the King IV report as a tick-box exercise and have not prioritised diversity targeting. When surveying the governance landscape, only a handful of corporates have set targets, with merely just over half meeting them.
Limited Candidate Pools
A glaring issue over the years has been the quality of education in South Africa. There have been major concerns over the country’s ability to cultivate competent leaders from diverse backgrounds due to a mismatch between market needs and skills development objectives.
Another critical two-sided problem has been the lack of nurturing of available talented individuals. On one side, Africa loses an estimated 70,000 skilled professionals annually. As it stands, South Africa has lost 900,000 qualified individuals between the ages of 25 and 40 to other nations with proverbial greener pastures. On the other hand, the country is becoming an unattractive working prospect for foreign nationals, falling from number 55 in 2013’s Global Talent Competitiveness Index to 68th in 2023.
Succession Planning
Given the general lacklustre attitude toward board diversity within organisations, inadequate succession planning is a natural result. The receptivity to more inclusive and reflective board compositions is low, demonstrated by involuntary structured governance practices. It is difficult for boards to look beyond what’s comfortable to talent pools outside familiar circles, leading to the inability to attract, develop, and retain feasible talent.
Why Obstacles to Board Diversity Persist
While the country has taken great strides in availing opportunities to previously marginalised candidate groups, a seeming mistrust of the leadership abilities of diverse groups remains. As discussed earlier, board members cling to their directorships for extended periods, creating hostile environments for new membership or strategic change. A reward structure based on merit would result in a more comprehensive leadership team.
Furthermore, the high unemployment rate of highly skilled workers and the difficulty in finding skilled employees are massive national challenges. Matching talent to available institutional opportunities is a gap that desperately needs to be filled to prevent South Africa’s brain drain. Recognising this, SPi is stepping in with modern executive recruitment solutions, ensuring businesses have the directors they need to excel.
How Barriers to the Ideal Board Composition Can Be Overcome
Relevant and relatable diversity education and training programmes are critical to tackling the ignorance surrounding the benefits of a diverse and inclusive board. External and objective intervention in board recruitment, talent acquisition, and succession planning can greatly assist. Consultations with a firm like SPi can navigate your corporation through the bureaucracy of regulations involved in diversity hiring, facilitating a more simplified and transparent process. With 10 years as board experts, we can intuitively guide you to a board with the right people and combination of skills.
Conclusion
Achieving board diversity in South Africa presents several challenges, from low turnover and high inertia to limited candidate pools and inadequate succession planning. Despite these obstacles, progress can be made through targeted education, training programmes, and external support. Search Partners International (SPi) offers the expertise and experience needed to navigate these challenges, providing modern executive recruitment solutions to build more diverse and effective boards. By prioritising diversity and inclusion, companies can foster innovation, enhance decision-making, and drive sustainable success.