Increasing cultural diversity on boards: quotas not the answer

Media releases

In the lead up to Harmony Day (Thursday 21 March), Diversity Council Australia calls for organisations to value cultural diversity and inter-cultural capability more, especially at the board and senior executive level, but rejects the concept of quotas.

Nareen Young, DCA’s CEO, said she supports efforts to leverage Australia’s cultural diversity but imposing quotas without first understanding what current levels of diversity are would be a mistake.

“There’s no doubt that a culturally diverse workforce adds to a business’ bottom line through improved performance, innovation and access to new markets. But the idea of setting cultural diversity quotas at board or senior executive level is a bridge too far as Australian business has only just begun to look at the issue of cultural diversity.

“Businesses need to walk before they can run – understanding the importance of cultural diversity for their business and exploring how much diversity they already have inside their organisation are critical first steps. Without an accurate picture of this, business can only speculate as to what they might need to do differently. This is why DCA is conducting important new research in this area,” said Ms Young.

DCA’s Capitalising on Culture research an Australian first

In an Australian first, DCA will conduct research in the second quarter of 2013 investigating the cultural profile of the board and senior executive team in ASX 200 organisations and the extent to which the largest listed companies are building inter-cultural capability and tapping into local and international talent when sourcing their business leaders.

Called Capitalising on Culture: A National Survey of Australian Business Leaders, and sponsored by PwC and the Department of Immigration and Citizenship, and supported by IBM, with the endorsement of the Australian Government’s Australian Multicultural Council, the research will empower organisations to develop strategies to better reflect customers in local and global markets in which organisations operate or plan to in the future.

DCA will survey the top 20 listed company board members and senior executives, including board directors, and executive managers (i.e. most senior person in the organisation such as Chief Executive Officer/Managing Director and those who report directly to that person, including those based outside Australia) on their:

  1. Cultural background and identity, to understand how they interpret and identify with their culture and ethnicity – DCA recognises all executives have a cultural identity not just those born or raised overseas;
  2. Global and multilingual experience, to demonstrate executives’ proficiency in this regard and the benefits this can bring to Australian industry;
  3. Organisational practice, to understand executives’ views on their organisation’s capacity to capitalise on cultural diversity, and
  4. Demographics, to assist with generating benchmarking data for a particular industry and for particular roles (e.g. board chairs, CEOs etc).

DCA and OriginsInfo will also analyse ASX 200 company board members and senior executives to determine their cultural origins.

Luke Sayers, CEO of PwC Australia said of the research: “There is no one-size-fits-all approach to fostering talent and leadership today. Embracing differences is critical to the success of our people, clients and society. We understand the valuable insights that research like Capitalising on Culture can provide and we’re proud to support this important piece of work.”

Andrew Stevens, Managing Director of IBM Australia and New Zealand said: “In this global economy, cultural insight can be just as important as technical ability for business leaders. We are pleased to support this research and believe it will help Australian organisations to further develop cultural diversity and inclusion strategies."

Hamish Trywhitt, Leighton Holdings CEO said: “The Leighton Group’s strategy is built on the diversity of our brands, geographic footprint and services, and successful implementation of this strategy is enabled by contributions from our diverse workforce. This landmark research to be undertaken by DCA will provide our business with invaluable information to leverage opportunities offered by the Asian Century.”

Cynthia Balogh, Chair, Victorian Multicultural Business Council said: “We fully support this ground breaking research to understand the true picture around cultural diversity amongst Australia’s top business leaders.”

Business benefits of diversity

The following research has measured the business benefits of cultural diversity:

  • Diversity leads to improved performance and innovation: Companies that drive innovation by leveraging the ideas and knowledge of their diverse employees meet product revenue targets 46% more often and product launch dates 47% more often than industry peers. [i]
  • Diverse teams are better able to solve complex problems. One study of 28 teams found those that were heterogeneous solved complex tasks better than the homogeneous teams. They noted the diverse teams exhibited a higher level of creativity and a broader thought process. [ii]
  • Diverse work teams produced results which are measurably better; provided teams are properly managed and trained, one study found six times better results than homogenous teams. [iii]

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[i] Tadmor, C.T., Tetlock, P.E., & Peng, K. (2009). ‘Acculturation strategies and integrative complexity: The cognitive implications of biculturalism’. Journal of Cross-Cultural Psychology, 40(1), 105-139.

[ii] Leung, A.K-y., Maddux, W.W,, Galinsky, A.D. & Chiu, C-y. (2008). ‘Multicultural experience enhances creativity: The when and how’. American Psychologist, 63(3), 169-181.

[iii] Hoffman,  S., Lane,  R., Posner, D. & Nagel, M. ‘Measurement: Proving the ROI of Global Diversity and Inclusion Efforts.’ in Tapia, A. (ed). (2011). Global Diversity Primer, Diversity Best Practices pp129-135.