Board Development: Increase Enterprise Value by Focusing on Behavioral Diversity

Last August the Securities and Exchange Commission approved new Nasdaq listing rules regarding board diversity and disclosure. It’s a good example of the further commitment to diversity, equity and inclusion (DEI) in the boardroom that we’re continuing to see across the corporate world.

In this example, the new listing standards ask Nasdaq-listed companies to annually disclose data around board diversity. It’s the kind of transparency and advancement of independence and diversity in corporate leadership that investors and others have celebrated.

Of course, such evolution means many organizations are looking anew at how they can implement guidelines like these while also ensuring any compliance actions are not mere tokenism.

First, drill down

For now, let’s assume a board meets or even exceeds these requirements. Still, regardless of a board’s diversity, there is no guarantee that its members can communicate and work together. This is where understanding human differences – behavioral diversity – plays a huge part of board development and execution.

It’s important to pause here and clarify that behavioral diversity is a component of DEI. In fact, to behavioral data geeks like me, behavioral diversity should be the first step in a DEI program, since behavioral diversity is how a person is (innately) wired as to race, gender and other crucial factors. These behavioral differences can be the No. 1 derailer of a DEI program.

Why? Without identifying and accounting for our behavioral differences we cannot, for instance, break the cycle of like-choosing-like. That is, our predisposition toward choosing or affiliating with or agreeing with someone we perceive as being like ourselves.

Understanding our own behavior – and that of others – is a powerful early step toward build relationships with people and organizations representing or connected to the individuals you need to know in order to bring the diverse best to your board.

Your board may still face challenges rooted in familiar ways of listening, observing, aligning and choosing, but by ensuring everyone has greater awareness of behavioral diversity (internally and externally), there is a vastly improved opportunity to foster diversity. In this way, you’re leveraging the positive power of diverse ways of thinking and being, rather than it becoming a stumbling block to the very scenario you wish to rectify.

Driven by validated tech

Introduce scientifically validated behavioral technology to reveal:

• Personality
• Bias
• Communication style
• Decision-making variability
• Natural behavior
• Financial relationship management
• Emotional intelligence

Armed with this insight, behaviorally diverse board members know themselves and one another at a deeper level. They can understand others’ behavior while also managing their own.

Institutionalize behavioral insights by adding behavior technology to your existing tech stack. Without reinventing the proverbial wheel of all programs and platforms, this ensures a diverse group to choose from and, more importantly, how each will fit with existing members.

Without insight, identifying and challenging behavior and poor attitudes means decisions will default to what has always been done before, whether at the recruitment stage or in the decision-making arena.

Yet, with a deep understanding of individual traits, pressure points, bias and communication needs, groups can and will be able to work well together based on a mutual need to support the organization they represent and to make decisions that add value to the business.

Not only that, but the board will be able to stand up to the scrutiny and standards that investors, observers, legislative bodies and others expect to see in corporate boardrooms.

Increase enterprise value

Embracing diversity, equity and inclusion in the boardroom is a crucial measure many now demand. And using behavioral sciences to understand the behavioral diversity of the board or other crucial leadership will lead to better results and increased enterprise value.

Organizations that take this matter seriously and demonstrate the use of validated behavioral technology to reach the highest DEI standards will satisfy corporate governance, legal compliance and good business practices. Every boardroom whose approach to DEI is inclusive, genuine and driven by behavioral diversity will deliver a diversity of people and opinions, viewpoints, richer debate, and far better and more informed decision-making.

Perhaps someday the term “BeDi” for behavioral diversity will be as prevalent as “BeFi” is for behavioral finance. Here’s hoping! Share your thoughts on this trajectory with me.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.