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CEO, CivicAction

Most skilled painters choose to harness the power of the entire colour spectrum to create compelling masterpieces. If all artists chose instead to only use one brush and one colour, our art galleries would be filled with flat, monochromatic paintings lacking vibrancy and movement. So why have we accepted for so long that leadership that represents only one dimension can create necessary depth and movement in our communities? Organizations should be jumping at the opportunity to harness the potential of diverse leadership, not dragging their feet.

In Toronto, over 50 per cent of the population now identifies as a “visible minority,” yet in 2017, Ryerson University’s Diversity Institute found that visible minorities only make up 3.3 per cent of corporate board positions, an increase of less than 1 per cent since 2014. Women aren’t well represented either; although women make up 48 per cent of the work force, in 2017 they only held 14.5 per cent of all Canadian board seats in companies that disclose the gender makeup of their boards.

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So why isn’t there more diversity around the board table? The problem certainly isn’t with the pipeline. Here are a few examples of diverse leadership programs:

  • ​DiverseCity OnBoard, a program that has a board-matching service to connect qualified candidates from underrepresented groups to governance roles for non-profits and public agencies, has a database of 1,800 diverse leaders ready to serve on boards in Toronto.
  • The Broadening Opportunity through Leadership Diversity program at the Schulich School of Business enhances the capacity and boosts the impact of a class of diverse leaders annually.
  • CivicAction’s Leadership Foundation runs programs that attract amazing diverse leaders from across the Greater Toronto and Hamilton Area, with our DiverseCity Fellows program attracting hundreds of applications every year and our Emerging Leaders Network comprising more than 1,700 rising leaders from a wide range of backgrounds.

The supply of diverse leadership is plentiful. The problem lies in who controls the tap.

The Canadian government took a big step forward to expand the leadership pallet recently when Bill C-25 received royal assent, officially mandating that all publicly traded companies must disclose their policies on diversity as well as the diversity of their boards and senior management. The federal government’s push toward accountability mirrors the Ontario government’s plan to encourage companies in the province to ensure at least 30 per cent of the directors on their boards are women.

It’s disappointing that in 2018 organizations still need the government’s push to tap into diverse leadership talent when it’s proven that diversity is actually good for business. Bill C-25 isn’t an administrative burden that will take up valuable time and resources, it’s an opportunity to improve the quality of business leadership and, as a result, increase performance.

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Here are three evidence-based reasons why businesses should not just do the bare minimum and report their leadership’s diversity but take the next step to actually modify their approach to recruit diverse leaders.

Diverse leadership strengthens the bottom line

Catalyst Canada found companies with three or more female directors significantly outperformed those with fewer women by 84 per cent on return on sales, 60 per cent on return on invested capital and 46 per cent on return on equity. Additionally, a 2015 McKinsey report on 366 public companies found companies in the top quartile for ethnic and racial diversity in management were 35 per cent more likely to outperform their industry in financial returns.

Diverse leadership fosters innovation

The Harvard Business Review discovered that when companies don’t have diverse leadership, women, people of colour and LGBTQ people are less likely to win endorsement for innovative ideas. In a study by North Carolina State University, a significant causal link was found between encouraging promotion and retention of a diverse work force and developing innovative products and services. Additionally, having more women in an organization does correlate with more innovation, but only if there are a significant number in leadership; according to the Technical University of Munich, when less than 20 per cent of management positions are held by women, innovation performance does not increase.

Diverse leadership boosts employee engagement

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A study in the Journal of Applied Social Psychology showed a positive relationship between diversity practices and employee engagement for all employees, and that when employees perceive a high level of inclusion, diversity practices can increase organizational trust. Moreover, according to Gallup, 41 per cent of female-led teams report being engaged, compared with 35 per cent of male-managed teams.

It can be easy to see government regulation as the stick that forces businesses to take action, but that misses the carrot, the real incentive. Bill C-25 is a win-win. It’s a nudge to businesses to ensure diverse leadership that will also increase performance, innovation and employee engagement.

Although Bill C-25 only mandates disclosure from publicly traded companies, all organizations have leaders. This is an opportunity for all to take stock of their leadership diversity and take measures to increase representation on their boards and management teams.

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