At Nextgen we want a pension industry which is more inclusive, representative and engaging. We believe cognitive diversity – which includes people with different perspectives, abilities, knowledge, attitudes, information styles, and demographic characteristics – all contribute to better decision making and ultimately better outcomes for members.

A recent report, Great Minds Don’t Think Alike, from Scottish Widows highlights the importance of cognitive diversity on boards. Company boards share similar challenges to some pension trustees. Changing market conditions, a shifting labour force, as well as systemic changes such as climate change, all require a range of perspectives and experience to create solutions.

The report found that one of the major benefits of cognitive diversity is that problems can be solved quicker. People who are cognitively diverse are more likely to work as a team by pooling their knowledge and learning from each other, or acquiring a new skill to solve a problem. It can also help with decision making as it encourages open and honest communication. There’s even evidence that fewer mistakes are made where there is cognitive diversity within a team.

This is backed up by both the academic research and the directors interviewed for the research. They show cognitive diversity isn’t a guarantee of success for a company, and it can only work if the right leadership is in place to nurture and develop it. The role of the chairperson is particularly important in this, as they’re responsible for driving the meetings and giving everyone a chance to air their opinions. How they deal with challenges and what could be seen as personal or negative comments is integral to success.

The report includes a range of recommendations and a checklist for chairs to ensure they are fostering diversity. The main recommendation is to work on widening the pool of candidates by considering candidates that might not meet all criteria, but have experience or a specific skill which is lacking from the board. As trustee responsibility has increased over the years it is likely recruitment criteria has also lengthened. It is worth revisiting which skills are essential. Rigid criteria can restrict broader representation and reduce cognitive diversity.

It’s a way for today’s decision-makers to respond to threats, take advantage of opportunities, and make better decisions. We believe the pensions industry needs to have cognitive diversity at the heart of everything it does, and for it to become the new norm sooner rather than later.

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