The Government backed Davies Review in 2011 followed by the Hampton-Alexander Review in 2016, successfully encouraged a voluntary effort to substantially increase the number of women on the boards of the FTSE 350 listed companies and this effort has cascaded down through AIM listed and the largest privately held companies. In 2012, only 12% of the FTSE 350 non-executive directors were women. Today, it is close to 40% and still increasing. While this success needs to recognised, it also masks a deeper problem. Women hold only 12% of the executive director positions on the boards of those companies. Indeed, only 5% of the CEOs of the FTSE 350 listed companies are women. This is what we call the boardroom “gender gap”. If companies can’t get on top of gender diversity, will they be able to succeed with other forms of diversity?
To discuss this challenge, Savannah Group hosted a private webinar for select chairs, senior board members and CEOs. The panel comprised of Denise Wilson, CEO of the Hampton-Alexander Review, Sir Andrew Mackenzie, recently retired CEO of BHP Group Plc and now a non-executive director at Royal Dutch Shell Plc, and Ruth Cairnie, Chair of Babcock International Group Plc and SID at Associated British Foods Plc.
Key takeaways
- Feed the talent pool
- Bias still exists in process and in culture
- Targets are critical, but not quotas or legislation
- Leading by example is stronger than legislation
- Leaders need to be allies in diversity
- Get gender balance right then keep moving
- Diversity comes in all forms and gender diversity can be a catalyst for broader thinking and adoption
Feed the talent pool
There was frustration amongst panel members who felt that although progress is being made at board level, to date there hasn’t been enough focus on gender balance in executive roles, particularly those with organisation P&L responsibilities. Board representation is important, but it is ultimately the executive team that runs the company with the board serving to guide, endorse and shape the direction that the executive team takes. There is a concern that the focus on gender balance on boards has meant that the power still predominantly presides with men in the majority of executive committee roles, and they therefore are shaping overall business direction.
“While I welcome the female role model on boards, I worry the revolution is potentially stalling.”
More needs to be done to encourage women to stay in executive roles for longer so that there is a stronger pipeline to feed senior board roles and CEO roles. There are also some powerful functional roles in global organisations that provide a pathway to the top executive team. One panellist noted that there is sometimes a devaluing of roles that women start to occupy, which we need to resist.
“The pursuit of gender balance through executive teams and through talent pools drives so much culture change.”
Bias still exists in process and in culture
Part of the problem of why we see fewer women in executive level roles is a negative bias in the selection process. This is despite phenomenal support from investors and the positive momentum that has already been created. The way organisations identify and reward talent can also exhibit bias. It was noted that the promotion criteria for senior executive roles can differ and often men are promoted on their potential, whereas women are promoted on proven performance resulting in further barriers into senior executive roles.
“I have had to be very clear about my ambition to take each of these steps, especially to get to a company chair role. I repeatedly have had to say to head-hunters thank you for the SID opportunity, but please remember I am looking for a company chair role. I had to create in people’s minds that I could be in that sort of role.”
Bias is present in culture too. We still see unhelpful myths and gender stereotyping that we need to dispel. Behaviours such as micro aggressions “grind people down on a daily basis and lead them to expect less of themselves and of organisations”. Examples shared include not getting someone’s name right or asking British born people from minority ethnic groups where they come from. These subtle aspects of culture put up barriers and hinder the success of those outside the majority group.
Targets are critical
From a business perspective, gender balance should not just be motivated by fairness and equality but should be viewed as critical to success. Some question the use of targets for achieving diversity. But our panellists all strongly believe in the role of targets to provide milestones, and to make sure diversity is measured and talked about in the language of the business. As one panellist pointed out, all key performance measures are target driven and if it is important to the business then management should be expected to measure the performance to provide an understanding of where they are at and a clear sense of where they need to be in order to be successful and competitive.
“There are still a lot of leaders who are driving this for equality or fairness reasons but they’re not embracing that it’s critical for business success. So, it’s not strategic in the way it should be. I think that’s why there are lots of good words, but progress does not match the stated ambition.”
One panellist looked back at a stretching target his organisation set to achieve gender balance on the executive team by 2025: “Having committed to that I now look back and see it with considerable pride… because what I learned through reaching for that target… is that it is one of the most powerful ways I have found to change our company’s culture.”
Looking through a wider lens at the influence of voluntary frameworks such as the Hampton-Alexander Review, targets are working here too. Voluntary targets are fundamental to driving progress, said one of our panellists, because they offer a view of what good looks like and they set you off on a journey over a number of years.
“Targets encourage a data driven process and so they encourage companies to collect data and to look at the pipeline.”
It is important however not to get obsessive about 50/50. It may be slightly different in terms of absolute numbers but the balance of influence, of power, and of potential should be equal.
Leading by example is stronger than legislation
While there was full support for the adoption of voluntary targets, our panel felt unanimously that legislating targets would point businesses in the wrong direction. Reports such as the Davies Review and Hampton-Alexander Review have been powerful in setting expectations, gaining transparency, holding to account, getting shareholders on board and raising standards without the need for legislation.
One panellist commented that as long as progress continues and we continue to ask, “where do we go next?”, then legislation would be retrograde. Even though progress is slower than we would wish, legislation is not to be seen as a panacea of good practice and also carries the risk of “encouraging a compliance mentality.”
The best motivator? “The more diverse companies will outperform and make the case”, commented one panellist.
The role of leaders as allies in diversity
The good news is that there fewer and fewer leaders who aren’t buying into diversity. Plus, there is a groundswell of evidence and information about the benefits of a more diverse business. A positive next step is for well- informed leaders to show their commitment publicly and through action.
“We have a cadre of leaders who are well meaning, have huge platforms but who are uninformed on the subject.”
Advice from our panel is to ask newly diverse boards to spend more time thinking about why they have not been increasing the diversity of their talent pool for roles such as CFOs, SIDs and Chairs.
Get gender balance right then keep moving
Meeting gender balance goals can help organisations get ahead in other areas and can act as a catalyst to broader thinking. For one organisation, having a gender balance focus led to flexible working being a longstanding way of working and meant they had better processes in place to deal with issues such as sexual harassment – leading to them being better prepared for important, but potentially business disruptive issues such as the #metoo movement. Organisations that have successfully achieved gender balance are far better placed to succeed in creating even more diverse workplaces, resulting in better performing organisations. It is well documented that more diverse organisations have better morale, motivation, health safety and profitability.
“If you can’t get it right on gender when you have all the data available then you won’t get it right on anything. And since a lot of the things you want to change are about culture and leadership then [gender diversity] helps with all kinds of diversity.”
Concepts such as diversity of thought encourage wider thinking about diversity – but in some instances it can act as a distraction. If diversity becomes bigger and therefore harder to measure, then it can stall. Gender balance is visible and so it can be used to open minds about diversity.
“Gender balance is so glaring and so clear to measure that you can affect an enormous part of the workforce very quickly and by doing that you think more broadly about diversity.”
Diversity comes in all forms, but gender diversity can provide a kick-start
Since there is commonality in terms of creating an inclusive culture, recruiting different people and attracting different people, the organisation can learn from gender diversity and apply these learnings elsewhere in the business.
“By being single minded about it you can open minds about diversity, and as a result we got better ethnic diversity and diversity based on sexual identity. The moves in that direction have been just as powerful but gender balance acted as the locomotive.”
And, if you are successful in achieving gender balance, you’re starting to encourage diversity of thought too.
Closing thoughts
The sentiment from our panel discussion is that most who are serious about gender diversity are not just pushing for 33% representation as proposed in the Hampton-Alexander Review. They are aiming for more. We’re seeing great progress and as one panel member concluded, “We have created a career path for senior women that was previously not available.” But we have a long way to go.
To continue moving forwards, leaders, employees, suppliers and consumers need to “work out whether they are part of the passive and silent majority….and work out how they convert themselves to allies and strong upstanders.”
To sum up the benefits of gender diversity as described by one panellist:
“Time and again we show that diverse teams – more gender balanced teams – have better morale, motivation, health and safety and, importantly, profitability.”
Thank you to our panel for an inspiring and enlightening conversation. If you’re looking to improve gender balance in the executive team or board of your organisation, you can connect with Savannah Group’s Board Practice members here.
