Benja Stig Fagerland and Gloria Moss
Good and bad news on the women front
The current year ends with some good and not so good news for women. In terms of positives, the German coalition government is on the point of announcing a 30% female quota on the supervisory boards of DAX companies (up 8% from the current level). In terms of the less positive, the US-based non-profit research organisation, Catalyst, announced on 10 December a figure for female representation on Fortune 500 company boards that showed that showed it was still below 17%.
Unfortunately, the one good news story emerging from Europe is countered by a picture that leaves much to be desired. For, this time last year, European Commission data showed that 85% of non-executive board members and 91.1% of executive board members are men, while women make up 15% and 8.9% respectively. Since it is only the executive board members who rise up through the ranks, the low figure here tells a story of woeful talent management. Non-executive directors can be parachuted into companies to sanitise the statistics but it is the executive member figures that paint the unvarnished picture.
Window dressing in the UK
Lord Davies was the man entrusted with producing a non-regulatory solution to increasing women's representation on company boards and earlier in May this year he produced an upbeat report on his initiatives. 'Overall the progress has been good' he writes with women accounting for 17.3% of FTSE 250 board directors. Only pages later do you read that women hold just 6.1% of executive directorships (up from 5.5% in 2010). This translates, in numerical terms, to just 18 female FTSE 100 executive directors compared to 292 males. In Spain, a similar story, with an announcement of a compulsory 40% quote by 2015 translating into an increase in largely non-exec positions from 7% to 13%, with women in senior management increasing from 7% to just 10%.
More of the same in Germany?
As mentioned, the coalition in Germany is trumpeting a 30% female quota for supervisory boards (up 8% on current levels) but this will apply to non-exec level appointments, leaving the current figure of 6% of female board membership untouched at the operational level. "Our biggest companies still have almost no women in their leadership," says German Minister of Defence Ursula von der Leyen. However, the whiff of change has prompted the bosses of the country's four biggest car manufacturers - Volkswagen, BMW, Daimler and Opel - to threaten to move production out of Germany. More than 50% of new car buyers are women so why would they not want their voice on your board?
Something similar in Norway?
Norway led the way on quotas in 2003 and the profile of women directors shows them to be better educated, on average, than their male counterparts. As Jan Akser, Managing Director of the Financial Services Association has said: "Gender quotas are the best thing that has happened for Norway's global competitiveness". However, this perception may not be widespread since the number of women in senior management positions in Norway since the enforcement of the quota in 2008 has only risen from 15% to 18% and there is still no female chief executive of a major Norwegian company. Svein Rennemo, the Chair of global giant Norwegian Statoil, has said that people tend to over-play the challenges of a quota system and under-estimate the benefits from directors who are more educated and able to offer different experiences. However, as even Lord Davies has underscored, there appears to be a problem with the pipeline, not the oil and gas pipeline but the one delivering female talent to the top of the organization.
The talent pipeline
A major focus of many people's attention is now on female talent and how this can be garnered for corporate and societal wellbeing. As Vivivane Reding, the EU's Vice-President and EU Justice Commissioner said in May this year "Gender equality at work is not a women's issue, but a business and economic imperative..... Today, women still only represent 16% of board members in Europe - a shocking waste of talent when you think that 60% of university graduates are female."
In terms of talent, people have highlighted four elements that add to women's USP but there of course many others. The first relates to independence with Chris Bart, Business Prof at McMaster University, suggesting that women are less deferential to tradition or defined power structures than men who he describes as 'pack-animals'. Fiona Hathorn, MD of Women on Boards UK, likewise describes female directors as more independent from the rest of the board, therefore more likely to question decisions than the male members. Her thoughts are in line with a study of Israeli boards which found that boards with more female members were more likey to sack an under-performing chief executive.
A second factor relates to leadership style with evidence that many women are more likely to use and reward Transformational leadership styles than men. This style is focused on Vision, teamwork and the individual and contrasts with the top-down Transactional leadership favoured by men. Significantly, Transformational leadership is credited with increases in productivity of 20%.
Then there is the whole issue of perception and its relationship to design and marketing. The research of one of the authors (Moss) has shown that men and women's design creations (eg websites; graphic and product designs) as well as design preferences differ in consistent and significant ways, with each gender showing a very strong preference for designs of their own gender. Since women purchase 83% of products, there is a strong case for their involvement in design and marketing decisions (cars being a case in point but you could point to groceries, furniture, furnishings, books, small electrical products and computers as other priority areas!).
Added to all of this is the area of complex moral reasoning. Chris Bart, a Business Professor at McMaster University in Hamilton and co-author with Gregory McQueen of A.T. Stills University in Arizona of a recent paper, compared test scores of 624 directors on the Defined Issues Test, which measures how people make decisions on complex matters and found women to have higher scores than men.
Ironically, it is these very differences that may be presenting obstacles to women's appointment since most people are challenged by behaviours at odds with their own.
Examples? The best known is the 'homogeneity principle' that underpins the phenomenon of recruitment in ones own image and the tendency for men to favour people with Transactional over Transformational leadership styles (remember all those distant women in senior positions?). A similar phenomenon has been charted by one of the authors (Moss) in the area of Design and Marketing with men preferring designs created by men and women preferring designs created by women.
The elephant in the room is therefore unconscious bias and healthy and successful organisations need to be fully aware of its influence and then focus on the competences needed to satisfy customers. So, the issue is not so much about gender but about competences and ensuring that gender-neutral competences are selected and applied during recruitment and promotion processes. The concept of the 'best' person is deeply flawed since research on leadership and design preferences by one of the authors (Moss) shows strong variations in people's response by gender. An understanding of the limitations of people's own preferences, and a focus on those of the customer, are therefore essential.
Lower organisational performance
The waste, of course operates at an individual level - the women who fail to fulfil their potential - as well as at a business and societal level since, as one of the authors (Fagerland) wrote in the 'Female Future in 2002/3' "More women as leaders means a strengthened bottom line". Four key studies have shown that this is by no means empty rhetoric.
Women enhance performance
The first, by the Credit Suisse Research Institute, based on a study of 2,360 companies worldwide from 2005-2011revealed that firms dominated by men had recovered more slowly since the 2008 financial downturn than those with a more balanced male-female ratio. Shares of large companies and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide.
The second, by the US-based non-profit research organisation Catalyst analysed financial data for 524 companies reported in the Fortune 500 between 2005-2009. Performance measures included Return on Sales (ROS), Return on Equity (ROE) and Return on Invested Capital (ROIC) and Catalyst found that companies with the most women directors - on average, 25% Women Board Directors (WBD) - outperformed those with the least (on average, 4% WBD) on ROS and ROIC.
The third study in 2007 by the global consultancy firm, McKinsey, confirmed these results and in 2008-9, a survey of 800 business leaders worldwide confirmed that certain leadership behaviours typically adopted by women are critical to perform well in the post-crisis world. Finally, a new study shortly to be published in the 'Journal of Corporate Finance', shows that organisations with more women on their corporate boards pay less on average for their acquisitions because they adopt a more prudent approach to business deals. For every female board member, 7.6 per cent fewer takeover bids are targeted and the cost of each successful acquisition is reduced by more than 15 per cent. The findings have a solid base since the authors, Prof Kai Li and financial experts from the Sauder School of Business at the University of British Columbia, analysed a large sample of acquisition bids by companies on the S&P 1500 index in the US in 1997 and 2009.
The lessons for 2014
Business prosperity and competitive advantage lies in understanding the workings of unconscious bias. This takes humility but the advantaged for the business will more than repay the effort. Successful board management is like a game of football, not synchronous swimming and so having an array of talent is all-important. Ultimately, therefore, the issue of women on boards is not about gender but about competences and talents.
Benja Stig Fagerland is author of the 'Female Futures' report for the Norwegian Employers Organisation, and instrumental in the decision to legislate in Norway for a 40% female presence on Norwegian boards; she is listed as "one of 12 "Woman Inspiring Europe" by the European Institute for Gender Equalisation (EIGE).
Gloria Moss is Professor of Management and Marketing at Buckinghamshire New University and Visiting Professor at ESG, Paris. She is author of 'Gender, Design and Marketing' (2009), Gower; 'Profiting from Diversity' (2010) and 'Lessons on Profiting from Diversity' (2012), both published by Palgrave Macmillan. Clients for advice on the impact of gender on marketing, design and talent management issues with clients including Bayer, Allen and Overy, Ford and O2.