Women are not necessary in the boardroom

18 December 2015 -

Boardroom diversity should not be treated as just a box ticking exercise to keep people happy. Real diversity of thought can drive businesses on to greater levels of success, and here’s the evidence

Guest blogger Margaret Kett of executive search experts, Tyzack

American writer, Fannie Hurst (b. October 1889), wrote that a woman has to be “twice as good as a man to go half as far.” Prophetic words given the sentiment of many businesswomen today regarding their entry into boardrooms of listed companies.

In the 1990’s surveys of Chief Executives and Chairmen revealed that women were generally perceived to lack the qualifications, experience and commitment required of directors. In many instances this belief appears still to pervade boardrooms, despite the fact that the ranks of women in executive roles have grown exponentially over the last decade.

There is no question that, academically, female executives are very much on a par with males. In their study of the human capital profiles of new appointees to UK FTSE 100 boards between 2001 and 2004, published in the European Management Journal, February 2008, Singh, Tergesen and Vinnicombe found that a statistically greater number of women than men held MBA degrees (19% versus 7%) and degrees from elite universities (21% versus 12%.).

Prior to their study, the authors expected that women would have less previous board experience than their male counterparts. They found this was certainly the case with FTSE 100 director experience (46% for men versus 22% for women) but a significantly greater number of women than men had both minor board director (63% versus 39%) and international board director experience (43% versus 36%).

In their 1984 paper, ‘The British boardroom: Time for a revolution’, David Norburn and Franklin D Schurz reported that accountants are three times more likely to be promoted to a board than are production or manufacturing managers. This remains fairly much the case today for those with significant accounting experience (for example CFO), and Singh et.al., found in their study a similar proportion of women to men with accounting qualifications held board positions in FTSE 1000 companies.

So the claim that women lack the qualifications and experience required of board directors is simply a nonsense.

As for commitment, there is always the same old argument that, given potential family commitments, women cannot dedicate sufficient time to their duties as non-executive directors.

Yet, again, the data tends to go against such arguments.

Work versus family

In their excellent, and still relevant, paper, ‘Investment in Work and Family Roles: A test of Identity and Utilitarian Motives’ (Personnel Psychology 2003, 56, 699-730), Nancy Rothbard and Jeffrey Edwards found that an employee who identifies highly with both work and family invests twice as much time in work as a person who is only highly identified with either work or family.

A number of explanations may account for this relationship.

The authors suggest that high identification with family may indicate people who are generally more responsible and committed, which would have positive effects on both work and family time investment. Likewise, these people probably invest more time in work because they view work as instrumental to meeting family needs.

Their findings certainly echo my own experience in human resources.

As Rothbard and Edwards conclude, CEOs and board chairmen “should not base selection and promotion on unwarranted stereotypes and misconceptions regarding how family identity impacts job performance, but instead, focus on job-related behaviours, decisions and outcomes”. Ans this is a view shared by a rapidly growing number of people.

Across the globe there is mounting pressure on companies from governments and lobby groups to address the issue of gender disparity in boardrooms. There are many reasons for this, not the least of which is that companies that have demonstrated diversity (particularly diversity of thought) are more successful than those that have not. That pressure is having positive results but a question mark hangs over the appointment of women to non-executive director positions.

Diversity breeds success

Diversity is essential to the growth and prosperity of all companies because it breeds innovation and innovation breeds business success. Management consultants McKinsey claim that companies in the top quartile for gender diversity are 15% more likely to outperform their industry peers.

Credit Suisse Research Institute has also stated that diversity coincides with improved corporate financial performance and higher stock market valuations. However, the data relating to gender parity in the boardroom may be confusing correlation with causation.

Simply having women on the board of directors doesn’t automatically mean greater diversity of thought. A number of female NEDs with whom I am in regular contact with claim that they are often seen as outsiders who represent a “women’s view” – a view that is not in keeping with the requirements of the corporate world.

In these instances, the issue of diversity is simply given lip service and this is hugely frustrating for those seeking positive change.

So, when we look at the data from McKinsey and others, is it possible that the findings are being looked at the wrong way around?

Two issues come to mind. Could it be that strongly performing companies hire more women and that women also choose to work for more successful companies, or could it be that a company culture that fosters diversity is also the reason why a company performs better?

Smart business leaders are realising that women bring a very different management style into play, a style that is proving to be enormously beneficial to a new generation of employee – millenials. This generation’s key motivators are workplace culture, inclusive and open management styles, a sense of belonging, variety and flexibility.

Since women tend to have a more transformative style of management as compared with a more transactional style seen with men, they are more likely to develop diverse problem-solving groups than those who adopt the command-and-control style of management.

Whilst there is little (if any) evidence to suggest that one form of management alone – transactional or transformative – achieves greater results, there is growing opinion that the combination of the two can achieve extraordinary results as measured by both financial and non-financial metrics. Being more diverse and inclusive does, however, provide the framework for companies to be more innovative, better positioned to understand their customers’ needs and recruit and retain the best talent.

Furthermore, with women today influencing up to 80% of consumer buying decisions, the business case for gender diversity has never been clearer.

Corporate survival has little to do with who is the fittest but more to do with who is most able to adapt. Adaptation means being able to diversify and be creative and innovative.

For those who believe women are necessary in the boardroom only as a box-ticking exercise, think again. Think along the lines of “essential for progress and prosperity”.