Room at the Top — Encouraging Diversity in the Boardroom

18/03/2015

By Leona Barr-Jones, Barr-Jones Associates

In January 2015 Germany joined France, Italy and many Nordic countries in opting for mandatory targets of 30% for women on corporate boards. Early analysis appears to show that quotas work and have been highly successful across Europe. This could result in a quota system being considered at EU level. The UK Government currently has its own voluntary target of 25% female directors of FTSE 100 boards by the end of next year — which it is on course to achieve. EU intervention would mean an adjustment to this level.

The benefits of diversity are clear. Recent statistics show that between 2005 and 2009, the top quartile of Fortune 500 companies by female boardroom representation outperformed those in the lowest quartile with a 16pc higher return on sales and a 26pc increase in return on invested capital -- numbers which grew to 84pc and 60pc respectively for companies with sustained high representation of women on their boards.

Targets can be a key way to encourage diversity within both the public and private sectors and I have seen it work well in both. Diverse boards have been shown to strengthen a company’s talent pipeline and increase innovation, leading to a stronger group performance. However, there must be a concerted effort to make targets work to increase the number of women at senior executive level as this is the direct pipeline to the board of any organisation. Companies need to be more proactive in developing the pipeline of female talent by holding leaders accountable for supporting women’s careers, challenging unconscious bias across talent management processes and making female talent visible.

For diversity to be effective within an organisation, several key pillars need to be in place:

- Diversity must be central to identifying talent within an organisation. Aspirational targets must be set to ensure that the management team is representative and diverse. To become truly diverse, organisations need to look at the widest possible pool of talent. If there are blockages in the pipeline for women wanting to reach senior positions, then analyse where these affect females.

- Identify and eradicate unconscious bias as much as possible. Ensure that talent management processes are free of unconscious bias through training and ongoing challenges of gender based assumptions.

- Mentoring and sponsorship of women. Ensure talented women are identified and make visible to senior management through sponsorship, mentoring. Powerful sponsors and mentors are often critical in accelerating women’s careers.

- Nurture female talent thorough leadership development programmes. Help women to develop leadership styles and ensure that mentors and sponsors buy into this.

As a Change Leader and trainer of Diversity, I am not convinced that quotas are the answer. I would prefer to show organisations why a gender diverse board leads a company to better financial performance and lead them to actively drive towards their targets for business reasons. Once a new culture is embedded into an organisation, the benefits quickly become clear.