Diversity – not just for Halloween
When I was in Norway last year, I took the opportunity to research the experience there of women on Boards – had the sky fallen in after all companies had to appoint at least 40% female Boards? (the quick answer is that nearly everyone in Norway thinks it was a non-event). There has been a flurry of research and articles recently, as other European countries consider following in Norway’s footsteps (so far Australia’s response has been restricted to requiring better reporting).
The most reported research has been this study (pdf) by Cranfield University on Gender Diversity on Boards: the Appointment Process and the role of Executive Search firms. The study was in two parts; a general review of the process of Board appointments, and then a specific set of interviews with headhunters to understand the appointment process from the key intermediaries in the process.
One of the first observations was that change in the pool of Directors appointed will come from changing the criteria – the brief given to the Executive Search firms. If you focus on experience, rather than skill set, you are going to appoint the same set of people who are already on boards:
So our next step is to say, what you’ve got to look at it’s not experience, i.e. I want somebody who’s either been on the Board, or been on the executive committee of a large company, is I need someone who can make a contribution around the Board table. Using our competencies, it is about strategic input, about focus on results, around influencing style and skill, and integrity and independence. Those are sort of the four major areas we look at. And what we say is you can get those skills from people who haven’t been on the Board yet.
But there is also quite a lot in the study about the later parts of the process, including the interview process:
As you know, many interviews are ‘Oh, you worked at JP Morgan, do you know X? Oh, a lovely chap, he knows all these people I know’. So… but is he any good at the job? ‘Oh, we never got there. We never actually got to the meat of it’. [...] Now, what you want people to do, when they go through a series of interviews, is to be asked the same questions, or at least cover the same issues. And that’s one of the weaknesses of a lot of interview processes, is that many people don’t know how to interview, and don’t know what to interview for. So our interviews are structured interviews based on behaviours, based on competencies. But if Board members don’t know how to do that, then they may come up with the wrong answer. So, actually, a lot of it is about training directors to look for the right things.
And right at the end of the process, when a fabulous woman has been found, the executive search firm also has to gee up the Chairman to appoint a woman:
The critical moment is often towards the end where there are two candidates, and the female candidate is maybe the less experienced one. And it’s preventing the Chairman from losing his nerve when somebody else around the boardroom table may say, well I like them both, and Jim looks like a terrific chap, but look at his record, but she’s never sat on a FTSE Board before, she’s been on the Board of her own business. So there’s a danger of constant voices of conservatism, and actually part of the value that we add is just helping the Chairman say ‘No, remember what we’re after.’
This opinion piece from Allison Pearson in the Financial Times breaks down the research for those who don’t feel like reading an 80 page report:
A report this week by Cranfield School of Management bears out my theory. It says the appointment of women to FTSE 350-listed non-executive director roles is being held back by selection processes which “ultimately favour candidates with similar characteristics to existing board members”. Or penises, as they are more widely known. Chaps are more comfortable with other chaps. Only when a woman has been foisted on them and does a terrific job without crying or talking about Tampax do they start to see that we can be quite useful.
McKinsey has done the most definitive research on why this matters – performance of companies generally improves with greater gender diversity at senior levels. But the final word should go to this post from a Silicon Valley venture capitalist :
This is why I personally care about diversity: it’s the canary in the coal mine for meritocracy. When we see extremely skewed demographics, we have very good reason to suspect that something is wrong with our selection process, that it’s not actually as meritocratic as it could be. And I believe that is exactly what is happening in Silicon Valley.
There’s plenty of good research on the subject of team performance that shows that diverse teams outperform homogeneous teams on many different kinds of tasks. The problem is that this research doesn’t argue for demographic diversity, but rather for a diversity of perspectives. So, again, racial or gender diversity is not an end in itself. But we have to ask ourselves: if teams are consistently being put together with homogeneous demographics, what are the odds that they also will contain a diversity of perspectives? Shouldn’t we be worried that the same selection process that produces homogenous results in one area might be accidentally doing the same in the area that we care about (but that is harder to measure)?
Cross posted at Actuarial eye