The progress in adding more women to boards has lacked momentum globally. Here are some tips from standout companies on how to take firmer action.
The tone of much public discourse on the issue of women’s representation on boards has been pessimistic of late, and understandably so, given the crawl toward gender parity in the United States. Women currently hold 19 per cent of board positions there, while in European countries such as France, Norway, and Sweden, where legislative or voluntary targets are in place, they hold more than 30 per cent.
That said, some progressive companies are taking the lead, looking for female board members in new places and bringing them on board in new ways. Many feel they still have a long way to go, but their experiences are salutary for those that are lagging behind and want to better understand how to make change happen.
McKinsey & Company recently conducted an analysis of companies in the S&P 500 to identify top performers in board diversity, defined as those with the highest percentage of women on their boards as of August 2016. It showed that women occupied at least 33 percent of board seats among the top 50 companies. In all, female representation on those boards has increased on average by 24 percentage points since 2005.
We then conducted a series of interviews with the CEOs and board chairs from a number of those standout companies, as well as some European businesses that have made similar progress. Our goal was to hear directly from them about their gender-diversity journeys—the challenges they’ve faced, the best practices they’ve adopted, and the benefits that they continue to reap from increased representation of women, as well as other minorities, on their boards. What follows is a set of best practices, although by no means an exhaustive one.
Change the mind-set
Even laggards acknowledge that increasing the percentage of women in the workforce and on boards is the right thing to do.
But general conviction isn’t sufficient. What’s too often missing, says Fabrizio Freda, president and CEO of the Estée Lauder Companies, is a sense of urgency: “People believe we are going to get there eventually. But that is not enough; it’s too slow. The real obstacle is the lack of urgency.”
Freda was one of many executives McKinsey interviewed who insisted that meaningful change will come only when executives make fewer excuses and work together quickly.
What’s needed are purpose and intention—a set of goals and motivations that will underpin decision making. For some, that has meant establishing a target number of board positions for women, while others take care to ensure that the list of candidates is diverse from the beginning, without adherence to a static quota.
Expand your criteria
Despite their best efforts, some companies cite the small pool of female executives as a continuing challenge. And they add that specific criteria for expertise in areas such as digital technology narrows the field even further.
Overcoming this reality of unequal numbers requires openness to creative solutions. One is to move beyond the standard practice of focusing a search on executives with prior board experience. Dan McCarthy, president and CEO of Frontier Communications, notes that many of the women on his board were first-time directors. “We were willing to take risks on individuals— we look for someone who has the ability to move from the tactical to the strategic—and it has turned out to be great.”
This approach can be particularly helpful for small- and mid-cap companies that struggle to compete with large corporations for high-profile candidates.
Maintain an active pipeline
Effectively creating and cultivating an active pipeline of female candidates is arguably the single most important element of a successful board-inclusion effort. When conducting a search, this means relying on both personal networks and search firms to identify candidates. Relying only on the former, particularly where a board is composed primarily of men, risks perpetuating the candidate slates from the old-boys’ network of yore; relying solely on search firms can produce highly qualified candidates who are not particularly suited to the personal dynamics of the board.
A little patience may also be necessary. As John Thompson, chairman of Microsoft, points out, some of the best candidates may take two or three years to cultivate. By taking the trouble to get to know potential candidates, even those who may not be available for some time, companies will establish foundations for the long term.
Companies that are open about their quest for diversity, meanwhile, will also benefit in the long run. Michael Roth, chairman and CEO of IPG, told us his reputation as a male champion for diversity had prompted a search firm to send him a qualified female board candidate proactively, even though he hadn’t initiated a search engagement with them.
Make the case
The leaders we interviewed had long since crossed the bridge of understanding the benefits of gender diversity, but their experiences provide a useful checklist for those still trying to convince the skeptics:
- Board diversity helps to draw in and motivate talented employees. As Genpact’s Tiger Tyagarajan explains, “To attract the best talent into the company, you need to appeal to 100 percent of the top talent, not 50 percent. To do that, you need strong female role models.”
- Boards that represent the customer base have better intuition. For retailers in particular, the reality is that women make up more than half of global purchasers. Board diversity is simply better business.
- A diverse board boosts decision-making quality. As Scott Anderson, chairman, president, and CEO of Patterson Companies, states, “The quality of discussions goes up dramatically when you have a more diverse group in the boardroom.”
Best practices to improve gender diversity on boards
– Make a visible commitment to diversity with sustained action throughout the organisation
– Set new principles for decision making (e.g., include women on every candidate slate)
– Look beyond current CEOs and other members of the C-suite
– Consider candidates with the right expertise, not just those with prior board experience
– Expand your network to include more women and explicitly ask search firms for female candidates
This article was adapted from a previously published piece in the McKinsey Quarterly, authored by Celia Huber (Silicon Valley, US) and Sara O’Rourke (Washington DC, US).
Credit – McKinsey & Company