There is a widely-held view that diverse Boards perform better, regardless of whether the focus is on talent or capability. But diversity is more than just about gender, and today the debate is moving on. The groups, protected under the Equality Act (age, race, gender, disability, religion, sexual orientation, marriage, maternity, transgender) are now increasingly becoming part of the discussion. Harvey Nash Executive Search serves as an advisor to global businesses, SMEs, governments and Not-for-Profit institutions. Its consultants discuss how embracing all types of diversity can impact company performance...

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Is ‘Diversity of Thought’ achievable?

Carol: We have come a long way in the four years since the Lord Davies Review of Women on Boards. Female representation in the UK’s top boardrooms has now reached an all-time high and there are no longer any all-male Boards in the FTSE 100. According to the latest figures from Boardwatch, with the recent appointment of Allison Brittain, as chief executive of Whitbread, we are just shy (24.7 per cent) of hitting the 2015 target of 25 per cent. Whilst this is significant progress, we are just at the start of the journey. Replacing white middle-aged men with women of a similar background and age profile, who are undoubtedly talented, does not necessarily lead to diversity of thought, nor will it improve Board performance. Where we really need to see greater momentum, is in the executive / senior management pipeline, which has yet to hit double figures. Targets for the Board have clearly worked, the executive level should be the next priority.

Anne: Furthermore, when there is only one woman on the Board, evidence suggests she is often viewed as the token voice of all women, despite the fact that she is an individual herself! Even worse, in boards where there are two women, there is the feeling that they form the opposition for the male camp. It is not until you place three women on a board that you can actually get a difference of opinion and true diversity of thought. Ultimately, it depends on the culture and environment of each Board as to how these interactions at Board level can become more effective.

Natalie: While there is undoubtedly an appetite for diverse leadership teams, there tends to be an unconscious bias to select candidates more closely aligned in personality and experience type to the existing Directors. For example, the Harvey Nash CIO Survey 2015, found that in the Technology sector only 6 per cent of IT Leaders (CIO/CTO/ VP) are women, and the pipeline to populate this pool in the future, is just 8 per cent. This would suggest, that clients need to start searching for diversity at a much earlier stage, proactively planning for future business leaders and investing in developing their potential.

Nigel: In general, there is a lack of functional diversity in the Boardroom. Our latest Board survey, found that there is a mismatch between the skills on Boards and the organisational challenges and priorities they face. Over half of the companies thought digital, talent management and brand were increasingly becoming issues, yet the majority (27 per cent) of Directors come from a Finance background. By contrast, only 7 per cent have a strategic Marketing history, and even less have professional and strategic HR expertise (4 per cent). When you consider the increasing dominance of technology and the advantage it brings to trading, productivity and risk management, you quickly see the issue with the shortage of individuals possessing this knowledge on Boards.

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How have clients’ perceptions of diversity changed?

Anne: The Public Sector is certainly much more proactive. Discussions around diversity are often prompted by the clients themselves. Although these conversations are predominantly about gender or ethnicity, this is still, a great development. On the other hand, clients from sectors such as Manufacturing, do not often raise the issue of diversity, if at all. It is in these cases that search consultants must be proactive in putting the issue on the table. These clients are still under the impression that the talent does not exist, but we know that they do. Our contribution, lies in going the extra mile to find them. We do not have to look too far beyond our global networks, Inspire and Aspire, which have over 5000 senior-level female members and our recently launched network for senior business leaders from all cultural backgrounds, Engage.

Some universities have been very good at reflecting their customer base and being proactive in ensuring fair representation in their Governance structures. For example, one university includes the President of the Students Union in their governing body. This, not only bridges the multi-generational experience gap of the Board, it also serves to represent the students, the ultimate customers of the institution.

Peter: We are increasingly seeing progress in the private sector too. The issue I keep raising with clients is around the composition of the nominations panel or committee. I explain to them, that if their aim is to attract diverse talent and they do not reflect this diversity on the panel, the potential contribution of a candidate who thinks outside the box could be missed. These discussions are often a significant point of inflection for many Chairs as we fundamentally work towards changing their thinking.

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What can organisations do to create a more diverse Boardroom?

Peter: Broadly speaking, Chairmen understand that they need to address diversity. Whether they have done so yet or not is a completely different matter. The reason for this is mainly down to the external pressures they have been under in recent years. However, we have now reached a point where they need to put this similar pressure on the CEO. There needs to be a push to ensure that diversity in the executive and senior management teams becomes a strategic priority and that there is a sustainable pipeline to deliver this.

Carol: It works a bit like a ‘Diversity Triangle’, with three equal sides working together to make a difference. On one side, executive search firms have to do more to ensure they are supplying balanced shortlists. On another side, businesses, need to create a level playing field by improving representation on nomination panels. Finally, individuals themselves, need to communicate more effectively, put themselves forward, not doubt themselves and be brave. This ethos is in the DNA of Harvey Nash, so much so, that last year (2014), we achieved the executive search kitemark from the Department for Business, Innovation and Skills (BIS) for our role in supporting the appointment of women on to Boards.

Natalie: We have also found that the approach men and women take to achieve recognition is very different. Women often struggle to network as effectively as their male peers. They also tend to be less self-promoting in public about their expertise and experience and are not as vocal about their ambition to advance into more senior roles. Professor Judith Baxter from Aston University, shadowed several FTSE 250 Boards listening to the language used by Board members. She observed, that women were more likely to ‘double voice’. In other words, men would say, “I think this…” whereas, women would say, “I’m not sure whether you will agree with this or not, but I think this…” Essentially, women had a noticeably more cautious way of communicating and were less likely to be forceful and direct.

Nigel: Openness to diversity largely depends on a company’s performance. In tough times, the Board becomes risk averse and shows a preference for candidates with a proven track record rather than a candidate looking to take a step up in their career. By contrast, when economies are strong and companies are successful, there is a greater appetite to consider a wider range of candidates ultimately leading to more diverse shortlists.

Similarly, in difficult times, individuals tend to unconsciously select those they empathise with the most. If the individuals responsible for candidate selection are all men, they will naturally lean towards a man, because of this unconscious bias. In these situations, the CEO needs to be supported by the Chairman in thinking outside the box and not choosing the obvious candidates.

Peter: It is also about pushing back at the early stages of a search, when you work with the client on the job description and candidate specification. It is important to ask the extent to which certain skills or experiences are necessary to do the job. This is because the more requirements and expectations on the list, the more prescriptive the job description becomes, making it harder to attract diverse talent.

Conclusion

 

Diversity in terms of physical Board composition is just a means to an end. The ultimate aim is to bring diversity of thought and contribution, that evolves as societies, markets and socio-economic conditions change. If an organisation can develop a range of diverse individuals within their talent pipeline, then there is no doubt they will see the benefits in terms of improved performance. Focusing on one area of diversity is a start, but of limited effect, if the end result is a Board that is gender balanced, but has only white, middle-aged, Oxbridge-educated representatives. To achieve the best results, companies need to be confident in taking risks, search firms need to act as genuine consultants challenging their clients at the briefing stage and individuals need the confidence to put themselves forward for senior roles.

About Harvey Nash

Harvey Nash Executive Search is part of Harvey Nash Group plc. For over two decades, they have served as an advisor to global businesses, SMEs, governments and NFP institutions. They operate across Europe, the US and AsiaPac, balancing international reach with local market knowledge. Their core business is executive search, but they have built a board assessment and leadership consulting business representing 20% of their revenues.

Harvey Nash