Alison Maitland explains how diversity has risen high onto the agenda of business leaders, driven by growing recognition of the business case for it, and by government measures in many countries to redress the gender imbalance on corporate boards.
Diversity has risen high onto the agenda of business leaders, driven by growing recognition of the business case for it, and by government measures in many countries to redress the gender imbalance on corporate boards.
The CEO Challenge 2014, a report by The Conference Board, found that human capital was the most important concern of business leaders globally and that diversity in leadership was one of the main topics requiring their immediate attention.
‘CEOs across the globe are clearly concerned about diversity’, it reports. ‘No region has it lower than number four on the “hot button” issue list. While CEOs are certainly feeling the pressure when it comes to recruiting more diverse corporate boards, there is particular focus on the issue of gender diversity. Diversity (or lack thereof) affects the corporate brand and makes a difference to both potential consumers and free market talent when considering similar products or similar employers.’
The changing regulatory environment is shaping these concerns. A growing number of countries are legislating for increases in female representation in top decision-making bodies. Some EU governments have strongly opposed regulation and supported business-led initiatives, such as the 30% Club in the UK, to drive progress by voluntary means. According to the EU, however, the most rapid rises in women’s participation have been in countries, such as France and Italy, which have taken or considered legislative action. A proposed European Commission Directive that companies should have an objective of a minimum of 40% of either sex among their non-executive directors by 2020 has been approved by the European Parliament and is being discussed by the European Council.
The rise of regulation has been driven by the slow pace of change and the economic imperative of making the best use of all available talent. Many companies have invested heavily in diversity, with gender at the top of the list, but have yet to see commensurate results. According to a McKinsey report, 63% of 235 companies surveyed had at least 20 different gender diversity initiatives. Despite this, in only 8% of large companies did women account for more than a quarter of top roles.
While some organisations have only recently adopted diversity strategies, others have more than 20 years’ experience of them. Among more experienced companies, there is a clear shift of emphasis in the search for what works. Instead of, or alongside, programmes focusing on categories of employees – women, ethnic minorities, people with disabilities, etc – these organisations are investing in developing leaders and creating inclusive cultures in which everyone feels valued and able to achieve their potential. Some companies have renamed their strategy ‘Inclusion and Diversity’, instead of ‘Diversity and Inclusion’, or dropped the word ‘diversity’ altogether. Others have renamed such programmes to reflect their emphasis on culture change. As many of these companies operate globally, they attribute increasing importance to managers’ and leaders’ possession of cross-cultural skills. Rapid advances in communications technology are also encouraging some organisations to pursue innovative work styles as a lever for greater diversity by giving employees freedom over where and when they do their work, enabling a better balance of personal and professional priorities.
The recent emphasis on the need for leaders to drive inclusive change has led organisations to invest in training to awaken executives to the impact of their unconscious biases – biases that everyone has to a greater or lesser degree. Training to recognise unconscious bias is much in vogue.
Regulation, understanding of the business case, and the development of inclusive leaders are parallel steps towards achieving the benefits of richly diverse and inclusive organisations and must work together. Each, on its own, is not very likely to have a sustained impact. It is not enough, for example, for CEOs to talk about the business case in order to drive the behavioural change needed to increase gender balance at senior levels, as shown by recent research by Dr Elisabeth Kelan at King’s College London for KPMG. ‘Instead’, she says, ‘CEOs need to be brave, and talk from their hearts as well as their heads’.