Narrowing management’s gender gap

Getting more women on to boards and into senior management ranks is not just about equity. It’s also good for business.

In the last year, an unprecedented number of women have joined Australian boards. According to the latest figures from the Australian Institute of Company Directors, women now represent 12.7% of board positions in the top 200 listed companies, compared with 8.7% a year ago.

Should companies be congratulated? Think again. Having just under 13% of female directors is not that great an achievement. Also, it is important to put this in some context. Companies are not necessarily doing it because they think it is the right thing to do. This rapid increase in women on boards coincides with the Australian Securities Exchange’s decision in late 2009 to introduce diversity requirements for listed companies. It has recommended listed entities disclose in their annual reports their achievement against gender objectives set by their board, and identifying the proportion of females on the board and in other positions. It is also important to remember that 92 of the ASX200 boards have no women.

There is a more important issue at play here. Appointing more women to boards may well create a shortfall in executive ranks because there are fewer female senior managers. According to official data, only 8% of senior executives and 4% of line managers are women. This is not a good supply line for board positions. Women are not being given the opportunity in senior management ranks to obtain the necessary skills to progress through the organisation necessary for them to take on the role of non-executive director.

This means companies need to focus first on getting more women into management roles. And that is a significant challenge.

There is a good reason why this has not changed. An Australian Institute of Management survey released in March found that 67% of female survey respondents indentified workplace culture as the equal most-important reason for women being under-represented in senior management positions in Australia. It found that women were twice as likely as men to blame ‘pay inequity’ (40% compared to 19%) and ‘limited career advancement opportunities’ (36% compared to 18%) as reasons women are under-represented in senior management roles. It also revealed that women were much more likely to nominate gender bias (50% to 37%) and inflexible working arrangements (59% to 44%) as reasons so few women make it to the upper echelons of management.

It is a fraught issue. Business leaders such as Elisabeth Proust, chair of Nestle Australia and a director of Perpetual, as well as a former senior executive of ANZ, and Governor-General Quentin Bryce have suggested the government might have to follow the direction set by Norway and introduce quotas. Prime Minister Julia Gillard says it is unacceptable that there are so few female directors and that only 3% of ASX200 companies have female chief executives.

“This is 2011, not 1911,’’ Gillard says.

But quotas are not the answer. Westpac chief executive Gail Kelly, a champion of diversity, argues that quotas could produce “unforeseen consequences and unintended and poor outcomes”. There is another problem: if board positions or management staffing decisions are made on the basis of a quota, how could a woman be considered worthy of the role and equal to the task, rather than just meeting the quota?

Still, something has to be done. As Proust has pointed out, research by Catalyst which surveys progress on this issue in the United States and Australia has found that women will achieve equality with men in boardrooms in 177 years. Australian business is not making the best of the talent out there.

There is a very good reason for more women on boards and in senior management: it’s good business.

Do the maths.

According to the Australian Bureau of Statistics, 49% of professionals in Australia are female. Women now make up 35% of the country’s 1.3 million small business operators, and the proportion of women opening businesses is growing three times faster than for men.

More than 55% of women are now employed in full- or part-time work in Australia and the female participation rate is accelerating faster than that for men.

Also, 49% of property investors in Australia are female. More women than men are now educated at secondary schools and universities.

More women than men graduate from university with bachelor degrees. In 2006, women accounted for 54.8% of all tertiary education students and 47.5% of all students enrolled in vocational education and training courses. Most were enrolled in management and commerce, society and culture, and food, hospitality and personal services courses.

Most importantly, Australian females are responsible for spending 90 cents in every household dollar. Indeed, the woman is the family’s chief purchasing officer. Women are the primary or sole decision-makers for every kind of purchase for the family. That includes holidays, groceries, home furnishing, home electronics, healthcare and do-it-yourself home renovation projects.

If a board or company’s management does not resemble the market being served, there is something seriously wrong. Women are a burgeoning and astonishingly untapped market and companies need to realign their structures to serve that market better.

Also, if more women are being educated in universities, Australia can’t be getting a good return on its investment dollar in education if women are not working as senior managers and company directors. As a country competing in a global economy with a population the size of Calcutta, we need to get the maximum return on those investment dollars.

So how should companies do it? Instead of starting with a gender audit, the first thing company leaders need to do is look at their strategy and do a skills audit. What skills does the company need to better serve its market and outperform competitors? Do they need to beef up sales? Is more expertise needed in marketing? Should the company be focusing more on developing intellectual property? Are the IT systems up to scratch?

The chief executive officer of the Australian Institute of Management Susan Heron says a proper skills audit has to be unbiased. Gender, ethnicity, age or whether or not the person is physically challenged are irrelevant.

“What every company needs to be doing is assessing the skills it needs. Irrespective of the diversity question, it’s about how we get the best skills for our organization to deliver strategically,” Heron says.

Heron says that if the skills audit is unbiased, more highly trained women will become senior managers.

“You are not fishing out of the same pool and you are open to the skills so that you are not hiring like upon like,’’ she says.

“If you are honest about it, then age or gender should not be playing a part in it.”

“If you have a customer base where the majority of your customers are female, or where women are making the majority of the spending decisions, then it makes sense to have that perspective in your senior management.”

She says companies can then follow that up with gender audits and pay audits. That identifies any disparities that flow on from the skills audit. Pay audits can be done easily by HR departments at the push of a button. These have to follow on from the skills audit.

Significantly, a company can only do a skills audit if it is very clear about its strategy. The business leader has to know where the company is going.

Heron says companies should focus on skills, not quotas.

“It sounds like an equitable objective but as the CEO of the company, I need to have the skills that will deliver the results I need because my board is held accountable,’’ she says.

“Any way you go about it is a bit fraught, it’s a very hard one. But there is no excuse not to see better representation of women in senior management when you think about the experienced women we have available, the educated women we have available, it seems to me odd that we can’t get better representation on an unbiased basis.”

But the starting point for CEOs however is to look at the strategy and the skills required to deliver it. The results will be different if this is done in an unbiased way. Gender audits and pay audits follow on from that, just to identify and fix the discrepancies. More women on boards and in senior management positions means companies will be in a better position to serve their markets.