Women in leadership - the economic case for quotas for Women....
For we consultants it is important that we focus on what affects a company's competitive position. There is mounting evidence that an organisation's performance improves as the gender and diversity mix gets better....
For we consultants it is important that we focus on what affects a company’s competitive position. Diversity is one thing that does. Indeed evidence is mounting that an organisation’s performance improves as the gender and diversity mix gets better. Of course the economists amongst us are always concerned to show not just correlation but causality- and as we know that is not always easy. But it stands to reason that the better one’s employee mix can represent the community one serves, the more likely it is that results will improve. There is also increasing evidence that more board diversity is good for profitability.
Of course it is always possible that the firm that does well is able to take more risks and be more open towards women, appointing them as board members in larger numbers. But we know that if there is more than one woman member on a board the dynamics change and the influence of women’s voices increases in decision making. I noticed this when I sat on the board of the Department of Trade and Industry (DTI), then BIS, and found myself with women almost in a majority. And this was even before one added the non-executives on the board. It was a great experience, especially after a long period in the private sector where often who shouted loudest, usually a man, won. Whether the fact that there were more women on boards led to necessarily better decisions is another matter. But the chances are it did. It seems almost a ‘no-brainer’. If you have a bigger, more diverse pool of senior candidates to choose from when appointing executive board members, then overall quality of the collective you appoint can only be going up.
This is the positive argument for quotas. Not everyone agrees with this. And yet, instead of preventing meritocracy, as some people fear, quotas help promote it by gradually widening the choice of candidates. I am not here talking about boards where most of the emphasis has so far been. Of course the board developments we have seen are welcome. But they have been achieved to a large extent by appointing part time women NEDs who don’t work for the organisation on whose board they sit and who have little chance normally to change its culture. Where the difference can be greatest is in encouraging the pipeline of executives- from which promotions to the board can come. And that is where the greatest gap still exists.
Today still 93 per cent of executive directors are men. And this is replicated across many sectors of society. While Whitehall has embraced diversity with gusto, much of the rest of the public sector has been lagging behind. Some 71 per cent of Parliament is male. In medicine, hardly any heads of hospital trusts are women, and a very small number of women are top consultants or chief executives.
Similarly in academia which women enter in large numbers. It is shocking that according to the "Times Education Supplement", in late 2014, some 81 per cent of vice-chancellors, 78 per cent of professors and 72 per cent of senior managers in UK universities were men. There is a similar pattern across many professions. More than two thirds of partners of law firms are men despite the fact that women represent 62 per cent of those entering the legal profession.
The private sector has a lot to learn from the way the civil service (where I worked after a long career in banking), the oil sector and consultancy manages its talent pipeline below board level. Flexible working, promotions while on maternity leave, jobs sharing, all facilitated by diversity targets that now enter Permanent Secretaries’ bonus payments calculations and act as incentives. This is where the biggest gains can be made. Even here things are by no means perfect. It would be good for example to see a female head of the civil service next. Even in the short period that the job was split in two under the coalition government, both ‘heads’ were men. But at least it is an environment that creates role models and encourages women to stay on through proper job flexibility, part time work and promotions even during maternity leave.
The alternative is a reduction in productivity as skilled people leave the labour force to have children or because they see no way ahead and then are either lost to the organisation that has trained them or return to roles, often part time, below their skills level.
Equality in leadership positions won’t happen in our lifetime unless companies are forced to keep and develop their talent, by quotas if necessary - though with a sunset clause. That will force a change in culture that having a few token women on boards won’t achieve. It is only by ensuring that women, who now leave universities in larger number than the men, can climb up the ladder with proper training and eventually assume the leadership positions they deserve. Equal pay for equal work will obviously help; and the pay reviews that have now been introduced by law that will force companies to publish the differences in pay between men and women in their workforce should go some way to close the pay gap - which tends to get worse when women take any time off to have children and persists even when they return.
What we want, to compete as a nation, is a high level of productivity; and that crucially depends on firms and organisations appointing the best talent available for each job, including for the top jobs. And this is much more likely to happen if the talent pool of senior people is enlarged to include many more talented women than has been the case so far. Allowing that talent to dissipate because we fail to ensure that women remain engaged and properly empowered will keep our productivity level below where it should be for longer and cost us growth and jobs.
Truth is that progress has been remarkably slow and the economy has suffered as a result. Pay gaps remain even in well paid jobs, particularly in the City. There are now still just 6 women CEOs of an FT 100 company. Having more women on boards is a good thing but it only tells a very partial story.
Vicky Pryce is on the board of CEBR, a former Joint Head of the Government Economic Service and author with Stefan Stern of ‘Why Women need Quotas’, Biteback, 2015. She was Master of the Worshipful Company of Management Consultants in 2010-11.