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27 March 2010

Diversity in the Boardroom

Tag(s): Boards

At a recent Criticaleye event held in the prestigious venue of The Royal Exchange I was privileged to hear Helen Alexander CBE, recently elected President of the CBI, give her trenchant views on diversity in the Boardroom. Helen is also a Non-executive director of Centrica, Rolls-Royce and the Port of London Authority. She is a Senior Adviser at Bain Capital and was Chief Executive of the Economist Group 1997-2008, having joined the company in 1984. She was Managing Director of the Economist Intelligence Unit from 1993-1996. Helen is Senior Trustee of the Tate Gallery, Chair of the Business Advisory Forum of the Said Business School, Oxford and a Governor of St Paul’s Girls’ School. She has an MBA from INSEAD and is an honorary Fellow of Hertford College, Oxford.

Helen recognises that business has a particularly low reputation at present and we need to make changes in order to make business a place where our sons and daughters want to work. That must start with the fabric of the boardroom where we must attract more talented people. We need to minimise the risk of group think and diversity is one of the keys to that. She quoted a story from Outliers by Malcolm Gladwell who gives the example of the dynamic of the captain and the first officer in an aeroplane. As a passenger one tends to feel more relaxed if you hear “Ladies and Gentlemen, this is your captain speaking. It is my pleasure to fly you today…” while if the First Officer tells you that he is flying the plane you might feel more tense.  In fact the statistics tell us a different story. Captains have been involved in more accidents than their First Officers. When the Captain is at the controls the First Officer may be reluctant to point out any error or possible risk. When the First Officer is at the controls the Captain oversees him and will not hesitate to step in if he perceives a problem.


Helen makes no apology in promoting diversity and nor should she. She has evidence to back up her claims. Research shows that mixed teams constantly outperform homogenous teams when faced with the same challenges. Typically a homogenous team might get off to a quicker start as all members of the team know the rules but will get stuck at the same place and find it difficult to make progress. A mixed team with different backgrounds tends to get stuck at different places and so work together to solve the problem.

She recommends that you must start by deciding what you want on the Board in terms of diversity by gender, geography etc and then set out to recruit the best people you can find to fill those roles. In using headhunters you need to make sure that they are really committed and will work through the programme rather than just fill from their conventional lists.  She wonders whether specific prior experience of say, running a profit centre is really necessary when what is required is that mix of skills and backgrounds.

Helen does not favour the quota approach taken in Norway, for example, where 40% of directors are required to be female but is concerned that pressure might build up to see such rules if  faster progress is not made. In Norway the government was unashamedly following a social justice agenda rather than concern about corporate performance. It has had mixed results as there has simply not been enough experienced female directors. One major oil company now has five directors, three male with 66 years of experience of the oil industry between them and two female with zero years of experience in the oil industry. Many companies have only been able to meet their quota by recruiting in Sweden.

Helen is confident that the talent is available and willing in the UK and cites one leading female headhunter who is building her own all female list of candidates. However, she does possibly support the idea expressed in the Equality bill which may go through Parliament before the General Election that public procurement might depend on conformance with a norm in gender representation. I fear this is another example of abusing the power of the state to complicate business and I know many small enterprises are sick and tired of the huge and growing number of boxes they are required to tick if they want to do business with the public sector.

In considering this question there is a danger that it is driven by excess focus on the gender issue when what matters above all is that the individual is the right person for the job and then that the Board is a mix of diverse well qualified individuals who each have something to offer in the better direction of the enterprise.

In discussion afterwards I asked her if she was not missing a trick as there is an opportunity to enhance our international competitiveness. If we can get this right we can improve our performance versus countries with more traditional cultural values like Japan and China.  I remember when I worked for Sony at a time when the Japanese economy was still outperforming all and sundry thinking we should all watch out when their women finally entered the workforce.

Some time ago when I was first contemplating a portfolio career one of my ideas was to start a new mentoring service focused on women. I called it The Glass Ceiling Project and lined up a number of successful women who were prepared to serve on an advisory board. Unfortunately I then got distracted by another project and the plans and draft brochures now gather dust on a shelf. With inspirational figures like Helen Alexander at the helm of British industry maybe it’s time I should dust them off.

Copyright David C Pearson 2010 All rights reserved

 




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