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Diversity Should Extend Beyond Gender in Boardroom Recruitment

Partner in Oliver Wyman's Financial Services Practice

The question of gender balance on corporate boards has received much attention over recent years. Whether or not you agree with having quotas or targets for female board members, they have clearly had an impact on major companies, including financial institutions.

Our analysis of the boards of more than 150 of the world’s leading financial services firms reveals that, on average, financial services boards were 20 percent female in 2013, up from 15 percent in 2008, and 12 percent in 2003. In addition, only 14 percent of these boards were entirely male in 2013, compared to 20 percent in 2008 and 29 percent in 2003.

To balance the boardroom, corporations have needed to conduct more thorough and creative searches for credible female candidates.

“Companies are having to look further afield for competent female board member candidates. These women, originally from non-financial services industries, offer observations from different angles in the decision-making process, which can be really valuable,” says Dame Clara Furse, Nomura Holdings board member and former CEO of the London Stock Exchange.

More women on boards has increased diversity in other respects—such as experience, skills, and temperament—among male board members, too.

This increased diversity has been particularly valuable for financial services, an industry where recent mistakes have been attributed to groupthink, insufficient challenging of senior managers’ ideas, and losing touch with customers.

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But as these efforts continue, the drive for diversity needs to be extended. Here are four strategies to ensure successful diverse recruitment:

  1. Broaden the idea of diversity

Boards must continue to search for strong and diverse candidates, but diversity should not be limited to gender or race. Boards should be looking for candidates who have been successful in different fields and in different ways, going beyond those with the kind of corporate experience who now dominate boards. For example, they should look at entrepreneurs and those who have held senior positions in the charity sector, trades unions, or consumer associations.

“It’s a question of looking at some of the non-typical paths to the board,” says Jane Fraser, CEO of Citi’s U.S. Consumer and Commercial Banking and CitiMortgage. “Boards should look at other professions such as the public and legal sectors, etcetera, where they could find more women.” 

  1. Equip chairs and boards to manage diverse groups

Board chairs need to be aware of the changing dynamics. Studies have shown that diverse groups can be more effective but also be more difficult to participate in and manage. What is more, diverse groups are not automatically immune from the uniform responses and unconstructive interactions that can dog homogeneous boards. A skilled chair can allow even a traditional, all-male group to interact constructively with minimal posturing or groupthink, while a diverse group will not rescue a poor chair.

“Diversity is less comfortable for everybody,” says Rachel Lomax, a board member at HSBC and former deputy governor of the Bank of England. “You have to do things differently, and show a bit of empathy and imagination in dealing with other people. You cannot take things for granted in a mixed group, you have to work harder.”

  1. Push diversity into management roles

The recent uptick in female non-executives at financial firms has not been mirrored at the executive level. In fact, our analysis of major global financial services firms revealed no correlation between gender diversity on the board and in the executive committee or managing board. Female non-executive directors can, and do, invest time and energy in improving gender diversity among the management of their institutions, mentoring and sponsoring high-potential women, and acting as role models.

“Gender diversity needs to be incorporated across all levels,” says Helen Crofts, chair of The-Women’s-Insurance-Net-Work. “While the current emphasis at board level is great news, I’m slightly concerned that the momentum won’t extend further down the pipeline.”

It is difficult, however, for the board to significantly increase the “pipeline” of senior women executives on their own. Board members are unavoidably remote from day-to-day operations and from most employees. To drive diversity into their organization, they must press senior executives to meet their targets.

“Boosting awareness and participation at the top end would ideally have a knock-on effect through the executive and management levels. Unfortunately, we don’t see much evidence of this at the moment,” Crofts says.

  1. Measure and pressure

The success of the “Women on Boards” campaigns has been impressive, providing two valuable lessons for those tackling gender diversity lower down the pyramid. It has demonstrated the merits of having clear and measurable goals, independent of any debate about quotas. Additionally, it has shown that scrutiny and pressure from investors and the media can galvanize effort. Given the increasing supply of talented and qualified women, a failure to increase the numbers of females in executive positions should be treated like any other kind of underperformance.

The old stereotypes of women in the workforce are largely gone, yet women are still woefully under-represented on the uppermost rungs of the corporate ladder. Campaigners and committed senior management need to keep pressing to achieve the diversity that (almost) everyone claims to seek.

You can read two other stories associated with this piece here on BRINK:

Michelle Daisley

Partner in Oliver Wyman's Financial Services Practice

Michelle specializes in the fields of corporate and risk governance, in particular board effectiveness and is co-author of the Women in Financial Services report.

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