The underrepresentation of women on executive boards has garnered media attention in recent months.
What’s gained less attention are the striking benefits diverse boards bring to businesses, so we thought it was time to redress the balance.
In this issue, Professor Sucheta Nadkarni of Cambridge Judge Business School speaks to Ellen Rossiter about what diversity brings to the board table. Sucheta’s research focuses on how top management teams shape companies, why some firms outperform their rivals, and identifying the sources of their competitive advantage.
It is research that saw Sucheta invited to join the Cambridge Judge Business School in 2014 as the Sinyi Professor of Chinese Management, and she is now also Director of the Wo+Men’s Leadership Centre and Head of the Strategy & International Business subject group.
After studying for her master’s degree in India, Sucheta taught for some time, before moving to the University of Kansas to research her PhD. Sucheta then joined the faculty of the University of Nebraska-Lincoln, before becoming an Associate Professor at Drexel University in Philadelphia, Pennsylvania.
“There are many reasons it’s important that women are better represented on company boards,” explains Sucheta. “Companies are there to offer their products to the market and this market is very gender balanced.
“It’s not good for a company not to be well connected with their market and in effect to exclude 50% of that market. Recruiting women to corporate boards and top executive roles helps businesses reach key consumers and find the best people.
“There are a number of indicators that diverse boards perform better, from increased market share to better return on company assets, as well as turning around profitability more effectively. In addition, greater gender diversity improves board behaviour and governance, resulting in better preparation for meetings and better attendance at board meetings.
“There is also evidence to suggest that in challenging times, like during the banking crisis or when the oil price fell, companies with diverse boards outperform companies without them. Different people bring different perspectives to the table and in essence diverse boards make more robust decisions – and this is particularly telling when times are tough.
Whether we should be looking for gender differences in leadership styles and whether these differences do indeed exist is open to debate, but one academic who maintains they do is Professor Alice Eagly of Northwestern University.
As Sucheta explains, Eagly’s research suggests that men have a ‘transactional’ leadership style, focusing on getting things done, whilst women have a transformational style which is more people based. This transformational style comes into its own at a time of crisis, bringing out the best in people, galvanising ideas, innovation and bringing about change.
“There’s a lot of sensitivity about companies having boards without women. Many businesses unconsciously take it for granted that if they have a single woman on their board they’ve played their part in creating gender diversity. What they don’t realise is that this tokenism doesn’t truly bring balance and can lead to a dysfunctional dynamic.
“The issue is not just counting how many women sit on boards – but about making those numbers count. Where women sit on boards – do they stay long term and are their voices heard?
“Female board members can find it difficult to be heard and to have their ideas accepted. We know of women with extremely good credentials and a lot to offer, who’ve walked away because they didn’t feel their ideas were valued.
“Selection processes need addressing if diverse boards are to be created. They need to be much more open. All too often the process is narrow and inward-looking, about who knows who rather than who will bring most to the role.
“Once senior appointments are made; we know that mentoring plays a significant part in their success. Where there is a change of CEO, for instance, mentoring by the exiting CEO is extremely important, as this helps establish the new CEO’s credibility.
“Research shows that male directors receive more mentoring than females and more support to
perform well. So we not only need to increase the number of senior female executives but ensure they receive support too.
“To have more representative boards, we need more representation at all levels of an organisation. Evidence shows that firms with fewer women on their board make fewer offers to women at a junior level too and don’t make the effort to develop or retain them.
“Too many firms take a short-term approach and don’t do enough to develop leaders internally and they don’t put the infrastructure in place to support women, like flexible working hours.
“Women typically have to work at more firms to reach senior appointments than their male counterparts – and they have to prove themselves at smaller firms first. Even once women are in senior positions, lower offers are made to retain them.
“Involving men in the conversation is really important. Male engagement in diversity programmes is crucial for their success; the greater their engagement the better the programmes work. A good example of which is engaging men in peer mentoring schemes.
“Diversity is about more than men and women – it is about everyone working together in a much more holistic way so that companies are more representative of society as a whole.
“The regulation requiring businesses with 250 or more employees to report their gender pay gap has definitely made a difference. Although it’s important to use this data judiciously, the gender gap revealed shows just how important it is to promote greater diversity.
“Reputation-wise, it’s not good for a company to report a gap, as it leaves them open to pressure from shareholders and other stakeholders – from their customers to prospective employees. Effective stakeholder pressure, like shareholder activism, can play an important part in galvanising greater diversity on company boards.
“As well as being underrepresented at board level, Women are significantly underrepresented in particular industries like the tech sector. Even women who study STEM subjects tend to build their careers outside of technology companies, in areas such as finance or consulting.
“That’s why we’ve launched our ‘Women in Tech Challenge’, which is about encouraging our female students to consider tech careers and build the necessary skills. We’ve got tech companies visiting the university to engage students in working for them.
“We need to work on the problem of perceptual barriers too, and to achieve this you need to start early. That’s why it’s so important the Government plays a greater role by improving the education system and encouraging more children to study STEM subjects from an early age.
“What I love about working here at Cambridge Judge Business School is that it’s so dynamic: it’s far from being academia in an ivory tower, and we strive to make a difference whether it’s inspiring the next generation, mentoring companies or sharing ideas and best practice.
“Our Wo+Men’s Leadership Centre was inspired by two of our MBA students who founded a conference on the subject of women’s leadership and it’s gone from strength to strength.”
Sucheta Nadkarni – Professor, Cambridge Judge Business School