Tackling the gender imbalance between boards and executive teams

Over the years, so much has been written about gender diversity in the boardrooms of the world’s largest companies. Board diversity is celebrated in annual reports and, for many companies, achieving a 40% female ratio on a main board is now viewed as a ‘healthy balance’.

All this focus on the main board however is detracting from a much bigger issue – the woeful state of gender balance in the top leadership teams of the world’s largest businesses.

Our recent analysis of the 2019 Fortune 100 shows that only 25% of the overall leadership population is female (i.e. the top operational / executive leadership layer of a business, below the main board), and a measly 9% of commercial and business roles are held by women. This 9% figure is especially staggering when you consider that almost 60% of CHROs in the Fortune 100 are female.

Given gender diversity has been such a hot topic for the last 15 years at least, this ‘progress’ is excruciatingly slow.

Heading across the Atlantic to the UK, it is a very similar picture in the FTSE 100. Whilst 55% of CHROs are female, only 10% of commercial leadership roles are occupied by women.

There are of course a number of well-documented factors that have led to the high proportion of female CHROs on leadership teams; the largest being the simple matter of access to talent. HR has traditionally been viewed as a female-dominated profession, so over time perhaps it is only natural that a high number of females rise to hold HR leadership roles.

But now that it is commonplace, particularly amongst top global businesses, for HR to hold a seat at the top table, should it be possible for this position of influence to do much more to accelerate the promotion of women into business-leading roles?

What about female representation within the Fortune’s big names?

Looking at the very top of the Fortune list, it is a bleak picture indeed.

At #1, Walmart can name just 3 females in commercial roles, out of its leadership team of 40 (and only 9 females in total in the leadership team). The next companies in the list (Exxon, Apple, Berkshire Hathaway, Amazon, United Health Group, McKesson) have no female representation in commercial roles at all.

In fact, this group of six companies have just ten females overall out of a combined leadership population of 60. Hardly surprising then that female roles models are still in such short supply.

#33 on the list, US health insurer Anthem Health, also deserve a mention. They are the only company in both the Fortune and FTSE 100s to have a leadership team with a female majority. Perhaps helped by being one of only 15 companies on either list to have a female CEO, even then this majority is only slight, at 57% or 4 out of 7 roles.  The next highest ratio can be found at #18, with JPMorgan Chase having a 50% representation of females on the leadership team, two of whom hold business unit CEO roles.

Are businesses taking the easy route to female representation?

Across both the Fortune and FTSE 100s, the total number of women holding commercial leadership roles is just 213, out of a total leadership population of 2,254, or 9.5%. Looking at the total female leadership population, these 213 women make up just 38%. This means the other 62% of women on leadership teams are holding roles in corporate functions, such as CHRO, General Counsel or CFO. 29% of the Fortune 100 General Counsels or Chief Legal Officers are female and 16% of CFOs are female.

Again, we can attribute these healthier stats to a greater availability of talent. We know for example that the number of female law graduates has been increasing year on year in the US and in 2017 stood just higher than their male counterparts at 50.3%.

But perhaps there is something more significant going on here. Are businesses falling into the trap of taking the “easier route” to leadership diversity by focusing on promoting women to these functional roles where the choice of talent is greater?

There is another divide emerging when the top and bottom halves of the Fortune 100 are analysed further. The percentage of female representation across the total leadership population remains fairly static (25% amongst the top 50 companies and 23% in the bottom half), but the table below reveals striking differences in the representation amongst individual roles – particularly the CFO and CIO positions.

It is hard to say what is causing this shift, but if the pattern is repeated even further down the Fortune list, the situation may well be even bleaker.

But why is the poor representation of females in commercial roles such an important issue? Simply put, it’s because the main route to CEO is still from commercial positions. 

Route to CEO remains a key issue, but what should businesses do?

2015 analysis by Korn Ferry showed that only 13% of Forbes 2000 CEOs were former CFOs and the overwhelmingly preferred succession route for CEOs is through operational and commercial roles. 

This does not bode well if we are to see a material improvement in the number of female CEOs at the helms of the world’s most influential businesses.

Addressing gender imbalance as we know is not a quick fix. There are a number of important factors that businesses must consider before lasting progress can be made. 

Watch out that behaviours in the most senior leadership teams aren’t creating cultural issues that will cascade right through the business. Working with our global clients to help them build external pipelines of female leadership talent, we all too often hear things that reinforce the negative aspects of a company’s culture.

For example, a major global bank who was seeking to address the gender imbalance in its digital function, gave us an initial brief to seek female IT leaders “with extra resilience” as “this leadership team is so male-dominated, and at times has a very confrontational environment”. 

The priority here should of course be to address those confrontational behaviors at the top, rather than trying to find female candidates to plug straight in, who will only reinforce that culture and add to attraction and retention issues down the line.

Ticking diversity boxes and taking the easy route to fulfil leadership diversity “quotas” is not the long-term solution.

Ensure enough attention is being given to succession planning in those critical business roles outside of those corporate functions where there may well be a greater supply of female talent.

Consider rotating talent to give them broad exposure and new leadership opportunities on their route through the organization. 

If your General Counsel, CFO or CHRO is female, what role can they play in providing cross-functional support and exposure to the rest of the business outside of their own functions?

Can they mentor identified high potential female talent in commercial roles? These functional roles are critical to any business and can provide an incredibly valuable insight into the wider corporate landscape of an organization.

If you are relying on external search firms to provide diverse candidate slates as the solution, this runs the risk bringing tokenism to diversity, which in turn only exacerbates the cultural challenges mentioned above, bringing a negative connotation to D&I.

Consider adopting an integrated succession planning process that encompasses internal and external diverse talent, ensuring you move away from reactive hiring at point of need.

Looking at each of the above is clearly not a quick fix for any organisation, but the urgency with which businesses need to address these points has never been greater. Otherwise, our Gen Z and even Gen Alpha counterparts and replacements will still be tackling the same problem.

If you’d like to find out more about how Armstrong Craven’s talent pipelining can bring strategy and diversity planning to your talent acquisition, please contact our team on +44 (0) 203 855 5380  or send your query to info@armstrongcraven.com.