Diversifying Leadership Teams With People Who Have The X-Factor
By Karl Simpson, founder and CEO, Liftstream Limited
Workplace inequality is not a new story, particularly that of gender. During my 20 years of executive recruiting, I’ve heard almost every conceivable reason why leadership teams remain so distorted in favor of men. Redressing the balance and achieving parity between the genders at the top of organizations is a very long way off in almost any industry you choose to select, best illustrated by the fact that only 3.4 percent of Fortune 500 companies have female CEOs, and women make up just 11 percent of the boards of the world’s leading companies. But surely the biotechnology sector, with its strong academic base, is better? Well, the short answer is NO.
The unfortunate reality is that, if today you’re an aspiring female executive working in biotech and looking for a place among the C-suite or on the board of a biotechnology company, statistically the odds are very much stacked against you. In fact, among the boardrooms of biotechnology companies ranging from 10 to 1,000 employees, just one in 10 are women, and only four in 100 companies are chaired by women. In the U.S., some 52 percent of biotech companies have all-male boards, and this figure rises to 60 percent in Europe. When the situation is as stark as this, it is little surprise that women point to systemic problems with the way in which leadership teams and boards are selected and configured, a view shared by a growing body of male leaders.
To advocate change, we all need to have data to support our arguments, which here comes in the form of a biotech sector gender study, “Diversifying the Outlook — The X&Y of Biotechnology,” and when you analyze the data, it is difficult to ignore the proportional lack of women leaders. To many people, this picture is not a surprise and is confirmation of the problem, whereas other life sciences executives say it merely reflects the real landscape of talent.
For progress to occur, three things need to happen. First, leaders need to accept there is a problem. Second, we need to understand the scale and drivers of it, and then we need to establish an incentive for change. In these few paragraphs, I want to describe today’s landscape and provide some positive actions your company can take. Hopefully it will provoke rigorous debates among your board and executive team.
With biotechnology companies resurgent and the recipients of capital inflows, increasing valuations, and healthy investor returns, it is easy to cite these successes and suggest nothing needs changing. The evidence though points toward a clear business case for diverse leadership. Companies whose boards have diversified gender have been shown to outperform those with all-male boards, giving better growth and, on average, high returns on equity with less volatility. So ultimately it is about better business, not fairness as many perceive. After all, men and women share a conviction to a meritocracy and only wish to see the best-qualified employee in place. Leaders commonly agree their leadership team is improved by multiple capabilities and experiences, rigorous discussion and varied perspectives about key decisions, and a more collaborative approach — all hallmarks of a diverse team.
If you are encouraged by this incentive, perhaps enough to add a woman to your board, then think even more boldly. Diversifying your board is going to take audacious courage and sustained effort, as the tokenism of one woman board member is unlikely to have the transformational impact. The research consensus is that for diversified boards to outperform their all-male rivals, they need to achieve a critical mass of women, projected as at least 30 percent — or more than one woman. This is the number at which the board dynamics are sufficiently transformed for the performance returns to occur.
Whether a publicly listed company or an aspiring private venture, the business case for diversifying your leadership is compelling and the motives varied. One such motive is that you want to be accessing the best talent. So, by neglecting the market of potential women executives, you are insufficiently utilizing the talent pool available to you. Equally, developing good governance strengthens reputation and conveys operational integrity, which attracts partners, investors, and employees, all of which create value.
LEADING POSITIVE CHANGE
Challenging attitudes and mind-sets is vital to improving the diversity picture. Leadership on this topic must come from the top, and chairs, CEOs, and C-suite executives have to begin the transformation. Looking for catalyzing events or windows of opportunity often result in inactivity. Instead, leaders need to start immediately, and with urgency, to introduce corrective behaviors.
Small or midsize companies can tackle this issue too, in spite of their inherent resource constraints. It is commonly suggested there is a correlation between company scale and the need for best-practice hiring and governance procedures. Good leadership is about mastering these issues in the context of your operational culture. There are many examples of start-up and small companies who have shown that with limited resources you can still create a highly diversified team and benefit from their multidisciplined leadership. Scale is no impediment to achieving diversity goals, and it is incumbent upon the chairs and CEO to set the agenda, making it clear that talent is everything, including a diversified team.
Consider also the process by which you appoint people. It is clear that small and growing companies need to be fast, responsive, and agile in recruiting key executives. Sometimes speed is at the cost of quality and can lead to suboptimal selection, although it need not always be so. Hiring people is a big investment, and like other investments, increasing your opportunity for value return is a leader’s responsibility.
REACHING OUT BEYOND YOUR NETWORKS
Our research has found that unstructured recruitment processes and an overreliance on personal networks are strong contributors to a lack of diversity, especially in small and midsize companies. Chairs and CEOs need to show clear leadership in the design and implementation of recruitment practices, which will lead to more comprehensive searches for talent and should encompass higher proportions of women on both long and short lists for board and executive positions. When designing those recruitment practices, reject assessment parameters that do not impact job performance criteria. Also, introduce balanced and gender-diverse candidate selection panels as well as transparent decision and feedback mechanisms. In particular, pay attention to interview interaction and internal-decision motives.
Male chairmen and CEOs often talk about their strong desire to recruit women to leadership ranks, but bemoan a deficient pipeline of prospects. Where intent is genuine, the perspective they have toward candidate pipelines is distorted by their own professional networks. This is not to imply that they have intentionally built a network of one gender, but there is every likelihood that through chance and circumstance they will have a gender-dominated professional network. Whenever you begin to think about hiring someone for your team, you think immediately to people that you know, have worked with before, or have some professional connection to. If that mental recall projects very few women, then you’re predisposed to assume that the pipeline is short of female candidates.
Karl Simpson, Founder and CEO of Liftstream Limited
Where companies have identified this skewed perspective of the pipeline, but have wanted to achieve more balanced representation in their recruiting efforts, conducting more exhaustive searches of the candidate marketplace has garnered qualified people to hire. In a survey we conducted of 530 life sciences executives, where 53 percent of respondents were male and 47 percent female, almost 60 percent of C-level men said they’d been recently contacted about nonexecutive director roles, whereas only 16 percent of the women had. This infers that women are being largely overlooked for these roles, which means your business can find them if it looks and can inherit a competitive advantage in doing so.
EVALUATE WITHOUT BIAS
Eradicating the bias in your company, both conscious and unconscious, is a key milestone toward developing improved equality, while having the effect of improving the way your business functions. Unconscious bias is not about discrimination, as both genders are equally capable of it. We all have these biases which subconsciously influence our views and decisions. The majority of leaders I interview on this topic have not encountered unconscious bias training. However, of the ones who have gone through this training, by turning unconscious biases into conscious ones, they have enabled corrective actions that have considerably improved decision outcomes capable of transforming areas like hiring.
Leaders must engage in this topic; they must be prepared to challenge and to be challenged. It can be a divisive topic fueled by social and political attitudes, but change is needed, and momentum is building. Setting on a path toward team diversity uncovers incredible opportunity, and great people will unlock the potential of your business. Make it your aim.