Made it to the top - but the view's not what we expected...

I know I've banged on quite a bit about women on boards, but here's a health warning. 

It seems that when women do get to the top many are faced with a glass cliff and left dangling over a dangerous company precipice.

Women are more likely to be appointed to leadership positions
when an organisation is in crisis.

By 2015 Lord Davies wants 25% female representation on boards (yes, one in four – an odd way of construing equality I know). And this year’s figures suggest everything’s on target to achieve it. In the FTSE100 women now account for 15.6% of all directorships, up from 12.5% last year. And although there are still 11 all-male boards, at least that’s down from last year’s staggering 21.

But last week, when talking to Ernst and Young about diversity, a lovely lady there alerted me to the notion of the glass cliff. 

Yes, we’ve heard of the glass ceiling – that invisible put impenetrable barrier that hinders female advancement in the workplace -  and even the glass escalator that gives men a smooth ride to the top, but the glass cliff? 

It comes from research by Ryan and Haslam at the University of Exeter who, in a systematic study of the performance of FTSE 100 companies before and after appointing a board member, found that companies who appointed a woman were more likely to have experienced consistently poor performance in the months preceding the appointment.

This is both good and bad news. It demonstrates that companies are willing to do something different in times of crisis. In fact there's more recent evidence that  a crisis disrupts traditional stereotypes of what makes a good leader, favouring female attributes over male. But it's a bit like taking over the controls after the car has been wrecked and Ryan and Haslam  include a note of caution in their paper, saying:

Positions on glass cliffs can be seen as being exceedingly dangerous for the women who hold them. Companies that have experienced consistently bad performance are bound to attract attention to themselves and to those on their boards of directors … In this way, compared to men, women who assume leadership offices may be differentially exposed to criticism and in greater danger of being apportioned blame for negative outcomes that were set in train well before they assumed their new roles.

Ryan & Haslam (2005),The Glass Cliff: Evidence that Women Are Over-Represented in Precarious Leadership Positions, British Journal of Management.

Number of women, not IQ, determines how smart a group is.

I know I've discussed this before but the evidence just gets more and more fascinating.

What makes a group (such as a board) really smart?

It’s not their collective intelligence but a high level of emotional intelligence. 

Studies show that:

• Groups that are really effective listen to each other.
• They share constructive criticism.
• They have open minds.
• They’re not autocratic.
• They have an equal distribution of conversational turn-taking.

When I reported to the Financial Services Research Forum last year that having three women on a company board tripled profitability, I didn’t realise what a huge topic this would become. Since my paper on the topic was published in Significance, more research has come to light that’s even more fascinating.

Imagine that you have a really smart bunch of people in the room. 
How would you measure their collective intelligence? The straightforward answer might to be measure the IQ of each individual, then work out the average to obtain the group IQ.

Not just small and smug-looking....

It turns out that IQ scores tell us nothing about the intelligence of the group.

One other factor does. 

The number of women in the group. 

No kidding.

Professor Anita Woolley of Carnegie Mellon gave subjects aged 18 to 60 IQ tests and assigned them randomly to teams. Each team completed several tasks, like brainstorming, decision making, visual puzzles—and had to solve one complex problem. The intelligence scores of the groups were calculated, based on their performance.

You might expect teams whose members had higher IQs to have scored highest. 

They didn’t.

The teams with more women did.

An amazing finding. When Anita Woolley published this in Science* and was interviewed for the Harvard Business Review she said:

You realize you’re saying that groups of women are smarter than groups of men.

Woolley: Yes… part of that finding can be explained by differences in social sensitivity, which we found is also important to group performance. Many studies have shown that women tend to score higher on tests of social sensitivity than men do. So what is really important is to have people who are high in social sensitivity, whether they are men or women.

As I said in my previous posts, it's diversity not expertise that makes the group effective. I'll shut up now. Perhaps ;)

*Science 29 October 2010: Vol. 330 no. 6004 pp. 686-688 

Boards and dinner parties.

Boards are a bit like dinner parties.

That’s what I told a group of company secretaries from FTSE 100 companies yesterday, when I was invited to speak at a seminar organised by Capita Registrars. The topic was women on boards, based on a paper I have just had published in Significance, the Journal of the Royal Statistical Society.

I was thinking about a dinner party I gave on Saturday night. Apart from the fact that it was exhausting (I seemed to spend most of Saturday slow-roasting a tomato) I was mindful of a statistic I’d come across in a recent survey. It said:

1 in 10 people would rather go to the dentist than go to a dinner party.

Perhaps they’d been to one of mine.

In fact the evening hummed along nicely, with Mike and Barbara, a lovely couple from work. My friend Jayne who’s a life coach and her husband Neil who works for a charity. Then there was my Geoff, who’s an antiques dealer and his wife Julianne. She’s a counsellor.

The evening was fine. Probably because we’re all quite similar. We share the same values and beliefs. We all prefer Sauvignon blanc to Chardonnay and agree on where to buy the  best Parmiggiano Reggiano in London (at Camisa’s in Old Compton Street).

In short, we’re very comfortable in each other’s presence because we’re all white, middle-class, heterosexual baby-boomers from St Albans.

Not surprising that we all found ourselves around the same table. Psychological studies show that we seek out people who are like ourselves. Research from the University of Chicago even shows we are more likely to fall in love with someone who looks like us. At a social level, hanging out with like-minded people means we can affirm our own beliefs and values. We can confirm that we’re right in what we think.

But it does mean, if we’re not careful, that the conversation revolves around the topics we all know and care about. We’re in our comfort zone – sharing common ground with people who think like us.

But it’s when we do something different and put ourselves in the discomfort zone that growth and development happens.  

I asked myself after Saturday night whether I should have invited a more mixed group. Why, for example, didn’t I invite my neighbour’s son who’s an aspiring poet and unemployed? Or the lovely Indian couple I see every week at Tai Chi?

How on earth am I going to have my own values challenged, and see the world as it is for other people, if I only hang out with like-minded people who are clones of myself?

BOARDS

I think the same is true of boards. They’re a bit like dinner parties (except no-one’s had to slow roast a tomato and probably a little less Sauvignon Blanc gets consumed)….but they tend to recruit members who are just like them.

About ten years ago the Norwegian Trade and Industry manager, Asnager Gabrielsen noted that boards were mostly made up of men with very similar views and backgrounds who went hunting and fishing together.

This meant there was a huge risk of group-think in the boards’ decision-making processes, and a real lack of diverse perspectives. 

Norway brought in laws stating that board membership should be at least 40% female.

Since then Norway has enjoyed 3% economic growth and an 11% budget surplus, while many of its European neighbours were still in the depths of economic recession.

Some boards in the UK probably still resemble those that worried the Norwegians. To borrow a phrase from my friend Alan Newman, they are mostly male, pale and stale.

Let’s look at the stats:

•          Only 13.4% of FTSE 100 company directors are women.
•          And 14 of those companies have all male boards.

 Yet the evidence for women on the board boosting company performance is compelling (the recent Lord Davies report acknowledges this) even if you ignore the Norwegian example.

•          A study by Pepperdine University had shown that companies with just 3 women on the board of directors outperformed the competition on all measures by at least 40%.
•        Data from Gavurin Intelligence showed that a board that’s 30% female triples a company’s profitability.

      Whilst this is correlational data and doesn’t constitute causality, the evidence from multiple measures now shows that:

• ·       THE most influential determinant of higher ROE is gender diversity  
• ·       It is arguably one of the most cutting-edge business improvement strategies available today

No wonder other countries are following suit and advising boards to appoint more females, with the threat of introducing quotas if they fail to do so.

A supply Issue? Those opposed to quotas always point to a shortage of women with the necessary credentials.

I would argue that there's no shortage - just a short-sightedness on the part of those doing the selecting. I would also cite research from Harvard, MIT and Carnegie Business School showing that diversity is more important than expertise when creating the best groups.

And there is a lot of psychological research showing that adding women to a group ensures that

•          more diverse opinions and attitudes are expressed
•         decisions get questioned when information certainty is low (something that females are found to do more frequently)
•          discussions get broadened
•          the groups’s overall level of social sensitivity is increased

-     To quote Thomas Malone from Carnegie Mellon:

"Having a bunch of smart people in a group doesn't necessarily

 make the group smart”.

It’s having different people that makes the group smarter. 

Like inviting really different people to the dinner party, the group dynamic gets changed for the better. There’s more growth and development in the discomfort zone. 

Yet we all tend to hang around with people who are just like us.

Perhaps it’s time we all invited someone new to the party?

"There should never be too much testosterone in one room"

Why Christine Lagarde should be president of the IMF
 
1.     For saying “I honestly think that there should never be too much testosterone in one room."

2.     Because she speaks fluent French. OK she is French. But she also speaks fluent English. How brilliant is that?
 
3.     For being ballsy enough to state that “Gender-dominated environments are not good... particularly in the financial sector where there are too few women,"
 
4.     She says this about cooking: “Cooking is about giving”. Don’t you just love that?
 
5.     And for saying: "In gender-dominated environments, men have a tendency to... show how hairy chested they are, compared with the man who's sitting next to them.”

 
6.      And also for saying the 2008 financial collapse was driven by the aggressive, greedy, testosterone-fuelled mood of male-dominated, hi-tech trading rooms.
 
7.     For being hugely ambitious but wanting to spend more time cooking for her family or making apricot and quince jam. (That’s not strawberry or raspberry jam. It’s bloody apricot and quince I tell you.)

8.     For being reluctant to say there are female and male ways of dealing with power… “but based on my own experience, women will tend to be inclusive, to reach out more, to care a little more."

9.     A man said about her "Her lightning-quick wit, genuine warmth and ability to bridge divides while remaining fiercely loyal to French interests have been a source of admiration." 

(Timothy Geithner, US Secretary of the Treasury, Time, April 2009)

10.   Hotel chambermaids can feel totally safe in her presence.

Female quotas on boards

I blogged last year about female quotas on boards and why women are a wise investment, following a talk I gave to the Financial Services Research Forum and the report I wrote for them. I won't present the business case again for female representation on boards but will repeat one key stat from a large study by Pepperdine University:


When a company had three women on the board of directors it outperformed the competition on all measures by at least 40%. 


A recent report on the same topic by Lord Davies, following extensive government consultation, starts off by saying:

"At the current rate of change it will take over 70 years to achieve gender-balanced boardrooms in the UK." 

Yet concludes that:
“We have chosen not to recommend quotas because we believe that board appointments should be made on the basis of business needs, skills and ability. But a more focused business-led approach can increase the number of women on company boards at a much faster rate than we have seen recently.” 


With these new 'recommendations' it might take no more than 69 years.

Women make the bottom line more attractive!

I spent a very uplifting day in the company of some of the top financial brains on Tuesday, at the Financial Services Research Forum in Westminster. 

The title of my talk was:

The Rise of The Sheconomist: Why Women are a Wise Investment,

in which I  discussed the financial capabailities of women.

It boiled down to this.

Women are as good with money as men. In some cases they’re even better. They get higher returns on investment, for example. And companies with women leaders have a 35% higher return on equity.

But men tend to over-rate their own capabilities. And women under-rate theirs! 

Little wonder then, with all the other societal factors that come into play, women have been marginalised when it comes to money.

However, we're soon to see a shift in financial responsibility from the state to the individual and women will need to be more financially self-reliant and assume greater financial responsibility. It’s vital to ensure they rise to the challenge and not become second-class financial citizens. That’s what Sheconomics is all about.

Pine, 2010, The Rise of The Sheconomist

When women’s skills are harnessed at an organisational level for example, it improves a company’s bottom line and gives them a competitive advantage. There’s lots of evidence for this, but one study by Pepperdine University found:

When a company had at least 3 women on the board of directors it outperformed the competition on all measures by at least 40%.

Norway saw the sense in this years ago, other countries are catching on more slowly.

Legislation in Norway in 2003 made it mandatory for every state-owned company to fill 40% of board seats with women by 2006, and for public companies to do so by 2008.

I wonder if there’s a link between Norway’s decision and the fact that the coutnry enjoyed 3% economic growth in 2009 and an 11% budget surplus, while much of Europe was  in economic decline?

Could a recipe for the success of corporates be:

Add three females and watch profits rise?

If you want to read my full report on this download it from the Recent Talks section on our website.

The 30% Club

With perfect timing, the 30% Club was announed on the same day. This is a fantastic new inititative encouraging UK companies to aim for at least 30% female representation on their boards by 2015. 

The initiative was founded by Helena Morrissey, CEO at Newton Investment Management and comprises a group of senior businesswomen. Go girls!

Read more about their progressive and impressive move here