12 March, 2019
There is a clear link between boardroom diversity and how well a business is set up for future innovation. International Women's Day should serve as a call to business leaders to assess if their company is ready to face the challenges of tomorrow's business world.
To understand why diversity is central to competing successfully in the digital age, it is first important to look at how consumer markets for new products and services are typically identified and why the current approach needs updated.
Traditionally, product development has been shaped by purely analytical and demographic data that is supposed to reveal customer interests and trends. However, identifying target markets on the basis of demographics alone is a simplistic approach and does not help businesses keep pace with the increasing blurring of traditional markets.
Markets are evolving as society and technology changes. To ensure new products and services hit their mark, businesses will need to embrace behavioural science – broadly, the study of people as whole and their interactions – and ensure the results of behavioural science studies are interpreted and implemented by different people.
Having people of varied backgrounds and perspectives in senior roles will best ensure that the needs of target markets are understood and catered for. After all, businesses that fail to address the needs of 50% of the world population risk becoming completely irrelevant.
Most organisations, however, continue to lag behind on diversity despite the clear commercial benefits that are on offer and a series of initiatives aimed at shaking up the white male-dominated corporate environment.
In the UK, changes to Corporate Governance Code that came into effect earlier this year require public-listed companies to describe their policies on diversity, their process for board appointments, their objectives for implementing the policy, and progress on achieving those objectives. A report by the Financial Reporting Council identified failings in this regard last autumn.
Other initiatives have included the Hampton-Alexander review, published in 2016, which proposed a 33% target for women in executive positions at FTSE 350 companies by 2020.
In similar vein, the 2017 Parker review focused on black, Asian and minority ethnic (BAME) appointments at boardroom level and recommended that each FTSE 100 board appoint at least one director from an ethnic minority background by 2021 and that each FTSE 250 board do the same by 2024.
In financial services, the Financial Conduct Authority (FCA) has called on firms to take action to improve both gender and ethnic diversity at the top of the business, while insurers must have a diversity policy for their boards under rules overseen by the Prudential Regulation Authority (PRA).
The introduction of the Gender Pay Gap (GPG) Regulations have also forced UK employers to be more open about the difference in average earnings between male and female employees in their business. A similar ethnicity pay gap reporting scheme is being considered by the UK government.
Hopefully the reporting regimes will help address underlying reasons for pay disparity by getting business to focus on things like flexible working, support for maternity leavers, mentoring, unconscious bias training and target setting.
More positive discrimination is required as it has been estimated that it will take 200 more years for women to obtain parity with male colleagues both in terms of salaries and filling high level positions.
Sweden and Denmark top the list of EU countries rated on the gender equality of their society. This is no coincidence given the progressive legislative steps the countries have taken. Sweden, for example, has in recent years strengthened parental leave rights to encourage more fathers to take time out of work and share in the care of their new born children – taking time out to care for children is often highlighted as a significant barrier to female career development.
The gender diversity challenge is particularly acute in the technology sector. The statistics are damning and rather depressing.
Women are estimated to make up just 17% of the 2.1 million people thought to be working in technology jobs in the UK, while a study last year by WIRED magazine and Element AI, a Canadian company, suggested that women may make up just 12% of leading machine learning researchers. Further, Innovate UK estimated that, in 2016, just 14% of people engaging with its funding programmes were women.
However, there are signs things are changing. I am personally seeing more female representatives on the other side of the table when I attend client pitches, and I have sat alongside senior female CEOs who push young women to dare and to be bold. On this International Woman's Day, the onus is on businesses not to view the diversity and equality agenda as a 'tick-box' exercise, but instead as a means to truly revolutionise the way the business behaves – future success and innovation depends on it.
This article was published in Out-law here.
For further information, please contact:
Diane Mullenex, Partner, Pinsent Masons
diane.mullenex@pinsentmasons.com
