October 16, 2019 – Much has been written about gender diversity in the boardrooms of the world’s largest companies. But all of the focus on boards tends to detract from a much bigger issue – the troubling state of gender balance in top leadership teams. Board diversity is celebrated in annual reports and, for many companies, achieving a 40 percent female ratio on a main board is now viewed as a “healthy balance.”
Recent analysis of this year’s Fortune 100 by Armstrong Craven shows that only 25 percent of the overall leadership population is female and only nine percent of commercial and business roles are held by women.
Bridging the Diversity Gap on Boards
A stubborn paradox exists within boardrooms across America. Companies are appointing more women to board seats than ever before, yet the overall share of women directors is barely budging. While business leaders have gotten the clear message that diversity matters in the workplace, it is equally clear that current methods of sourcing and selecting candidates is falling short.
Peggy Alford, a senior executive with PayPal who was just elected as the first African American woman to join the nine-member board of social media giant Facebook, joins Hunt Scanlon Media in New York on Nov. 6 to examine the disconnect between the business community’s intent to achieve greater equality on their boards and the realization of attaining that goal. She will explore why every company needs to cultivate a culture of inclusiveness and she will outline steps for companies and recruiters to take to boost diversification at a faster rate.
Join Peggy at Next-Gen Leaders: Advancing Women to the C-Suite! Women business leaders are looking for fresh pathways to the top . . . to help them get there we will draw on her expertise as well as top HR, talent, recruitment, and C-suite leaders from other blue-chip brands, including IBM, The New York Times, Littlejohn, LinkedIn, Avaya, WarnerMedia Entertainment, Pfizer, PepsiCo, The Philadelphia Flyers, PayPal, Facebook and a host of others.
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“This nine percent figure is especially staggering when you consider that almost 60 percent of CHROs in the Fortune 100 are female,” said Rachel Davis, deputy CEO of Armstrong Craven. “Given that gender diversity has been such a hot topic for the last 15 years at least, this ‘progress’ is excruciatingly slow.”
In the U.K. it is a similar picture in the FTSE 100. While 55 percent of CHROs are female, only 10 percent of commercial leadership roles are held 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,” Ms. Davis said. “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?” she asked.
What about female representation within the Fortune’s big names?
The Armstrong Craven analysis looks at the very top of the Fortune list, which paints a bleak picture.
At No. 1, Walmart can name just three females in commercial roles, out of its leadership team of 40 (and only nine 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.
Rachel Davis was part of the team involved in the management buyout of Armstrong Craven in 2013 and currently sits on the organization’s main board, responsible for business development and driving the sales performance of the business globally. She advises top companies on all aspects of talent management and helps them meet their strategic workforce requirements. She has a particular focus on diversity & inclusion and organizational design and has built close relationships with multiple Fortune 50 and FTSE 100 organizations.
In fact, this group of six companies have just 10 females overall out of a combined leadership population of 60. It is hardly surprising then that female roles models are still in such short supply.
No. 33 on the list, U.S. health insurer Anthem Health, also deserves a mention. It is the only company in both the Fortune 100 and FTSE 100 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 this majority is only slight, at 57 percent or four out of seven roles. The next highest ratio can be found at No. 18, with JPMorgan Chase having a 50 percent 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, only 213 women hold commercial leadership roles out of a total leadership population of 2,254, or 9.5 percent. These 213 women make up just 38 percent of the total female leadership population. This means the other 62 percent of women on leadership teams are holding roles in corporate functions, such as CHRO, general counsel or CFO. Twenty-nine percent of the Fortune 100 general counsels or chief legal officers are female and 16 percent of CFOs are female.
“Again, we can attribute these healthier stats to a greater availability of talent,” said Ms. Davis. “We know, for example, that the number of female law graduates has been increasing year on year in the U.S. and in 2017 stood just higher than their male counterparts at 50.3 percent.”
“But perhaps there is something more significant going on here,” she said. “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 percent among the top 50 companies and 23 percent in the bottom half), but the table below reveals striking differences in the representation among individual roles – particularly the CFO and CIO positions.
|Fortune 50 (1-50)||Fortune 100 (51-100)|
|Leadership role||# of females in role||# of females in role|
|Women (as % of total leadership population)||25%||23%|
“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,” said Ms. Davis. “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?
Analysis by Korn Ferry showed that only 13 percent of Forbes 2000 CEOs were former CFOs and the overwhelmingly preferred succession route for CEOs is through operational and commercial roles.
Moving Up in the Boardroom — Lessons From Female Board Chairs
At the end of 2018, only 30 female chairs were listed among the Fortune 500 and the FTSE 100 combined, though the overall shares of board seats held by women were 22.5 percent and 29 percent, respectively.
“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,” Ms. Davis said. “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.
Armstrong Craven said it is important to be careful that that behaviors in the most senior leadership teams aren’t creating cultural issues that will cascade 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,” said Ms. Davis.
A major global bank who was seeking to address the gender imbalance in its digital function, for example, gave the firm 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,” said Ms. Davis.
Ticking diversity boxes and taking the easy route to fulfil leadership diversity “quotas” is not the long-term solution.
“Ensure that 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,” said Ms. Davis. “Consider rotating talent to give them broad exposure and new leadership opportunities on their route through the organization.”
Maximize the power of the female role model.
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, asks Armstrong Craven. Can they mentor identified high potential female talent in commercial roles?
Record Number of Women Win Directorships but Gender Parity Lags
Forty percent of new board seats on U.S. Fortune 500 companies went to women last year. Still, improvement is lagging. The total share of seats for women remains under 25 percent. Racial and ethnic board appointments unchanged at 23 percent.
Ms. Davis said that these functional roles are critical to any business and can provide an incredibly valuable insight into the wider corporate landscape of an organization.
Don’t rely on diverse candidate slates.
“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 diversity & inclusion,” said Ms. Davis. “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 organization, but the urgency with which businesses need to address these points has never been greater,” Ms. Davis said. “Otherwise, our Gen Z and even Gen Alpha counterparts and replacements will still be tackling the same problem.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media