Executive Insight

Gender Differences Emerge in How Directors View Board Diversity

In one of the most comprehensive global surveys of corporate board directors to date, directors were found to be in striking alignment on economic outlook, political and regulatory concerns, and the business challenges facing their companies - but genders differ sharply when it comes to board diversity.

Released today, the 2012 Board of Directors Survey - conducted by WomenCorporateDirectors (WCD), Heidrick & Struggles, Professor Boris Groysberg of the Harvard Business School, and researcher Deborah Bell - captures in extensive detail the governance practices, strategic priorities, and views on their own boards' strengths and weaknesses of more than 1,000 directors from around the world.

Key Findings: Politics, Strategy, and Regulation

Top 2012 political issues: state of the economy and federal budget deficit. When asked to name the political issues most relevant to their role as a corporate board director, both men and women cited "unemployment/the economy" and "the federal budget deficit" as the top two concerns. Below these top two, men and women differed slightly, with "healthcare costs" coming in as the #3 concern for women and "energy costs" as #3 for men.

Take-away: Gender differences practically disappeared when we looked at how men and women directors think about issues like the economy; these bottom-line business issues tend to allow for the greatest consensus in the boardroom.

Regulatory pressures and talent issues pose challenges to corporate strategy. The threat of increasing regulations on top of those already levied since the start of the global financial crisis is seen as the biggest obstacle to achieving strategic objectives, according to the survey's U.S. respondents. Both men and women directors cited the "regulatory environment" as the top challenge for their companies, followed closely by the need to "attract and retain top talent." Directors outside the U.S. named regulatory environment and talent concerns equally.

Take-away: Despite the good intentions behind regulatory reform, board directors do not see increased regulation as the answer to the economic crisis; men and women directors are similarly concerned about the ability of Dodd-Frank to create better corporate governance - only about a quarter of both men and women respondents agreed that these regulations would result in better corporate governance."

Professor Groysberg underscored the importance of talent management to companies' long-term strategic goals: "Given that for many companies human assets are a major source of competitive advantage and given the very large differences in performance between the top people and everybody else, it is becoming increasingly critical for boards to be involved in talent management to assure that their companies' most important assets and competitive advantage are not being mismanaged."

Key Findings: Diversity and Governance

Diversity on boards: a pull from above or a push from below? When asked to rank the most effective ways to build diverse corporate boards, women directors cited "board leadership serving as champions of board diversity" as the #1 factor. Men in the survey ranked this equally with "developing a pipeline through director advocacy, mentorship, and training."

Take-away: Women tend to put the responsibility squarely on board leadership, while men see it as both a pipeline and a leadership issue; women view the board chairs, lead directors, and nominating committee chairs as the real change agents in building a diverse boardroom.

Disagreement on reason why women are underrepresented on boards. Forty-five percent (45%) of men vs. 18% of women surveyed believed that the "lack of women in executive ranks" is the primary reason that the percentage of women on boards isn't increasing. As the top reason why there were not more women on boards, women respondents cited that "traditional networks tend to be male-oriented."

Take-away: There is a clear perception gap when it comes to evaluating how the still predominantly male business networks impact the number of women on boards; women see a real need to develop the kinds of networks that have historically been the path to directorships. These more diverse networks will create greater success for the company.

"On many boards, creating an inclusive culture for the organization has not been a point of focus," said Professor Groysberg. "The increased importance of diversity to organizational success, however, is compelling boards to make it part of their strategic focus. Unfortunately, many boards lack awareness of best practices in this area and are uncertain about how to integrate diversity and inclusiveness initiatives into their organization's long-term strategy."

One “alarming” area of agreement in the survey is in how men and women rate their personal strength - or lack thereof - in CEO succession planning. Only 1% of women and zero percent of men rated succession planning as their strongest area of board expertise and only 40% of respondents globally said that their boards had an effective succession planning process for directors.

Source: WomenCorporateDirectors (WCD)

Most New Leaders Do Not Hit the Ground Running – and That’s Costly. Here’s a Way to Help…

After over 15 years of doing this work, we have come to believe that in every case, the role and operation that the new leader expected to occupy are different than what they encounter when starting the job.

Linda Schaumann Reese, Ph.D., Managing Partner, Leader OnBoarding, Inc.

Leaders in new roles are expected to rapidly, and effectively, size up their operations – and are typically given little guidance in doing so.  They are increasingly being hired to have significant impact in complex situations, with an expectation of near-immediate results. As they enter new roles, they rarely have the same understanding of the operation and the role as their peers, their subordinates, or even as their boss.

These gaps in understanding, if not exposed and addressed, will contribute to poor performance and leader derailment – costly, disruptive failure. Indeed it is well know that some sixty-four percent of new leaders hired from the outside don’t make it in their jobs and forty percent fail within the first 18 months.

A new culture assessment tool – Culture Snapshot – provides newly-placed leaders with a comprehensive, easy to understand assessment of their new operation’s performance climate. Culture Snapshot is a turnkey solution specifically developed for leaders transitioning into new roles. It provides data and tools for root cause analysis, and identifies potential levers for change, helping new leaders convert information into meaningful action.

Culture Snapshot revolutionizes leader transition by rapidly and explicitly identifying operational performance issues, as well as gaps in understanding and expectations. It brings together the perspectives of those who know the operation best – who depend on the operation for their own success. And it builds a deeper understanding of the operation’s performance climate to enable the new leader to focus on high-impact action.

Culture Snapshot provides much more than a report – it is a guide that offers an integrative, user-friendly and concise view of the operation’s strengths and weaknesses, while exploring root causes and high-impact levers for needed change, supported by certified, highly-skilled facilitators deliver findings in a way that focuses transitioning leaders to take the right action, at the right time, and in the right way.

Charlesmore Partners offers Culture Snapshot as part of its suite of organizational effectiveness tools to support the onboarding of client leaders and the development of high performance organizations. Please read our Executive Insight Thought Leader – Why New Executives Fail.

Culture Snapshot was developed by Denison Consulting and LeaderOnBoarding, Inc., two domain-leading firms that we have long relationships with, and is provided under license and in collaboration with both firms. We are also certified facilitators of Denison’s Organizational Culture Survey and Leadership Development 360.

Please contact Edward Ferris for more information at +1.215.353.6472.

Learning, Talent and Innovation in Asia

The war for talent is alive and kicking in Asia despite the global economic slowdown reports The Chartered Institute of Personnel and Development (CIPD) in a new report. It shows that competition for people with the right experience and skills is fierce and retention is an ongoing battle. Growth and change are continuous and rapid. On top of that, organizations are worried about the draining of skills out of their countries.

Amidst this backdrop, CIPD report that it is encouraging to see so many organizations in its Asia survey prioritizing talent management activities. Not only are these activities being prioritized, but many (more than half) are perceived as effective. It is surprising, however, that so few organizations are using talent activities to forward-plan and address future business and skill needs – something that needs to be tackled to secure future growth.

Other encouraging findings are that a high proportion of organizations are actively trying to raise skill levels, which makes sense when there are so many skills shortages in the labor market. Coaching in particular is gaining prominence as a way of raising skills across Asia. However, big gaps remain in leading and managing change – an essential requisite for any leader in Asia currently.

CIPD finds a strong focus on innovation throughout the research. Around three-quarters believe creativity and innovation are critical to their business. This is particularly the case in China and in Taiwan, where the focus is around process innovation. And, those organizations with talent strategies are also more likely to focus on creativity and innovation, as one often encourages the other.

Around half of respondents say that managers are encouraged to innovate as part of their daily roles – again good news. However, less than a third involve all their employees in their innovation strategy. This clearly represents an opportunity to do more and to become even more creative and innovative by drawing on the diversity of the entire workforce – after all, some of the best ideas come from the bottom–up and, in particular, from employees on the front line working with customers. It is also encouraging that organizations in Asia seem to be facing little pressure on their learning and development budgets currently and for the next 12 months. CIPD’s research findings points to three priority areas for spend:

1. Addressing skills shortages in general and anticipating the future skills requirements of the business – carrying out skills audits, developing internal talent pipelines to fill current and future shortages and developing careers to enhance retention (worldwide talent shortages are most acute in Asia Pacific
2. Specific development in leading and managing change – not something that can be taught in the classroom but gained through experience by stepping up and job secondments/rotation
3. Finding ways of releasing creativity and innovation at all levels.

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HR Not Getting the Job Done? Here Come the Accountants…

Four in 10 C-suite executives around the world say their companies are missing performance targets and growth opportunities because of ineffective talent management, according to a new report by the American Institute of CPAs and Chartered Institute of Management Accountants. The report, based on a global survey conducted for the AICPA and CIMA by the Economist Intelligence Unit, shows a need for better information to ensure companies fully harness the skills of their people.

According to the report -Talent Pipeline Draining Growth: Connecting Human Capital to the Growth Agenda - 43 percent of the CEOs, CFOs and human resource directors surveyed said their companies have missed financial goals in the past 18 months because of inadequacies in human capital management. Almost the same number, 40 percent, indicated that such shortcomings--they could include insufficient systems, processes or management information--have hindered their ability to innovate.

Even so, there's sharp disagreement over who should take overall responsibility for measuring the effectiveness of an organization's talent management strategy. An overwhelming proportion of HR directors, 83 percent, said it is their accountability. But only 30 percent of CEOs and CFOs agree. Indeed, the majority of CEOs, 65 percent, say the CFO and the finance team should take the lead.

"Ideas are the currency of the knowledge economy so human capital must be managed as rigorously as financial capital," said Arleen Thomas CPA, CGMA, senior vice president for management accounting at the AICPA. "It is clear from our research that many companies are falling short of their potential because they lack thorough, relevant information about their people to support effective strategy, hiring and training decisions. CGMAs can bridge this gap, combining broad perspective and analytical rigor to ensure the right focus and metrics that align talent management with business strategy."

Additional findings from the survey include:

• More than half of executives, 51 percent, said their firms do not have a formal succession planning process for C-level roles such as CEO, CFO and COO.
• Nearly 38 percent believe it is likely they will need to go externally to recruit for C-level positions in the next 12 months, indicating a lack of confidence in their internal talent pool and bringing into question the effectiveness of the existing human capital development strategies.
• Despite weakness in human capital strategies, more than three-quarters, or 77 percent, of CEOs plan to cut spending on workforce skills, training and qualifications over the next 18 months.
• North American executives generally report more difficulties as a result of poor talent management than their European and Asia-Pacific counterparts, as do executives in the financial services and energy sectors.

"There is a worrying boardroom divide that threatens to destabilize sustainable growth by allowing the best talent to slip away," said Charles Tilley, FCMA, CGMA and CEO of CIMA. "It is vital that organizations embed a robust human capital strategy within the wider business plan and develop appropriate metrics and KPIs that are subject to the same level of scrutiny as financial data.

"In order to do this, business leaders need to receive the right information which can be translated into actionable insight," Tilley continued. "This is pivotal to effective decision-making and there must be clarity on responsibility, accountability and ownership for the talent within all our businesses. CGMAs have the ability to unite financial facts and non-financial information to provide this insight from a position of independence and objectivity. They can help organizations to create closer collaboration at the executive and operational levels -- especially between finance and HR."

The report recommends four steps for organizations to improve their human capital strategies:

Get the right information. Human capital information needs to be credible and accurate. But data alone will not ensure it is useful or relevant when it comes to implementing the organization strategy. It also needs to be analyzed and translated into relevant and actionable information and insight to provide effective decision support.

Set better performance measures. Organizations need to develop human capital metrics aligned to support and implement the broader business strategy. The measurement and management of such metrics need to come under the same level of scrutiny, focus and controls for both accuracy and relevancy as financials and other key data.

Establish accountability. Organizations must ensure there is clarity on responsibility, accountability and ownership for human capital performance management. The research findings highlighted that, for the most part, the CFO has the mandate from the CEO to take responsibility for measuring human capital performance.

Encourage partnering. Restructure for closer collaboration at the executive and operational levels, particularly encouraging partnering between finance and HR. In this partnering role, CGMAs can support HR and the firm in making credible human capital investment proposals and decisions based on robust management information.

Source: American Institute of CPAs.

Gender Diversity on Boards and Firm Performance

Over the past six years, companies with at least some female board representation outperformed those with no women on the board in terms of share price performance, according to the latest study by the Credit Suisse Research Institute.

In the latest Credit Suisse Research Institute study, the issue of gender diversity and performance is considered from a global perspective. The study analyses the performance of close to 2,400 companies with and without female board members from 2005 onwards.

The key finding is that, in a like-for-like comparison, companies with at least one woman on the board have outperformed stocks with no women on the board by 26 percent over the course of the last 6 years.

Why Do Women on the Board Enhance Performance?

The report identifies six key reasons why greater gender diversity could be correlated with stronger corporate performance:

A Signal of a Better Company

There is a body of research that suggests that appointment of women to the board is a sign that the company is already doing well rather than a signal of greater things to come. The Research Institute's analysis found that it was indeed the larger companies that, to some extent by definition, have already performed well, that were more likely to have women on the board representatives. However, the strong outperformance of companies with women on the board, even in an exclusive comparison of the large caps, suggests there may be other facets to the relationship.

Greater Effort Across the Board

Evidence suggests that greater team diversity (including gender diversity) can lead to better average performance. Research conducted by Professor Katherine Philips at Columbia University has shown that majority groups improve their own performance in response to minority involvement producing better average outcomes in more diverse environments.

A Better Mix of Leadership Skills

McKinsey and NASA have conducted various studies on leadership skills and have shown that women are particularly good at defining responsibilities clearly as well as being strong on mentoring and coaching employees. Hence, the idea that a degree of gender diversity at the board level would foster a better balance in leadership skills within the company may hold merit.

Access to a Wider Talent Pool

Data from UNESCO shows that by 2010, the proportion of female graduates across the world came to a median average of 54 percent. This compares to a median average of 51 percent female graduates in 2000. The trend towards an even greater proportion of female graduates looks set to continue if female success at primary and secondary school level is any guide. Hence, any company that achieves greater gender diversity is more likely to be able to tap into the widest possible pool of talent that is implicit in these graduation statistics.

A Better Reflection of the Consumer Decision Maker

To the extent that women are responsible for household spending decisions, it makes sense that a corporate board with female representation may enhance the understanding of customer preferences. Not surprisingly, consumer-facing industries already rank among those with the greater proportion of women on the board.

Improved Corporate Governance

There is unusually strong consensus within the academic research that a greater number of women on the board improves performance on corporate and social governance metrics.

The Research Institute's analysis of the MSCI AC World constituents showed that stocks with women on board are more likely to have lower levels of gearing than their peer group where there are no women on the board. Lower relative debt levels have been a useful determinant of equity market outperformance over the last four years, delivering average outperformance of 2.5 percent per annum over the last 20 years and 6.5 percent per annum over the last four years.

Gender Diversity and Senior Management

Gender diversity within the senior management team has become an increasingly topical issue for three reasons:

1. Although the proportion of women at board level generally remains very low, it is changing. Only 41 percent of MSCI ACWI stocks had any women on the board at the end of 2005, but this had increased to 59 percent by the end of 2011.
2. Government intervention in this area has increased. In the last 5 years, 7 countries have passed legislation mandating female board representation and 8 countries have set non-mandatory targets. China may even add a woman to the powerful nine "man" Standing Committee of the Politburo towards the end of 2012.
3. Most interestingly, the debate around the topic has shifted from an issue of fairness and equality to a question of superior performance. If gender diversity on the board implies a greater probability of corporate success then it would make sense to pursue such an objective regardless of any government directive.

Source: Credit Suisse

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CNBC Interview

The Five Make or Break Challenges of 21st Century Organizations - Gary Hamel

A (Not So) New Approach to Salesforce Development

Industry studies show that high performing sales people secure 67% more revenue than average performers. For over 20 years now, we have helped companies build high performing sales teams through the design and implementation of customized professional development programs; our approach is different than most salesforce development offerings.

Developmental efforts in the sales arena typically take the form of group training programs or workshops built around a particular sales process methodology. While effectively executing a disciplined competitive sales process is important – it is only one of a series of key competencies that have been shown to characterize successful sales people, and which it is important to develop for sustaining sales excellence.

Over the last two decades we have worked with and studied successful sales people in some of the world’s best and most prestigious companies; consistently the most successful sales professionals role model a series of discernible and definable competencies. We have codified and distilled these capabilities into their core elements in order to help sales professionals understand the DNA of sales excellence and then, using proven techniques and best practices of professional development, we help create an experientially-rich professional development process that accelerates progression to sales excellence.

Our work is based on four key design principles:

1. Effective development is rooted in the business
2. Professional development is a very individualized journey; people begin at different points and progress at different rates
3. It works best when integrated into the work and the performance priorities of individuals
4. It’s embedded in experience

We also believe that growth is not automatic. It depends upon the individual having:

• The ability to learn
• Access to feedback
• The open-mindedness to listen
• The willingness to change

As T. S. Elliot once famously said, “Some people can have the experience and miss the meaning.”

We start with competencies – the knowledge, skills and abilities successful salespeople consistently demonstrate and that set the standard for sales excellence; then we assess an individual’s current capabilities against these standards to create a gap analysis and identify specific development needs.

Next, armed with this data, we collaborate with client management and the individual to decide a development strategy and to agree priorities. We then help build out customized short-term and longer-term development plans for each sales person. Developmental initiatives are collaboratively mapped out, rooted in the business, and integrated into performance requirements. As individuals pursue their plans, targeted experience is gained, lessons are learned and competencies honed. Better still, sales results and performance improvement provide proof of process effectiveness and return on investment.

It’s a very straightforward process that is easy and cost-effective to implement. Sometimes we work with entire sales teams, other times with high potential or underperforming sales people. Our goal is to help clients build a high performance salesforce and – as a direct consequence - win more high-value project pursuits.  

More information: [email protected] or +1.215.353.6472.

New Study: US Faces Leadership Time Bomb Unless Practices Change

A UK-based  alent measurement solutions company - SHL - has just released the results from a study of over a million workers in 251 countries. The study looked at the supply of future leaders per country relative to the size of its workforce, both as each country stands today and then as a projection of future leadership supply trends.

It reports that the US currently stands 5^th in the league table of leadership potential supply, and is on track to drop to 8^th place “tomorrow”  (although it never actually defines the timeframe that tomorrow represents).

The point from the study though is that rapidly developing economies such as Mexico, Turkey and Brazil are starting to outpace older economies such as the US, the UK and Germany in the supply of global leaders – a trend that SHL describes as a “leadership time bomb” and offers five guidelines to cultivating leadership capability:

1. Make It a Priority: Acknowledge the risk, and put a formal action plan in place. Start by clearly defining the behaviors and skills which make a successful leader in your organization.
2. Look Beyond Performance: Have a full picture of the leadership potential across your organization and don't restrict that view to only those you think are high potential. Do not confuse ambition with ability.
3. Replace Subjectivity with Objectivity: Gut instinct won't do. Using scientific data, benchmark your people against competitor talent and identify leadership shortages to avoid succession risk.
4. Be Pragmatic and Proactive: Don't wait for yearly review cycles, instead, employ development interventions at the point-of-pain with individual employees or across departments. This includes where and when to spend learning and development budgets throughout the company.
5. Cast a Wider Net: Take a global view of where your leadership talent is located and be prepared to use creative strategies to source talent across borders to fill leadership gaps.

Additional findings from the study:

Globally, only 1 in 15 (6.7%), managers and professionals qualify as leaders today. 1 in 3 managers and professionals have the next tier of leadership potential, but for this level of people the journey to realize that potential is longer and needs targeted investment. The value of investing in these people is substantial because there are six times as many managers and professionals with this level of potential than leaders for today.

In China (Taiwan), Germany, Sweden, Switzerland and United States, the supply of leadership for today and tomorrow is stronger than the average global supply. While competing for leadership talent remains a challenge in these geographies, the odds of finding effective leaders for today are significantly higher at 1 in 10 vs. the global average of 1 in 15.

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Africa – Transformative Growth is Possible

Africa is the world’s second-fastest-growing region. Poverty is falling, and around 90 million of its households have joined the world’s consuming classes—an increase of 31 million in just over a decade. The continent is poised to reap a demographic dividend over the coming decades, as its labor force grows to become the largest in the world by 2035 and its dependency rate declines.

But a new McKinsey Global Institute report, Africa at work: Job creation and inclusive growth, shows that the continent must create wage-paying jobs more quickly to sustain these successes and ensure that growth benefits the majority of its people.

Despite the creation of 37 million new and stable wage-paying jobs over the past decade, only 28 percent of Africa’s labor force holds such positions. Instead, some 63 percent of the total labor force engages in some form of self-employment or “vulnerable” employment, such as subsistence farming or urban street hawking. If the trends of the past decade continue, Africa will create 54 million new, stable wage-paying jobs over the next ten years—but this will not be enough to absorb the 122 million new entrants into the labor force expected over the same period. However, by implementing a five-part strategy to accelerate the pace of job creation, McKinsey estimates that Africa could add as many as 72 million new wage-paying jobs over the next decade, raising the wage-earning share of the labor force to 36 percent. 

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The Collaborative Organization - How to Make Employee Networks Really Work

The traditional methods for driving operational excellence in global organizations are not enough. The most effective organizations make smart use of employee networks to reduce costs, improve efficiency and spur innovation.

The key to delivering both operational excellence and innovation is having networks of informal collaboration, writes Rob Cross and colleagues in this award winning article. It’s well worth reading.

Recommendations include:

• Executives should analyze employee collaboration networks to discover how high-performing individuals and teams connect.
• Networks should be designed to optimize the flow of good ideas across function, distance and technical specialty.
• Network analysis can show where too much connectivity slows decision

Read the article