The gender-balance delusion

If the board of your company was approached by a world-leading management consultancy who shared data on hundreds of organisations across the globe who had significantly superior performance and who shared a specific characteristic not present in your organisation, you would hope that your board would look very closely at that characteristic.

Unfortunately, like all of us, board members are fallible human beings and almost incapable of making truly rational, logical decisions. (Research shows that it takes MENSA level IQ to have a chance of this, and then only when applied to logic problems in experimental conditions – far from the reality, pace and complexity of business life).

This has been evidenced by the recent barking-mad excuses made by FTSE board members when quizzed about why they have failed to appoint women to their board.

Here are a few of the reported ‘rationales’ put forward by some of our most respected business leaders:

   “I don't think women fit comfortably into the board environment"

    "There aren't that many women with the right credentials and depth of experience to sit on the board - the issues covered are extremely complex"

    "Most women don't want the hassle or pressure of sitting on a board"

    "Shareholders just aren't interested in the make-up of the board, so why should we be?"

    "My other board colleagues wouldn't want to appoint a woman on our board"

    "All the 'good' women have already been snapped up"

    "We have one woman already on the board, so we are done - it is someone else's turn"

    "I can't just appoint a woman because I want to"

                   (BBC News reporting on the government backed Hampton-Alexander Review, May 31st 2018)

Let’s just reflect for a moment on the data that they find so unconvincing when related specifically to the benefits of having a critical mass of women on a board or, even more outrageously, gender-balance.

  • McKinsey (2007): Companies with a critical mass of women (a ratio of at least 3:7) on their boards gain 48% higher EBIT (Earnings Before Interest and Tax) among a range of other measures.
     
  • Credit Suisse (2012): Over 7 consecutive years, investors would have had a better return from investing in companies with women on their boards than those without. (Insight based on the analysis of 2,360 companies across sectors and across the globe: Europe, N. America, EMEA, Latin America and Asia)
     
  • McKinsey (2016): Workplace gender-balance would deliver an additional £150 billion by 2025 in the UK alone. That would:
    • Pay for the NHS in full for 1.25 years, or
    • Pay the annual national debt for 5 years.
    • Be 4,285 times the amount Boris Johnson’s Brexit Bus famously promised us that we’d get back every week after Brexit!

Why do apparently clever and successful people seem to be sticking their fingers in their ears and yelling, ‘la, la, la’ like a 7-year-old desperate to win an argument that they have already lost?

They remind me of the many occasions when I’ve been driving change in, or for, organisations and encountered the sleepy functions or regions that have happily plodded on outside the spotlight, with few demands on them either internally or from customers. When the reality of the imposition of doing something new and different hits, with the prospect of having to learn something new (God forbid), the classic response was always, ‘it’s different here, you just don’t understand this part of the business’. It’s their tried and trusted anxiety-defence narrative trotted out to protect the status quo.

As with all problems - alcoholism, drug addiction, over-eating – they can only start to be addressed when individuals recognise their issue and take ownership of it.

So, why is it so difficult for business leaders to see and own these overwhelming facts about this powerful lever for driving business performance?

Human brains have evolved to efficiently deal with the billions of sensory inputs they receive every hour. They have developed strategies which sacrifice logical decision-making for speed of processing to make an immediate decision to act on, perhaps because any decision is better than indecision when a sabre-tooth tiger is bearing down on you.

If shareholders are the modern-day equivalent of sabre-tooth tigers, boards need to get a far stronger grip on the things that ambush their ability to deliver the leadership profile that maximises performance if they are to survive in the competitive business jungle.

Here’s what board members and other leaders need to know and interrogate themselves about:

Firstly, we all experience what psychologists call the over-confidence effect. This refers to misplaced optimism, covering a wide range of aspects of our lives, such as how much work we believe we can get done in a space of time. But, more importantly in this case, it’s misplaced optimism about the accuracy, the extent and the relevance of our knowledge of what works (or not) and why. We believe we know the right answer, but we don’t actually refer back to our evidence-base to challenge ourselves, and to ensure we have the best, most balanced, most contemporary insights to reach the most potent solution.

Extensive research has shown, rather alarmingly, that doctors and lawyers come out very badly on this cognitive error. The main reason is that they rarely follow up on the decisions they make and advice they give to find out if they chose the best options to deliver the optimum outcomes, unlike weather forecasters who gain immediate feedback and can fine tune their analytics to make immediate improvements to their outcomes.

Secondly, we all suffer from optimistic bias, which is characterised by having unrealistic views about the possibility of adverse events happening to us regardless of clear data.

 ‘it won’t happen to me’; ‘it isn’t relevant here’; ‘I won’t get caught driving at 40mph in a 30mph zone’; ‘I can drive just as well having had 2 drinks as I could with none’; ‘I can still catch the train even if I leave in another 10 minutes’.

In the face of a potential threat, people become over-optimistic about the level of skill they have to control outcomes.

In this case, I would suggest that the ‘potential threat’ is a change to the board environment that has become very comfortable through the familiarity of its make-up. Introducing people who are ‘not like me’ feels uncomfortable. Preventing this discomfort, or limiting this threat, often triggers something called the homosocial reproductive tendency (HRT), a tendency on which men over-index. This is the tendency to populate and re-populate groups in the same image as existing group members. And, therefore, the ‘over-optimism’ in the face of this potential threat, is about their ability to deliver optimum business performance without the gender-balance characteristic that has so resoundingly proven to be a step-changer to the bottom-line.

We all know about unconscious bias, we understand this to exist in all of us and we know that organisations have to work hard to address it through processes which build in the opportunity to make a balanced decision.

However, personal motivation or perceived needs can drive cognitive (decision-making) strategies that undermine this opportunity.

These motivations or ‘needs’ can lurk just beneath the surface and lead us to believe that the lack of women on leadership teams has nothing to do with not wanting women on our teams. However, it is these motivations that, I would argue, drive the gender-balance delusion. It is these that twist and distort the facts and steer decision-makers away from challenging their real knowledge of what could deliver the best outcome for their organisation. It is these that determine the extent to which gatekeepers look for, or ignore, evidence of the ability to deliver outcomes.

It should therefore be easier to address than unconscious bias.

Leaders must find the courage to consider the impact of being mere mortals and therefore as likely as all of us to steer our decision-making in our own favour. And stakeholders and shareholders must hold them to account.

  I leave you with Sir Philip Hampton’s reflections on those FTSE board-member comments:

"We used to hear these excuses regularly a few years ago, thankfully much less so now. However, leaders expressing warm words of support but actually doing very little to appoint women into top jobs - or quietly blocking progress - are really not much better."