28 January 2016
We need more women leaders, not just #womenonboards
CBI Director-General Carolyn Fairbairn has delivered her first keynote speech on diversity at an event hosted by law firm Latham & Watkins in London.
The press release for the event is available here.
It’s a great pleasure to be here.
You have asked me this evening to talk about Women on Boards. And I am delighted to do so.
We should be rightly proud of the record here – a credit to government, business leaders and to the members of the Davies Review.
The Davies target of 25% of board positions held by women was met last year, a little early. A great achievement and it matters.
But I hope you will forgive me if I broaden the exam question and talk more widely about Women as Leaders. I believe that this, not women on boards per se, is the real issue.
Boardrooms are important places, and it’s great that women are there in greater numbers.
But it’s worth being clear. Non-executive directors and even chairmen are part-time. They attend between 4 and 10 board meetings a year. They approve strategy, are guardians of values, challenge decisions and help manage risk. These are very important roles.
But they are not running organisations on a day-to-day basis.
They are not hiring most of the people, taking daily decisions, shaping and defining strategy, forming cultures and habits through their everyday choices and the examples they set.
This is the job of executives – the sleeves-rolled-up leaders in our society.
And the truth is we just don’t have enough women who are executive leaders in the UK.
We don’t have enough women running things.
And it is not getting better anything like fast enough.
We do have more women going to university than ever before.
The participation rate of women in the labour force has never been higher.
We have roughly equal numbers of young men and women joining the civil service, the graduate schemes of our companies, becoming apprentices, studying law.
And now we can proudly say that more than 25% of FTSE 100 board directors are women.
And yet, less than 10% of the executive leaders of our top companies are women.
I am frequently the only woman in a meeting. I have just come back from Davos, the annual meeting of the World Economic Forum and a gathering of world leaders from all walks of life. The proportion of women was only 18%, less than one in five.
It became one of the biggest topics of the whole event – at times eclipsing robotics and the decline of China as a top concern of business.
And crucially, progress is glacial. Today, there are just nine more female executive directors on FTSE350 boards than in 2010.
While the number of female chief executives has barely moved – 5 in the FTSE 100, the same as 5 years ago.
And let’s not fool ourselves that the boardroom victory will somehow lead inevitably to victory at the management level. It won’t.
It will help and as I said, I don’t for a moment want to talk down the achievements of Lord Davies and his review team. More women in the boardroom can help to shift the dial within organisations.
But it is no panacea. Just to repeat - part-time, 10 board meetings a year. That’s no criticism – that is just how governance works. I have two daughters and the number of NEDs on boards in the UK will not pierce their consciousness.
However, the appointments of Dame Louise Richardson as the first female vice-Chancellor of Oxford University, Frances Morris as the first female Director of Tate Modern, or Susan Ridge as the first female British Army General, I believe will.
And they will most certainly notice who their boss is when they start work. So far we have 16 women CEOs in the FTSE350, running companies as diverse as Kingfisher, Mitie, Royal Mail, Imperial Tobacco and Whitbread. They are all exceptional leaders.
So let’s turn our attention now to the people running our organisations.
Let’s turn our attention to the CEOs, the CFOs, the heads of operating divisions, the managing directors, the Director Generals and Permanent Secretaries in government departments, our ministers of state.
And for the professional services world where I spent several years of my working life and where many of you work today, to the partners and senior partners who are running the show.
In my view, the countries that work out how to bring the extraordinary untapped wealth of female talent into their leadership teams – in business, politics, the arts, everywhere – will have a real competitive advantage.
There’s no doubt in my mind that developing more women leaders will make a real difference to the success of the UK economy, our productivity and the UK’s future place in the world.
The reasons are worth rehearsing. And they are solid, business reasons. There is of course a crucial issue of equity and fairness, but I’m going to put this on one side, not because I don’t believe in it. I do. But I think we will get faster change by focussing on the pure business rationale.
It is well known that diversity is good for organisations.
Diverse voices – people of different genders, from different parts of the world, and of different ages, sexuality, religion, physical and mental health – enable better decisions.
There are many evidence based studies that support this. McKinsey analysed 366 quoted firms and found that companies in the top quartile for gender diversity are 15% more likely to have financial returns above the national industry median.
These studies can beg the question about correlation versus causation. How can you be sure it’s not that high performing companies have diverse boards and not the other way round?
But in the end it doesn’t matter. The fact is that diversity and good performance go hand in hand.
But for me, an equally strong argument for taking the issue of women as leaders so seriously is because we desperately need the best talent we can get.
We are in a ferociously competitive age.
Managing changes, taking the right risks, adapting our companies to a new world where digital technologies will transform our worlds.
Leadership will be the difference between winners and losers.
The link with productivity is strong. I am part of a team of business leaders, led by Sir Charlie Mayfield, the Chairman of John Lewis, who are seeking to understand why the UK has such a large productivity gap with the US and Germany, and find ways to fix it.
One of the issues that has emerged is a gap in organisational effectiveness between some UK companies and peers around the world.
It comes down to leadership. We need the best we can get – and that should include the best women.
Many chief executives agree but are grappling with what to do about it. I’ve had some terrific discussions in my early weeks at the CBI, and there are some great examples of best practice. Companies from all sectors are taking this seriously.
From their experience and from mine, I’d make a couple of observations.
The first is that there are two different types of issue that need disentangling.
Some companies are struggling to attract women into their companies at the ground floor, out of school or university. Engineering and tech firms in particular need people with STEM skills. And here the work being done to attract more women into quantitative and scientific studies is terrific.
But other companies have no trouble attracting women to join them – retailers, banks, professional services companies – but find they leave. And in particular, more and more CEOs are telling me that their best women are choosing to leave just as they get into very senior positions and are being offered top jobs.
And this fits with my personal experience. I have many friends who have succeeded in managing family and work successfully, but in the end have decided they just don’t want to go for the very top jobs. They are instead choosing to stand down and contribute in their communities – at schools, charities – or to take non-executive roles instead. And brilliant they are at it too.
As a result many of our firms are seeing an exodus of senior women.
So the question we need to ask is why. We have talked a lot about glass ceilings over the years, but in my view we now need to talk more about sticky floors. Why are women choosing to leave?
The answers are complex and need very careful thought.
And none of this is about judgement.
There are factors to do with being a mother that are immutable, and there is no right and wrong in terms of personal choices.
But some of the factors leading women to choose to leave can and should be thought about very carefully. The availability of childcare, flexible working arrangements and support in caring for elderly parents are part of this. At the CBI we have had a lot to say on these issues over the years, and will continue to.
But there is another part and that is the working environment itself. Taking leadership roles in our society is risky, exposed, hard work. The personal toll can be high. You need friends, support systems, connections, a sense of belonging.
And this is where I think the UK business world is not changing fast enough. Too much of UK business is still geared up for men, in terms of its social habits, its small talk, its clubbiness. Women can look at this world and think – that doesn’t feel fun, it doesn’t feel as though I fit, it isn’t for me.
As I say, these are complex and subtle issues. But unless we spend as much time thinking about the sticky floor as the glass ceiling, and about what is affecting the choices women make, it will be hard to make progress.
And this leads on to my second observation, and that is the only way we will get change is where the CEOs of today lead and champion the progress of women into top jobs. That’s because it takes so many things to change, and precisely because so many of them are subtle and subconscious.
All of the companies I mentioned earlier as exemplars have CEOs who speak out, challenge their organisations, repeat and repeat how important it is for women to succeed.
We need more of them, more CEOs to be inspirations in enabling women to thrive in their companies.
Last October Nicky Morgan, the Education Secretary, announced that a new review, with a new independent chair, would succeed the Davies Review and focus on the executive pipeline.
I’d like to suggest that this new Review draws on the success of the Davies Review and establish a new voluntary target of 25% female senior executives in major UK companies.
The timeframe would be up to the new review – as would the milestones marking progress along the way.
We have seen that voluntary targets work. There was no compulsion about Lord Davies’s Review. But it did three things extraordinarily well. First, it set a big bold simple target that was measured against and reported on. Many thanks to Cranfield Business School for taking the lead on the numbers – it has really mattered.
Second, it fostered networks of people who set about solving the problem, sharing ideas, getting things done. The 30% club, a private sector group of Chairs and business leaders, has made a big difference.
And third, when interest flagged, it kept reminding people why any of this mattered.
So let’s do it again.
25% is an ambitious target, but I think that’s appropriate.
We will need some decent measurement in place – we will need a good definition of executive. Perhaps it can be members of a management board – most companies publish this. Or something else – let’s work it out.
And differences between sectors will need to be recognised. It will be very hard for our engineering and scientific firms to move fast while girls are not choosing to study the subjects you need in this kind of company. So the STEM projects will be vital, and the goals should reflect realism.
But the success of Davies shows us just what can be done through sheer energy and commitment, and the clarity of a target. And how important it is that it is not compulsory. Quotas are not the answer.
Quotas can drive a compliance culture, making diversity a ‘box-ticking’ exercise. Yet voluntary, business-led targets can inspire firms to see diversity as an opportunity and find the right answers for their sector.
The government showed extraordinary resolve and commitment in setting up the Davies Review; now is the time for the next phase – getting the number of women leaders up.
And I am personally committed at the CBI to helping make this happen.
The CBI is ready to work with government and businesses across the country on this vital agenda. We can help spread best practice, highlight successes, keep making the case and raising the profile, working alongside our members, many of whom care deeply about this.
Great leadership is going to be essential to the future success of the UK on the world stage. Where better to look than in the ranks of our own talent – wonderful women currently working in companies and organisations up and down the land. Lots of you in this room today.
And while I’ve focused on gender diversity today, this is only the part of the picture in creating the inclusive workplaces which allow talented individuals to flourish regardless of race, religion, disability, sexuality or age.
But half our population, half our school leavers, half our graduates, are women. We know women have the capacity to be great leaders.
So let’s make sure that many more reach the top – not just in boardrooms as non-executives, but running our organisations day to day, calling the shots, managing change, hiring the next set of stars, and leading the UK into a bright and successful future.