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Why does diversity matter for companies?

Nick Marsh, Managing Director, Harvey Nash Executive Search APAC

In the second series of articles on the importance of advancing gender diversity [Women on boards - why is progress so slow in Asia?] Nick Marsh explores why companies should prioritise this business issue and how they can encourage positive change in their corporate culture. Boards made up of members from the same small network can often lead to 'group think', where those in the group come from the same background, share the same viewpoint, and are generally happy with the status quo. A certain level of tension or conflict in a boardroom is proven to encourage varied approaches and often leads to boards being more agile and aware of customer issues. 
McKinsey, Blackrock and Catalyst have produced many studies, which allied to anecdotal evidence from many CEOs and business leaders, indicates that companies with diverse boards and management teams have better performance over time, than those that do not. According to figures by Credit Suisse, the share prices of companies with market capital greater than $10 billion that had female directors, outperformed those without by 26% across seven years. For small to mid size companies, the stocks of companies with female directors on their boards outperformed others by 17% over the same period, proving the existing gender imbalance is costing firms money. Gender diversity can also have an impact on a country's entire economy; the World Economic Forum's Global Gender Gap Report 2014 shows strong correlation between a country's gender gap and its economic performance. 

Changing the corporate culture
Rather than rushing to implement strict  quotas for your business, often the best approach is to change the culture of an organisation. Harvey Nash research outlined in The Balancing Act found the primary barrier to women's progression to the top is male-dominated corporate cultures, where gender bias is endemic albeit largely unconsciously. Companies need to ensure their corporate culture and values are aligned with encouraging gender diversity, cascaded down from the leadership team throughout the entire organisation. 

Male champions of change
This is not only a women's issue - this is a business issue and men are critical to its progress. Ensuring male employees are  engaged in the diversity discussion is imperative, with the aim of turning them into 'male champions of change'. Men need be involved in the sponsorship of women, particularly as they often lack advocates and champions who make sure they have access to all possible opportunities. Men also need to play a role in helping to identify how organisational culture or policies may be hindering the fair progress of women and be actively involved in making the changes. Companies need to dispel any beliefs that it's a "zero-sum" situation that may lead some to believe men may suffer from the advancement of women.  Promoting the importance of a diverse workforce, stands to benefit the whole organisation and ensure those who are best for a role have the opportunity to apply and be considered fairly. 

Talent mapping and career development plans
Talent development, internal mentoring and succession planning are also central to creating change. Closing the gender gap is a multi year process, requiring businesses to identify potential leaders early, invest in their talent development and help them to map out career paths to accelerate their growth. Using search firms when hiring at senior levels also helps, as external firms are often better at identifying hidden female talent and connecting companies with them. For example our shortlists for senior executive roles are on average 31%female. 

Support for families
Finally businesses need to be set up to support women with families. Too often top female talent leave the workplace after having children, with many having to make the choice between a successful career or a happy family. Flexible working practices can enable parents to better manage their commitments. Initiatives such as paternity leave or family care leave can help address gender diversity by enabling men to also share the workload at home. 

These steps can have a real impact. Companies like IBM, Accenture, Schneider Electric, GE, Pepsi, Johnson and Johnson, Estee Lauder, P&G, Abbott Labs, Kellogg, and Goldman Sachs have all invested in diversity programmes and seen real results in the numbers of women that are advancing through their companies into senior roles. 

Our third installment in this series of articles will explore what women can do for themselves -- follow Harvey Nash Executive Search for more information.