As a Finnish woman, I had the privilege of being born into one of the most equitable societies in the world. Finland consistently ranks at the top when it comes to education, income equality, life expectancy and happiness. But even Finland struggles with equality in the work force. Every country is still far from providing women and minorities with the same opportunities to excel professionally compared to majority groups.
When diversity of the labour force is not reflected in higher managerial and directorial positions, it is hard to justify that the prospective career path is the same for everyone. Can I expect the same opportunities to succeed in a company where all of its senior leadership is male? Probably not.
So how far behind are the most senior levels in companies? According to the latest Glass Ceiling Index by the Economist, 23.6% of board members were women in the United States in 2018 – an improvement from five years ago, when EY released the shocking statistics that there were less women on boards than men named John, Robert, James and William. Given that women represent roughly 50% of the population, this is a severe under-representation that reflects the incompetence of the work environment to include women and echoes the broader inequality of opportunity that exists. This under-representation can be expected to be even worse in parts of the world where societal norms prohibit women from participating in the labour force to a greater extent. For instance, in South Korea, 98% of board directors are male.
The importance of diversity
The first obvious step to improving diversity in the company is to review the hiring process and identify the factors that could bias the final selection of candidates. We need to remember that diversity should not be a target for its own sake, it should reflect a fair and well-functioning recruitment process. At the board level, if new directors are mainly searched for among current CEOs, the pool of diverse talent is extremely limited from the beginning – only 5% of Fortune 500 CEOs are women and only 0.6% are black (all of which were male). Setting up a proper nominating committee that is in charge of the selection process combined with anti-bias training has been shown to provide better results. But selecting new board members effectively relies on there being open positions to fill in the first place. Applying limits to term length and maximum amount of consecutive terms that a board member is allowed to serve, could improve the ‘refreshing’ of board diversity levels too. Nevertheless, the potential for change does not stop at the entry point to the firm.
Academic evidence strengthens the case for managers to seize opportunities for creating an inclusive work culture. Several studies have found that diverse companies financially outperform their less diverse counterparts (see for example this study on gender and ethnic diversity, and this research on skill diversity). Related to this, a recent Harvard study showed that positive employee perceptions of their employers have an impact on financial performance of the company as well. It is indeed the internal culture, how people interact and treat each other, that can undermine people’s performance. Management needs to start paying attention to the human elements of the business, as it is also these that ultimately will drive the company to the next level.
The human element is the diversity of experience, knowledge, attitudes and skills that people have acquired throughout their lives. If employees feel like the full potential of their background is ignored or not respected, they feel undervalued, resulting in lower motivation and productivity levels. Ensuring that diversity in the workplace is appreciated leads to innovative conversations and debates that look at problems and respective solutions from all possible angles. Companies should actively seek to create an inclusive work environment that fosters this behaviour.
Earning the right to operate
Being a competitive business today requires more courage and creativity than ever before. To be able to keep up with the fast-paced business environment there must be a willingness to try new things at every level of the firm, without being afraid to take risks or act quickly on opportunities. We all need to understand that the whole work force is more than the sum of its parts – combining diverse talent at every level of the firm adds a whole new level of quality and value both to the firm and society as a whole.