Making sure more women contribute to the economy adds up to good economics. Susan Dalgety looks at Scotland’s record
AREVOLUTION is happening in Scotland’s boardrooms; gender equality is no longer seen as just a “women’s issue”. The moral imperative for balance at work remains, but is now supported by a robust business case. In language that even the most traditional business leader can understand, companies with a balance of men and women on every rung of the corporate ladder perform best.
According to McKinsey & Company, the global management consultancy, companies across all sectors with the most women on their board of directors significantly outperform those with no female representation – by 41 per cent in return on equity and by 56 per cent on operating results.
In a recent article for McKinsey, chief executive of global services company Sodexo Michel Landel, revealed that when teams had a male-female ratio of between 40 and 60 per cent, their performance in key areas such as brand awareness, client retention and financial metrics was consistently better than those of unbalanced teams.
Unleashing women’s potential is also good for the wider economy.
Research by the UK Women and Work Commission found gender balance at work could be worth £23 billion a year to the Exchequer. To put this in context, the annual Scottish budget is around £30 billion.
The commercial and economic imperative for equality appears compelling, but how does a company achieve gender balance?
Business in the Community’s high profile Opportunity Now campaign to secure gender balance at work is focused on three key areas of activity:
• Balancing boards
• Flexible working
• Eliminating the pay gap
Jane Wood, managing director of Business in the Community Scotland, believes leadership and mentoring are key areas where business can learn from each other how to build a balanced, diverse workforce: “We work with businesses which are exemplars They have got it – in culture and leadership, so we get them out into the wider business community to show aspirational leadership.
“The best thing you can do in business is get one business to tell another how this works, how it affects their bottom line, their absenteeism record. It is so simple, but effective.”
Wood is keen for Scottish business to develop best practice in mentoring for women. Studies consistently show that networking, coaching and mentoring are key to achieving gender balance.
She says: “I think more men should act as mentors to women. Help women build confidence in their leadership skills, to pursue goals that are aligned with their values.
“Achieving change is always going to be about leadership. Business in the Community Scotland offers thought leadership to its members and others. And the Scottish Government is showing leadership through its commitment to 50/50 on boards.”
The push for more women on boards was launched in June by First Minister, Nicola Sturgeon, whose own “board” – the Scottish cabinet – is gender-balanced.
Sturgeon wants Scottish businesses to sign up to her pledge of achieving a 50/50 gender split on boards by 2020. At the launch of the 50/50 pledge, she said: “For Scotland, as for any nation, our greatest resource is our people. So we can’t afford to underuse the skill and talent of more than half of our population.”
Scotland’s biggest headquartered company, the Royal Bank of Scotland, has made a deliberate business decision to use the skills and talent of Scottish women. Its long-term objective is for a 50/50 gender balance at all levels of the organisation by 2030.
And in four years’ time – 2020, it has set a target for one-third of its top 600 management roles to be held by women.
Marjorie Strachan, head of inclusion at RBS, explains: “What is important for us is ensuring we reach the right balance of women in every area of the bank – not just on aggregate.
“When we announced this, our chief executive Ross McEwan stressed the importance of authenticity. This is so crucial. We want better balance across all parts of Royal Bank of Scotland, substance, not soundbites.
“To achieve meaningful change, we have set a target of at least 30 per cent in our top three leadership layers (around 800 roles) by business, impacting on traditionally harder to influence layers of leadership.
“Research shows that 30 per cent is the tipping-point that makes a difference in culture and behaviour. We have been working hard towards improving the balance of women in our top 5,000 positions by 2020 and are already at 40 per cent. We have an ambition to reach 50 per cent across all parts of our organisation by 2030.”
RBS has featured in the Times Top 50 best employers for women every year since the award commenced.
Strachan adds: “Internally, we’re building an environment where our people can bring the best of themselves to work. Every day. Our people want to work for an employer who creates a fair environment and where opportunities are there for everyone with the right support. We still have loads to do, but we are noticing more positive feedback on our peoples’ engagement levels.
“Gender balance is as important for our customers as it is for our colleagues, as is every other aspect of diversity. That’s why we have Women in Business specialists who offer mentoring, networking and professional business advice to women led and owned small and medium sized enterprises.”
One of the conundrums of recent years is that the growth in the number of women graduates is insufficient in itself to bring about gender balance at the top.
McKinsey research shows that unless the current rules of the promotion system are changed, the growth in female graduate numbers will have a very marginal impact on women’s representation in senior positions.
Nowhere is that more stark than in Scotland’s legal profession.
Women have outnumbered men at point of admission to the Law Society of Scotland for more than 20 years and there are now more women than men in the profession (51 per cent).
Yet the pay gap between men and women persists. It is 42 per cent at its worst for a man and woman in the same stage of their legal career. The overall gap for full-time work in Scotland is 7.3 per cent.
The society’s chief executive Lorna Jack says this imbalance will create challenges for the profession “if talented women are not progressing to senior roles, be it partnership, solicitor advocate status, calling to the Bar or becoming a member of the judiciary”.
Jack believes there are “many and nuanced” reasons for the imbalances, including recruitment practices and what McKinsey calls the “double burden syndrome”.
In its groundbreaking Women Matter study, McKinsey argued that combination of work and domestic responsibilities weigh heavily on women, particularly in professions which favour a linear career path, with no real space for career breaks, or maternity leave.
As Jack says: “The choices organisations make in hiring, promotion and partnership is a factor.” Women may find it harder to move if they hit a plateau because they want to remain in an organisation once they have accrued maternity rights.
“Motherhood – and the break in a career that usually brings – can have an impact and however flexible and forward-looking firms are, there seems to be a ‘maternity penalty’.”
Other factors might be that women work in less well-remunerated areas; a different approach by men and women to salary negotiations, and a level of unconscious bias within recruitment and pay decisions.
The Law Society is determined to change the culture of the profession so that it is fit for the 21st century.
It has introduced ten equality standards and an equality pay toolkit, as well as guides for new parents returning to work, and crucially, their line mangers.
As Jack says: “Ultimately we have to recognise that if women make up 65 per cent of new solicitors, there will be structural problems for the profession if we don’t get this right.”
There are structural problems ahead for other sectors and professions too if gender balance is not achieved.
Equate Scotland was set up in 2006 to support gender balance in the key industries of science, engineering, technology and construction. It provides support for students, training and development for employers, career coaching for women and feeds into national policy-making.
Industry estimates suggest women make up only around 8 per cent of engineering jobs, with just one in ten senior posts filled by a woman. Fewer than 3 per cent of chartered civil engineers in Scotland are female.
Engineering UK says Scotland will need almost 150,000 new engineers by 2022, and that filling these posts would lead to a £1.7 billion boost for the economy. But according to Equate Scotland director Talat Yaqoob, only 16 per cent of current engineering students are women.
“We are at risk of closing the doors to the jobs of the future to women”, she says.
There is no single policy, or cultural change that would make an immediate difference. She says: “The barriers are systemic and the system needs time and support to change, which is what Equate Scotland is about.
“In the short-term, we need to publish pay gaps. Unsurprisingly these are larger in the industries where women are missing. We also need to encourage more young women to see STEM (science, technology, engineering, maths) as a career. Over the longer term, we need to change the industry’s approach on retention and progression for women.”
Cultural transformation is never easy, whether in a law firm or an engineering company, as Landel can attest. In his McKinsey article last year, he said changing a company’s culture takes “rigour and determination”, and change needs a set of clear, measurable, attainable long-term objectives,
He wrote: “It takes time to convince all those, including some women, who do not understand that why this issue is a strategic one.”
However, time is something that the Scottish economy – and other economies – are short of. According to the Office for National Statistics, in 2012 there were 3.2 working-age people for every Scottish pensioner. By 2037, there will be just 2.6.
The think-tank, the Institute for Fiscal Studies, recently examined ageing, migration and birth rates. The trends they observed suggest that, over the next 50 years, the Scottish workforce will actually shrink.
There is a similar shortfall in Europe with an expected deficit of 24 million people in the active workforce by 2040. However, if the employment rate for women can be raised to the same level as for men, that projected shortfall drops to 3m.
The case for gender balance at all levels of Scottish business, from entry level jobs to chair of the board, seems clear.
Profits would increase as companies attracted and retained the best talent. A more flexible, fairly remunerated workplace would boost productivity.
The economy would benefit greatly from the increased spending power of women – and it might even be more stable.
As Jayne-Anne Gadhia, chief executive of Virgin Money, said recently, the great crash of 2008 may have been less painful if more women had been in charge.
“If there had been more gender balance and diversity pre-crisis, we would still have had a crisis, but I bet you it would have been less rocky, less bumpy and less painful,” she said.
Now, the campaign by Business in the Community to secure gender balance in the workplace, sets out a compelling business case for equality.
Achieving a more gender-balanced workplace creates efficiency savings, enhances employee engagement, boosts productivity, meets the diverse needs of customers and suppliers and improves brand reputation.
According to Business in the Community, flexible working is a key enabler towards women’s full participation in the workplace – and it works for men too.
Agile working patterns for business help reduce absenteeism and overheads, enhance retention, and cut carbon emissions, to name but a few.
BT reports 63 per cent fewer sick days in home-based staff, compared to their office counterparts. And BT’s average annual sick day count per employee is 3.1 days, compared to a national average of 8.5 days.
IBM secured property savings of 2 million square feet after 40 per cent of its workforce started working without a dedicated office space, and spending at least part of their week working from home or other non-IBM locations.
Research by Opportunity Now reveals 78 per cent of managers recognise that flexible working increases employee loyalty, which leads to savings on recruitment.
And by encouraging remote working and car-sharing, EDF Energy reduced single-occupancy car travel from 83 per cent in 2001 to 38 per cent in 2010.
Source: Food for Thought: The Gender Case Business Case by Business in the Community