A recent study researched almost 22 000 firms globally and found that when women comprise a third of executives, companies are more profitable. Companies that increased the number of women on boards reported significant increases in profitability (about 15%).
Who wouldn’t want a more profitable business? Yet, the percentage of senior roles held by women has declined. Women hold less than a quarter (23%) of senior management positions at South African companies and 39% of local businesses do not have any women at all in leadership positions, according to Grant Thornton research released on International Women’s Day this week. The Thirty Percent Club pegs women representation for southern Africa at 17.1% of JSE/FTSE Top 40 and state owned companies.
The low rate of women sitting on boards is worryingly low, but the problem is not unique to South Africa. In fact, female quotas have been mandated in a number of EU states for board posts in an attempt to grow these numbers.
Why having women on boards matters
In addition to evidence that companies with more women in senior positions outperform those with less female representation, the MSCI World Index found that many institutional investors are increasingly focused on the gender composition of company boards.
Companies with a more diverse board composition tend to be more innovative and make better decisions. Put simply, having more women in business leadership results in higher returns in sales, a greater return on invested capital and a higher return on equity.
So how do we get more women into these upper ranks? Are quotas the answer?
Female advancement needs to be encouraged throughout the corporate structure. In the South African context, I have no doubt that just as with enterprise supplier development, those companies which embrace diversity will be much richer businesses. There isn’t a board in this country that wouldn’t benefit from the increased collaborative approach, relationship building skills and intuition that women bring.
In my view, the implementation of quotas will not make the critical and immediate difference we need in South Africa. Rather, a recognition that diversity drives transformation, while giving businesses access to new markets and new thinking, is the key to unlocking greater participation.
One of the reasons for poor female representation in business leadership is the tendency for women to be concentrated in specific managerial functions that don’t position them on the correct path to the chief executive, such as HR and Marketing.
While researching my recently released book, Play to win: What women can learn from men in business, it became clear that strong role models are especially powerful. Successful women should mentor and support other women where they can and more importantly, they should accelerate progress by recommending other women.
It is time to get more active and more organised. The Institute of Directors (IoD) has the ability to filter all of its candidate CVs for female directors, so the tool is there for companies which have made a top-level commitment to support women leaders. The IoD also runs a number of programmes to encourage greater participation by women at board level, including training and knowledge sharing.
Now is the time to act to get more women in key decision-making positions. This is not a gender issue, it makes business sense to ensure a more diverse board. Only if more women join boards and demonstrate the value they add, can this no-brainer approach gain momentum.