Confronting a boardroom gender shock

Australia's dismal record on gender diversity in the workplace is set for a rude awakening in 2013, when new legislation will force companies to tackle the problem head on.

Meriton Apartments managing director, Harry Triguboff, could be one of many hit by new laws on gender diversity. Legislation coming into effect next year intends force companies around Australia to overhaul their performance management appraisal systems to ensure more gender diversity. Meriton Apartments is one of nine Australian businesses on the Equal Opportunity for Women in the Workplace Agency hit list of non-compliant companies.

Gender equality becomes a management issue in 2013. It’s not about social justice, it’s about business performance. Do the maths. According to the Australian Bureau of Statistics, 49 per cent of professionals in Australia are female. Women now make up 35 per cent of the country’s 1.3 million small business operators, and the proportion of women opening up businesses is growing three times faster than for men. Also, 49 per cent of property investors in Australia are female. More women than men are now educated at secondary schools and universities. And most importantly, Australian females are responsible for spending 90 cents in every household dollar. Clearly, there is something very wrong if a company’s board and management structure do not resemble the market being served.

From April next year, companies will have to account for how much women earn compared to male colleagues and what sort of flexible working arrangements they provide. The Workplace Gender Equality Act, which passed parliament late last month, is the biggest overhaul of Australia’s equal opportunity laws which some saw as a toothless tiger. It had relied on co-operation from employers which didn’t happen.

Certainly, the latest figures released by the EOWA are testimony to that. The figures, released to coincide with the legislation, are damning.

Despite the fact that Australia now has a female prime minister and governor-general, fewer than one in 10 executives on the ASX 500 are women. Worse still, 63.1 per cent of ASX 500 companies have no female executives. Yes, there was a noticeable increase in the number of female directors thanks to the work of the Australian Institute of Company Directors but there has been little change for women in the top management ranks over the last 10 years. It’s flat-lining. There are seven female chief executives in the ASX 200, compared to six in 2010, and 60.6 per cent of ASX 200 companies don’t have any female executives, hardly any change from the 61.9 per cent in 2010. Indeed, given the way the economy has grown, you could argue it’s gone backwards.

Which is why the changes have won support from industry leaders like Telstra chief David Thodey, Alcoa Australia managing director Alan Cransberg and Australian Institute of Company Directors chief executive John Colvin.

What are the consequences of non-compliance? The company can be "named and shamed” by the new Workplace Gender Equality Agency (the EOWA rebranded). It might also make them ineligible for Commonwealth contracts, grants or other financial assistance.

EOWA director Helen Conway has warned that that if companies fail to comply, the calls for quotas will get louder. It’s a trend overseas with the European Union contemplating plans to plans to make it mandatory for companies to keep 40 per cent of board seats for women and governments of Norway, France, Spain, the Netherlands, Belgium and Italy passing gender quotas.

To head that off, companies here will have to overhaul their performance management systems. A number have done that.

Engineering firm Parsons Brinckerhoff, for example, has specifically recruited more women despite the fact that fewer women do engineering. It introduced flexible work arrangements with variable start and finishing times, working from home schemes, study leave, phase-in retirements and systems that allow people to purchase annual leave. It also has schemes that allow people to accrue 12 weeks over three years and take three months leave. It has increased maternity leave from six weeks to 16.

There’s an extensive mentoring program and it has systems ensuring at least one female candidate is considered for all managerial vacancies. At least one female is on interview panels for managerial vacancies. Parsons Brinckerhoff also has an extensive mentoring program for women, a women’s network, leadership training programs, accelerated development programs for women and a system where senior females and managers leaving the business meet with the managing director to talk about their experiences. The firm estimates that 29 per cent of its managers are women.

Mining company St Barbara has four targets – increasing the number of women across the company, increasing the number of women directors, increasing the number of women returning from maternity leave and closing the pay-equity gap. Because men and women there are paid the same, the only way to close the gap is to increase the number of female managers. St Barbara has a female participation rate of as high as 39 per cent for its superintendents and 20 per cent at executive level. About 23 per cent of its workforce is female, way above the mining industry average of 14 per cent.

Suncorp has flexible work programs allowing women to work from home, it has identified a female talent pipeline for key senior leadership roles, pay equity reviews, policies that ensure that the final short list for senior leadership positions includes one female and male candidate and quarterly reporting to the board on gender diversity targets. It is estimated that 44 per cent of all leaders at Suncorp are women.

The consultants at McKinsey say chief executives can’t take a back seat, they have to be disciplined. As the EOWA figures show, it won’t happen if they just assume it will take place without any work on their part. That means monitoring gender diversity programs, setting targets and putting gender-diversity indicators into managers’ performance appraisals. Extending that logic, it means that managers wouldn’t get bonuses if they failed to promote women.

ANZ, which has achieved female participation in management ranks of an impressive 38 per cent, uses a balanced score card system for appraisals. Hitting diversity targets is part of that balanced score card and that drives the bonus pool. ANZ also makes sure that half of all the graduates it employs are women. It also puts women on accelerated development programs and requires at least one woman to be on every short list when it’s recruiting.

Why is any of this important? Because companies can’t afford to ignore half, or some would say more than half, of the available pool of talent and the EOWA figures tell us that women are a woefully neglected source of talent. In a skills shortage where talent is in short supply, that’s just stupid.

Things will only change when managers and company leaders start losing their bonuses for not hitting diversity targets. That will work better than the tick-box approach of quotas. When that happens, there will be lots of gender diversity converts.

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