Recommendations Gender Diversity BoD and CEO

Recommendations for establishing a pipeline of best-qualified female talents for listed and large non-listed companies

Written by Dr. Fabienne E. Meier, Partner, Knight Gianella, in March 2021

The new Swiss Stock Corporation Law requires representation of both genders in the top management of listed companies. Therefore, Boards of Directors and Executive Management should see gender diversity as an opportunity because it promotes exchange, team dynamics, innovation, and thus their companies’ competitiveness and attractiveness.

For this, top management boards need to rethink and realign themselves: It is no longer enough to attract only the best-qualified female talents, and it is crucial to create framework conditions for a sustainable talent pipeline. Only companies that have value-based leadership and a team-oriented organization are attractive for female talents. This includes conflict-free structures and complementary responsibilities within the team. Companies that fail to achieve this will invariably fall behind in the fight for female talents.

The basis for the recommendations

The analysis by Knight Gianella and the recommendations is based on 100 individual interviews with female Board Members, CEOs, and CHROs from listed and large non-listed companies in Switzerland from September to November 2020 and extensive literature research.

Current challenges

The new benchmarks of the Swiss Stock Corporation Law on gender quotas have been in force since January 2021. These require that the major listed companies (approximately 300) introduce the women quota. Both genders must be represented by at least 30% at the Board of Directors and 20% at the Executive Management level. The transition period is five years for the Board of Directors and ten years for the Executive Management.

Boards of Directors, CEOs, and Executive Managements have to meet these numbers. However, reality shows that 20% of the most important listed companies in Switzerland still do not have a single woman on their Board of Directors. The quota of women at the Executive Management level is even worse.

Although the top management boards have usually made efforts to find the best-skilled women, they are often not in a position to win them over. Even when companies have won them over, these women often leave the boards after a few years because they do not feel comfortable or cannot sufficiently influence the rules of the game. In other words, these women give their companies the cold shoulder.

This is due to the composition and dynamics of the top management boards and the structural framework conditions in these companies. The attractiveness of the industry also plays an important role. Therefore, the two top management bodies need to make a paradigm shift on the cultural and structural level to increase the company’s attractiveness for the best-skilled women and ensure competitiveness.

Advantages of gender diversity

Several studies have shown that mixed teams and companies are more successful and more competitive. For example, companies with more than one woman on the Board of Directors show that they are on average 20% more successful than companies without women. The same/similar values are also transferable to the Executive Management. Margins and profits are also higher in these companies. However, it would be even better to have 20% to 30% women because it increases the performance of the companies by up to 40%.

The reasons for this increased competitiveness are various. Mixed management boards bring different views into the discussion and have a stronger interaction. As a result, they make better decisions and are more innovative than non-mixed teams. The Knight-Gianella-Board-Survey 2020/2021, published in November 2020, highlighted that the women on the board bring new issues for discussion, place a higher average value on strategically sustainable issues, and are more cost-conscious than their male counterparts. They also place a higher value on corporate social responsibility and team dynamics. As a result, companies with diversity in practice have more committed long-term employees and can retain new talents.

The necessity of gender diversity

The establishment of gender diversity has become a compelling necessity. However, the best-skilled women are a scarce resource to meet the required demand for companies. There is also a growing shortage of the best-qualified talents in Switzerland for structural and societal reasons, especially in technical fields and industries.

Until 2003, more than half of technical faculties at the ETH had fewer than 10% female graduates. In the business administration programs at the HSG, the rate was slightly better at 20%. Counting the alumnae there, only about 1350 women age 46 to 60 or 18% of the graduates have enough experience for a management position or in a Board of Directors. Considering that 70% of women have children and, hence, gaps in their curriculum vitae due to their family situation, skilled women for roles in the top management are even rarer and must be trained. Women with children prefer to work as board members as it is a flexible and highly qualified part-time model with few administrative tasks.

This situation is problematic for Switzerland as a business location in the long term. Due to the lack of highly qualified talents, Switzerland is increasingly losing its attractiveness in international comparison. Investors also suggest that Switzerland should solve the problem because they only want to invest in companies and countries that can and want to remain competitive through gender diversity.

Paradigm shift

Boards of Directors and Executive Management are facing a cultural and structural paradigm shift (see figure). The traditional working environment of male-dominated boards with classic forms of leadership and cooperation is no longer sustainable. This development is happening regardless of how many competent leaders are operating in the current top management board. Instead, there is a need for value-based leadership, team-oriented cooperation, and flexible working.

The majority of women want to be involved in a company where they can make a meaningful contribution. They complain about male-dominated committees with unconscious bias and unnecessary meetings caused by inherent conflicts, internal competition, and unclear responsibilities. And this is where the leverage lies. Companies should face this fact and realign.

Boards of Directors and Executive Managements should change their perspective and see gender diversity as an opportunity to become more competitive. They need a holistic approach, and the whole company must be aligned accordingly. Only properly positioned companies that are attractive to women will win this battle for the best-qualified female talents.

Holistic solution approach

To ensure women’s quota and increase competitiveness, it is necessary to include all company levels (see figure). Boards of Directors and Executive Management must create the framework conditions for successful talent management and pursue the following four goals:

1. Gender diversity as part of the corporate strategy: As a first step, the top management should anchor diversity as part of the strategy. Every company should have clear goals regarding where it stands today and where it should go, and strategic directions and measurable goals can be derived, tracked, and controlled – also on the time axis.

   
   

2. Board of Directors and Executive Management evaluations: The second step is to evaluate the Boards of Directors and Executive Management. The composition of the boards must ensure that the best-qualified leaders with the appropriate competencies work together. They should also operate with value-based leadership, conflict-free cooperation (structures), and unbiased communication. The individual members should be positioned as value-based figureheads. Only a few selected executive search partners like Knight Gianella have relevant expertise, credibility, and trustworthy access to Boards of Directors and Executive Management to accompany them in this sensitive and discreet task.

   
   

3. Structural framework for gender diversity: The third step is to implement consistent structures for gender diversity to develop at all. The vast majority of companies studied show inconsistencies in implementing the strategy in the target operating model. The tasks and responsibilities of individual areas are unclearly delineated, overlap, leave gaps, and have inherently contradictory objectives. This leads to high demand for coordination, and conflicts that often take up more than half of the management time are judged as not very meaningful and require a great deal of coordination. It restricts the flexibility of individual employees and makes for the most crucial reason cited as a barrier to gender diversity. During this time, no value is created for either clients or shareholders. And, above all, it prevents the development of a board into a team and the benefits of gender diversity.  

   
   

4. Ensure talent management: In the final step, companies must build a talent pipeline. When it comes to acquiring rare qualified talents, companies should work outside their networks (think outside the box) with selected executive search partners who can demonstrably ensure the best possible access characterized by trust. Once these talents have been acquired, they should be developed. The gaps these women have in their resume due to their career paths and family situation must be closed. Companies should proactively address the taboo topic of family planning for women who may have children in the near future. Knight Gianella’s Gender Diversity Career Model explains how to understand women’s needs better and agree on common solutions.

Conclusion: Gender diversity brings an excellent opportunity for more competitiveness if the Boards of Directors and Executive Management create the framework conditions. Only a holistic approach allows to anchor the topic of gender diversity in the company, attract the best-qualified female talents for the top management boards, and bind them to the company in the long term. Let’s do it!