It's the pipeline, stupid

14th Feb 20

Are we seeing some progress at last on diversity in business leadership? The news is good from the FTSE 100, whose constituent companies have collectively filled a third of their director positions with women, according to the Hampton-Alexander Review (H-AR), up from 12.5% in 2011. The press has duly reported this as a victory for equality.

The 33% figure is important because it’s above the tipping point when “contributions of the minority group cease being representative of that particular group and start to be judged on their own merit.” That’s the definition provided by the 30% Club, the campaigning group and networking organisation set up by Dame Helena Morrissey ten years ago to improve gender balance in business.

But behind the encouraging numbers there are some caveats. (Even the Government’s report on the H-AR suggests “more needs to be done”.) Most notable is that fact that we can’t claim that boards are truly blind to gender – or, more positively, that they are accessing the right talent regardless of what it looks like – until we have more senior executive positions held by women.

There the picture is a little different. FTSE 100 stats compiled in June 2019 by Cranfield show 28 women (up from 24 in 2015) hold exec roles in 25 blue-chips. The Cranfield report lists 12 female CFOs. Even the more recent H-AR (with figures that are six months fresher, and presumably include another uptick in female execs) says just 15% of FTSE 100 finance chiefs are women.

So let’s break it down for the FTSE 100, based on Cranfield’s more granular data:
• Total number of directorships: 1,056
Directorships held by women: 339 (32.1%)
• Total exec directorships: 257
Exec posts held by women: 28 (10.9%)
• NED posts held by women: 311 (38.9%)
Number of FTSE 100 companies with a woman exec director: 25

Cranfield's data is 6 months old - but paints a less rosy picture

Note that the H-AR’s claim that “28.6% of FTSE 100 leadership roles are held by women” defines that group as execs or direct reports into main board positions.
(One other interesting stat: the number of single-female – so-called "one and done" – boards within the broader FTSE 350 is still 39. Only two boards remain all-male. But the number of all-male executive committees in the FTSE 350 is currently still 44.)

Targeting female representation on the wider board is great. But NEDs are only the start. We need more women in top exec roles to stoke the pipeline of high-flyers coming after them who will sustain the progress made over the past decade. Put another way: there are only so many NED roles existing senior women can fill. We need the next generation... and the one after.

One other stat from the H-AR: 66% of HR directors – a rarity on full boards 30 years ago, and still far from universal – in the blue chips are women. Again, it's about pipelines. The culture in HR has long been predominantly female. There are lots of excellent woman coming through the function to choose from. With a bigger pool of talent – and with plenty of role models and mentors at the top to boost their ascent – women have no trouble attaining top jobs in that field.

With our particular focus on finance, we would love to see a bigger cohort of women coming through finance functions (which should be the case, given around half of student accountants are women) because it creates a virtuous circle of more role models and more workplaces where a woman doesn't feel unusual simply for being who she is. The more unremarkable it is to see a woman CFO at a household name in the FTSE 100, the better for all businesses looking to find the right finance person - not just the right finance man - for their needs.

Whether you are a Blue Chip or, like most of our clients, a growth company, diversity of thought and experience is essential in crucial boardroom positions. After all, who doesn't want the biggest pool possible of senior candidates from which to choose when they're appointing to a key role?