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Diversity is good for business.
Indeed, companies that systematically recruit their employees from the widest possible pool of talent enjoy an advantage in an increasingly competitive global economy, according to Accenture research. But it’s not just a diverse workforce that helps put companies ahead. Top leadership teams drawn from across nationalities, genders and professional backgrounds also contribute measurably to performance.
New research in Europe shows that the more diverse a company's senior management-in terms of gender, nationality and other characteristics-the better the company is likely to perform.
The more diverse the company’s executive board the more successful the company: As part of the Phönix Report consultant company Accenture recently investigated what constitutes successful leadership in eight European industries: telecommunications, pharmaceuticals, oil and gas, utilities, chemicals, steel, banking and insurance.
"There were significant differences in the degree of diversity in companies across Europe. But we found, on average, that the more diverse the company’s executive board—which we define as the team of top managers who actually run the business—in terms of age, gender, nationality, education and other characteristics, the more successful the company," says repport authors Walter Hagemeier, Alexander Holst and Matthias Eden - as the reader has noticed all men.
"Phönix research shows a significant correlation, for example, between both the gender and the international diversity of a company’s executive board and stock market performance. Companies with more women among these top managers not only provided better returns to stockholders, they were also more profitable. We found, too, that companies can boost profitable growth if they strive to ensure a mix of youth and experience in their leaders, as well as a diversity of educational and professional backgrounds."
The Swiss pharmaceuticals company Actelion takes great pride in what it calls the “innovative team of creative minds” at the core of its $1.7 billion business. The team powers a highly focused R&D effort that has made the company a leading biopharmaceuticals player. The team is strikingly diverse. Indeed, Actelion’s workforce, almost half of which is female, represents nearly 50 nationalities. The company, which is one of the top performers in the Accenture sample, recognizes diversity—including diversity in its leadership team—as a critical component of its success.
The public face
"Diversity makes sense in an increasingly complex and multi-polar world. CEOs are still the public faces of their companies, but successful leadership requires the collective efforts of the entire upper echelon of executives. And that team needs to understand, embrace and act on an amalgam of viewpoints, constantly questioning established ways of doing things and providing an antidote to the groupthink that stymies innovation," the authors note.
"It stands to reason that an executive board that combines diverse strengths and opinions can drive original thinking, better governance—and, ultimately, high performance. At least it can if the balance is right."
"A lone woman on the board could be viewed as a token, resented by her peers and too isolated to make an effective contribution. Better to have several women—ideally with diverse professional backgrounds. Witness Norway’s Statoil, one of the highest-performing companies in our sample, where women from fields as diverse as shipping, technology and law comprise 40 percent of the executive board (a percentage that is, in fact, mandated by law)."
Significant variations
The correlation between gender and higher profitability was strong right across our sample, as pertinent for pharmaceuticals players as for banks. There were significant variations in the importance of other diversity factors among the eight sectors we investigated.
For oil and gas, chemicals and steel companies, for example, the correlation between international diversity and higher profitability was especially pronounced—probably because these sectors are particularly dependent on having a more global footprint. The eight-strong executive board of Swiss crop protection specialist Syngenta, for instance, includes Americans, Britons, a German and a Swiss.
For similar reasons, banks also benefit from an internationally diverse leadership team. All four Scandinavian nations are represented on the executive board of Sweden’s Nordea, for instance, which is the largest financial services group in Scandinavia and the Baltic. At the same time, the case of Turkey’s l Akbank suggests that the broad international experience of a company’s most senior managers may be as significant a contributor to performance as diversity of national origin.
"As a group telecommunications companies’ leadership teams have more female members than any other industry in our sample (an average of 7.3 percent compared with an overall average of 4.3 percent). They also tend to have slightly younger boards (an average age of 48 compared with 51 overall). And they exhibit more international diversity (an average of 27 percent compared with an overall average of 17 percent). Case in point: the executive board of Russia’s second-largest cell phone operator, VimpelCom."
The Phönix Report
There were 358 publicly listed European companies from 24 countries in our peer set—the largest (in terms of revenues) in each of eight industries: telecommunications, pharmaceuticals, oil and gas, utilities, chemicals, steel, banking and insurance. Accenture chose these sectors because we wanted to examine the relationship between leadership and diversity across as representative a spread of European industries as possible. Oil and gas, utilities, chemicals and steel constitute an asset-intensive industrial cluster; pharmaceuticals is R&D-intensive; and telecommunications, banking and insurance are service-oriented.
About the authors: Walter Hagemeier is the Dusseldorf-based country managing director of Accenture Management Consulting in Austria, Switzerland and Germany (ASG). Alexander Holst, a senior manager in Accenture Management Consulting, leads the company’s Sustainability group in Austria, Switzerland and Germany. Matthias Eden is a Dusseldorf-based consultant in Accenture‘s Management Consulting group.
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Read more:
www.accenture.com
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