Gender quotas: differentiation through diversity
Companies need to seize the new legal gender equality quotas as an opportunity to attract the best talent. The time for half-hearted measures is over.
By Liza Engel, Chief People Officer and Member of the Executive Board
We are on tenterhooks: which of Switzerland’s 20 most valuable companies, those comprising the Swiss Market Index (SMI), will be the first to be led by a woman? When it comes to the fair representation of women in business, I have heard a lot of promises and seen many different initiatives come and go, but progress has continued to move at a glacial pace. It is clear to almost everyone in Swiss boardrooms that greater diversity – meaning a wide range of people of different genders and age groups, but also with different origins, languages, religions and sexual orientations – is the main sociopolitical priority of the hour. The significant increase in female representation in the recent parliamentary elections and the powerful women’s strike have brought home that it is time to promote equal rights in the executive suite too.
Apart from a few dinosaurs, almost everyone has realised that a diverse workforce leads to better results and can increase sales and profits in the long term – provided that employees are sensitive to differences and work together respectfully. A fairer gender balance in top management positions not only helps individual companies and businesses as a whole; it also advances society more generally.
The Corporate Law Reform finally passed the final vote in parliament’s summer session, with the regulations entering into force on 1 January 2021. A policy that was decried as a radical demand by left-wing politicians 20 years ago is now becoming a reality in Swiss corporate life, namely gender quotas. Gender diversity ratios are being introduced for boards of directors and executive boards at listed companies with more than around 250 employees.
Comply or shame?
Women and men will have to each make up at least 30% of members of boards of directors, and 20% of executive board members. This new rule affects between 200 and 250 companies in Switzerland. While no harsh penalties will be imposed for falling short, companies will have to publicly state in their remuneration reports why they are missing the targets and what measures they are taking to redress the balance.
However, this “comply or explain” approach leaves companies some leeway. A male applicant could still be employed, even if a company does not yet meet the gender quota. As such, it cannot be claimed that men are being discriminated against, as various critics had asserted. This risk seems fairly small to me. In my view, it is more likely that Swiss companies will be pilloried if they continue to fail to meet the benchmarks five or even ten years from now.
The race is on: When will the first woman become CEO of an SMI company?
Liza Engel, Chief People Officer
SMI companies with all-male executive boards
Where are we currently on gender representation on boards of directors and executive boards? A quick look at the 20 largest listed Swiss companies shows emphatically that there is a lot of catching up to do: half of SMI companies currently have an adequate number of women on their boards of directors. Zurich is the leader here, at 45%, while SGS trails the pack with 10%. The family-run Swatch Group is the only company with a chairwoman, Nayla Hayek.
The picture is much bleaker when it comes to SMI companies’ executive boards: only Roche, Novartis, ABB, Zurich, CS, Lonza and LafargeHolcim already meet the new requirements. Seven companies – namely Richemont, Sika, Geberit, SGS, Alcon, Swisscom and Swiss Life – still have no female representation at all on their management boards. And a female CEO is nowhere to be found (as at 31 October 2020). As you can see, it will take a lot of work to meet the quotas. We cannot afford to wait another generation for women to slowly make their way into the upper echelons of businesses.
Consultancy firms such as Deloitte are particularly affected by these challenges, as clients are increasingly insisting on diversity in their consulting teams. However, women are in short supply right from the start: many more men apply to us, we still appoint more men than women, and currently only 39% of our employees are female. Nevertheless, women represent exactly one-third of the executive board (as at 31 October 2020) and the figure was even higher last year. So how did we manage that?
It won’t be easy
Many consulting firms are promoting cultural change to make themselves more attractive to women, but this is still often done rather half-heartedly. Conversely, we generally advertise jobs at 80% to 100% of full-time hours. We also introduced comprehensive family-friendly employment conditions years ago, at a time when several weeks of paternity leave still seemed a pipedream.
It is absolutely essential for management to develop a vision together, to present a united front and jointly drive its implementation. Each individual manager is responsible not only for advocating equality but for reflecting on and adapting their own day-to-day actions in this regard. Companies should also not shy away to let diversity criteria be a factor when determining bonuses.
Measures to tackle prejudice
In addition to recruitment and promotions, everyday activities such as filling project roles and selecting team members for client assignments must be scrutinised: are the most capable people actually being selected and are we actively showing diversity to the outside world, or are we passing on old prejudices?
We must take action at different levels to tackle known cognitive biases such as groupthink, familiarity bias, fixed opinions and stereotyping. Mandatory training and awareness-raising can be helpful here. However, I believe that clear measures in connection with all key HR processes are more important.
In the case of nominations for promotions, for example, the vast majority of people tend to favour candidates who are similar to themselves. We at Deloitte, therefore, introduced a multi-stage process a few years ago, in which we compare the gender figures in each area with the mix in the workforce as a whole. This process allows us to identify deviations and to discuss them with the team leaders in question. It has been shown that there is a proven self-policing effect where a body is made aware that its decisions will be examined for gender bias.
The best women on the team
It will take more than two or three years for SMI companies to make up the ground needed to meet the new Swiss gender quotas. However, by consistently aligning business processes with diversity targets and applying selective interventions in relevant decision-making processes, employee behaviour should be influenced in a predictable way to generate measurable success quickly.
Companies can thus not only avoid critical media coverage and the image of an outdated corporate culture. By using credible measures and active positioning on the employer market they can also carve out long-term advantages and attract precisely those creative young women and men, who bring with them the impetus that is urgently needed for the sustainable development of the business. That is needed today more than ever.
Such highly qualified people are becoming increasingly hard to find given the growing shortage of skilled workers and an ageing population. The race is afoot: when will the first woman become CEO of an SMI company? And which company will be able to use this milestone as an unparalleled advantage in its job advertisements? Place your bets now!