Chapter Three: International literature review

Diversity enhances performance

There is growing evidence that diversity in the workplace is not just fair and equitable, it can also improve the performance and profitability of organisations and countries. Mortvik and Spant (2010) found that OECD countries with more progressive attitudes to gender equality in the workplace are likely to experience greater economic growth. Global investment banking firm Goldman Sachs (2007) went further, calculating that gender equality in the workplace could boost Gross Domestic Product by 9 percent in the United States, 13 percent in Europe and 16 percent in Japan. Closer to home, Business New Zealand CE Phil O'Reilly is on record as saying, "If Māori and Pasifika don't succeed in the next twenty years, New Zealand will fail as a nation. It's that simple." (Listener, 2010)

Maitland (2009) cites London Business School research that shows the most innovative teams are those with a 50/50 gender balance. These findings are backed by Dezso and Ross (2008) whose study of United States firms found a positive association between "innovative intensive" firms' performance and female participation below the CE level, but no positive effects from simply having a female CE. The authors say their findings provide evidence of a "female management style that enhances teamwork and innovation but is rendered less effective by the leadership attributes of the CE position."

An international study by McKinsey (2007) shows that international companies where women are most strongly represented at board or top management level are also the ones that perform best. However, there is no marked difference in organisational excellence until there are at least three women on governing bodies - in other words, when true gender diversity replaces tokenism.

A New Zealand Ministry of Women's Affairs review of international research (2009) also shows companies with women on their boards outperform those that do not. Teams with a mix of men and women are more likely to experiment, share knowledge, complete tasks and consider a wide range of issues and options, resulting in commercial decisions more in touch with customer needs. Having women on boards also provides role models that lead to more women in senior management.

In its 2008 literature review of diversity and equality, the Equal Employment Opportunities (EEO) Trust says, while it is difficult to demonstrate a direct link between workforce diversity and business outcomes, potential benefits are improved staff recruitment and retention; improved creativity, innovation and problem-solving; and improved marketing strategies and outcomes.

Pio (2010) expands on this list to include "transnational interconnectedness, problem solving, widening the creative horizon, cooperative behaviours, reputational benefits, resource acquisition, increase of business, a wider customer base, along with singing in tune with EEO policies and HR legislation."

However, the EEO Trust (2008) warns that "both positive and negative business outcomes can arise from diverse workforces" and stresses that "successful support of diversity depends on how policies and practices are implemented, with supportive management and workplace culture identified as critical factors." It also highlights the limitations of the business case approach, quoting Kirton and Greene's findings (2005) that it will not necessarily lead to fair or equal representation of disadvantaged groups 'as there are too many cases when it could be argued it will not pay to pursue diversity."

A combination of approaches - ethical, social, business and legal - is most likely to produce the best workplace diversity results. In the public sector, the OECD (2009) observes that "diversity plays a part in maintaining core public values, increasing managerial efficiency, improving policy effectiveness, raising the quality of public services, and enhancing social mobility." It notes that a commitment to diversity and encouragement of diverse opinions and perspectives will lead to public servants who are motivated, committed and able to develop innovative reform strategies.

The United Kingdom (UK) Cabinet Office (2008) agrees: "Through understanding the diversity of society, by better reflecting the aspirations, experiences and needs to the people we serve and by respecting and valuing differences, we can provide the policies and services that people want from us. To do this effectively, we need a workforce with the best possible mix of existing and future talent."

International situation

Most of the international literature focuses on women, although many findings also apply to minority groups facing workplace barriers.

The pipeline for women is in peril, according to Catalyst, a New York City-based non-profit research group that specialises in women in business. Its survey of MBA graduates in Asia, Canada, Europe and the United States (2010) shows that when it comes to top talent, women lag behind men in advancement, compensation and career satisfaction. The findings hold true even when considering men and women with the same aspirations, and only those who did not have children.

As early as 1990, Thomas said the 'pipeline' approach generates a recruitment-oriented cycle that is doomed to fail. He said that while affirmative action is necessary to gain a diverse workforce, it fails to deal with the root causes of prejudice and inequality within a company and puts the burden of cultural change on the newcomers. Increasingly, the problem is not getting women and minorities in at entry level, but making better use of their potential at every level, especially middle and senior management.

Another Catalyst/Opportunity Now UK study of the attitudes of top-level women executives and CEs (2000) showed both groups agreed that the key barriers to women's advancement were commitment to family responsibilities, male stereotyping and preconceptions about women's roles and abilities, and lack of visibly successful senior female role models. However, CEs were more than twice as likely as senior women to believe that opportunities for women to advance to senior leadership in their organisations had greatly improved in the previous five years, and were more likely to believe that women hadn't been in the pipeline long enough.

A decade later, little has changed. In the New Zealand Listener (2010), Barnett says most women who make it to the top are childless or keep their children from view. She quotes a recent issue of The Economist: "Motherhood, not sexism, is the issue. In America, childless women earn almost as much as men, but mothers earn significantly less."

An unexpected finding from McKinsey (2007) was that the career choices of both male and female middle and senior managers are mainly influenced by their professional environment and personal aspirations rather than family considerations. However, almost twice as many women as men in the international survey were childless and almost twice as many were single, suggesting that women pay a higher price for success. This is confirmed by a Harvard

Business Review survey that shows the higher women climb up the corporate ladders, the fewer children they have, whereas the reverse is true for men.

McKinsey says the 'double burden' syndrome - the combination of work and family responsibilities - weighs heavily on women, especially when combined with the dominant 'male' model for rising through the ranks. They say women's ambitions are restrained by "an acute awareness of barriers," and that the decision by many to 'opt out' of the workforce at some point in their careers is both a result of those barriers and an additional cause of the shortfall of women in top management.

O'Neil and Bilimoria's study of US professional women from their 20s to their 50s (2010) finds three distinct phases in women's careers:

· idealistic achievement (ages 24-35)

· pragmatic endurance (ages 36-45)

· reinventive contribution (ages 45-59).

Organisations need to understand, recognise and support these phases to retain talented professional women.

New Zealand situation

Diversity in both public and private sector New Zealand organisations has slipped or stagnated in recent years. Most of the 364 respondents in an EEO Trust Diversity Survey (2007) said their organisation had a positive diversity culture. However, even best practice organisations showed a decline in Māori and women in senior management since 2005 (with a small increase in the number of Asian and 'other' ethnicities). There was also a decline in the proportion that integrated their diversity strategy into their core business strategy, prepared written action plans and trained managers in diversity management. Only 21 percent measured the effectiveness of their diversity practices.

Early indications for the 2010 Human Rights Commission stocktake of women in leadership in public and private life also suggests that improvement in many areas is likely to be minimal and has in some cases regressed. The Commission notes that the New Zealand Government ratified the United Nations' Convention on the Elimination of Discrimination against Women (CEDAW's) in 1985 (United Nations, 2010).

The Ministry of Women's Affairs recorded that women made up 42.3 percent of ministerial appointees on State sector boards and committees by the end of 2008, compared with 8.7 percent on private sector boards.⁹

International public sector

An OECD report (2009) identifies a number of obstacles to diversity in the Public Service. Many of these obstacles relate to unclear or complex regulatory frameworks, lack of financial resources, rigid human resource management frameworks, and cultural barriers. "These limitations need to be addressed from a whole-of-government perspective to be overcome," it says.

The need for a big picture approach is a common theme. Hutchison and Eveline argue that the lack of a systematic and coordinated response to women's leadership development has resulted in a limited talent pool for leadership recruitment in the Western Australia public sector.

Public sector women interviewed by Kathleen Townsend (2009) identified a number of factors in their low representation in senior management in the South Australian public service, including:

· 'anointment versus opportunity' for senior roles

· slow and bureaucratic recruitment system

· women waiting for opportunities to occur rather than looking outside their own divisions or departments

· having to give up tenure to accept an executive position

· the perceived difficulty of work/life balance

· the male culture of organisations

· low turnover of top jobs

· women going to work for the private sector or setting up their own businesses.

Hooker's study of the recruitment of under-represented groups into the senior UK civil service (2008) mentions 'old boy's networks', flat organisational structures, racial discrimination, bullying and harassment as barriers to progression.

New Zealand public sector

Australia New Zealand School of Government (ANZSOG) research (2009) looks at ways to attract more women to CE positions in the New Zealand Public Service, and makes comparisons with the Australian Commonwealth and Victorian public services. Although Australia has a slightly lower proportion of women in tiers 2 and 3, they started from a lower base and appear to have greater momentum. Key findings of the research are:

· New Zealand women are less interested than their Australian counterparts in applying for a CE position and are more likely to perceive the role negatively

· some women are more reticent than men to put themselves forward for promotion

· women need greater encouragement to apply for CE jobs

· access to targeted career support, training and development is important

· female trailblazers can encourage women to aspire to CE positions in the longer term

· women face additional trade-offs because of family commitments and child rearing.

The Commission's Equal Employment Opportunities: Progress in the Public Service (2001) reported "encouraging signs for the progression of women, Māori and Pacific peoples into professional and managerial roles... at a much higher rate than their current overall representation in those occupations". While noting that some barriers may still remain for women, it said, "the proportion of senior positions that are occupied by women is moving to match the overall proportion of women in the Public Service".

Just five years later, the Commission's midpoint review of EEO policy (2006) revealed that the policy had largely failed to meet its objectives. Reasons were not always clear. However "for most of the Public Service EEO has tended to be regarded and implemented as a human resource practice." The lack of sector-wide leadership, and what was perceived as "inconsistent advice" from the Commission further complicated the policy.

The report found departments were unclear about the right level of representation for certain groups. It said patchy progress across different departments was masked by an overall improvement for EEO groups across the sector. Smaller organisations faced capability issues, along with lack of resources and specialisation to implement the policy. Self-assessment was deemed to have failed, and uneven leadership from CEs stymied implementation and progress: "...in the main, attempts to achieve political equality - such as EEO - have operated in such a way that 'target groups' have continued to be defined in relation to the existing dominant groups. In other words, these 'target groups' are simply added to the existing dominant power structure but the essential qualities of the structure remain the same".

The Commission's second Career Progression and Development Survey (2005) showed an increase in levels of ambition in the New Zealand Public Service since an earlier survey in 2000, particularly for Māori and Pacific public servants. Women were less likely than men to want a senior job, but the gap between the two had significantly decreased.

The survey identified the greatest deterrents to applying for a higher-level position were lack of the right experience and qualifications, concern about balancing work and family responsibilities, no desire to locate to another area, and no desire to work additional hours.

Women were more satisfied with their careers than men, in spite of the gender pay gap, their under-representation in senior management and their high representation in low-paid occupations. However, the report warned that women are not a homogeneous group and that differences in seniority and ethnicity were likely to affect their perspectives. It also noted that some of the findings for Māori, Pacific peoples and women reflected their younger age profile. The greatest difference between Māori and Pacific peoples and other workers was the relative importance they attached to leave to meet cultural, religious or community obligations.

Research conducted (but not published) by the Commission in 2009 into the recruitment and appointment of CEs finds no evidence of intentional bias or barriers for women, Māori and other minority groups. However, it highlights the potential for indirect or unintentional bias. Key findings are that women's rate of application for CE positions has decreased, women are less likely to be appointed when they do apply, and fewer women than men are in the 'feeder pool' of senior managers. If these trends continue, there will be fewer women CEs in future. The position for Māori appears to be similar, while representation of Pacific and Asian peoples in senior management positions needs to increase before there is likely to be an increase in their applications for CE roles.

Best practice

Culture change and leadership

As stated earlier in this literature review, a combination of approaches (including ethical, social, business and legal approaches) is the best way to encourage diversity. Many commentators warn that without an over-arching framework, specific initiatives will inevitably fail.

McKinsey (2007) says the efforts of European companies that are champions of gender diversity "amount to nothing less than a cultural revolution." Practices will only develop when top management is convinced that diversity brings a competitive advantage and commits to implementing change, under the leadership of the CE.

Maitland (2009) agrees. She says companies leading in gender diversity display three characteristics. They have:

· understood the wider reasons for change and why their own company culture must change

· led the gender drive from the top and ensured that male, as well as female, leaders are deeply involved

· shifted their focus from getting women to adopt, and adapt to, 'male' patterns of behaviour.

Thomas (1990) argues that a move from affirmative action to affirming diversity is required. Organisations need to be clear about their motivation and vision to fully tap the human resource potential of every member of the workforce; change corporate culture, assumptions, systems and models; expand the focus of diversity to include age, background, education, function and personality differences; and understand that managing diversity is a change process, and managers need support to implement it.

Pio (2010) says while blatant racism is practically non-existent in New Zealand workplaces, hidden bias is "alive and kicking." Proactive policies and practices are needed, including mentoring, recurring and mandatory training of managers and supervisors, organisational diversity assessment with periodic monitoring and analysis, along with appropriate authority and resources.

With regard to the public sector, the OECD (2009) says, "... the most advanced diversity initiatives contain a vision statement linked to political commitment of government to pursue diversity as part of the government's political, social and economic agenda. A government-wide vision helps to tie diversity initiatives with broader strategic and reform objectives."

Changing behaviour to create a civil service-wide inclusive culture is the key theme of the 2008 UK strategy 'to embed diversity in every aspect of civil service', underpinned by strong leadership and talent management systems. A Diversity Champions' Network has been formed to guide the strategy and support individual departments' action plans.

Hutchison and Eveline (2007) identify the need for public sector organisations in Western Australia to adopt a holistic approach if they want to attract and retain women leaders. They recommend implementation of a sector-wide leadership development framework and appointment of a government minister solely responsible for women's leadership development, supported by a single unit.

Recruitment

Adapting the human resources management system to ensure recruitment, appraisal and career management systems do not hold women back is one of four best practices identified by McKinsey (2007) as essential for the development of gender diversity.

The Corporate Leadership Council's research into Fortune's 50 best companies for minorities (2004) suggests those that have the best diversity practice in senior positions hire internally (and that external recruitment companies place very few candidates of this kind). Instead, effective employee development programmes, mentoring, affinity groups and strategic entry-level hiring produce effective succession options.

On the other hand, Kathleen Townsend (2009) says the use of external agencies is critical to 'widen the net' and increase the volume of applications from women and candidates outside the public sector. She says approaching candidates directly is an effective way of targeting specific groups, and setting requirements for firms to show evidence of their efforts to attract female candidates would not be unreasonable. "Having a target of a minimum percentage of women, unless there is clear counter argument, is worth considering."

In 2009, the Commission looked at how to encourage diversity and support candidates throughout the CE recruitment and appointment process. The research provided recommendations on improved systems for collecting and monitoring information on the gender and ethnicity of candidates, understanding candidates' aspirations, perceptions and experiences of the process, and setting expectations of those involved in recruitment and appointment to ensure they encourage and support diversity. The research also provided an implementation plan to improve care of candidates throughout the process, particularly to ensure that unsuccessful candidates are not discouraged from applying for other CE roles.

A year earlier, the Commission analysed the impact of the Leadership Development Centre on CE appointments. From February 2007 to September 2008, 48 candidates were short listed for 12 Public Service appointments and the Parliamentary Counsel Office. Of the 44 from the State sector, almost half (fifteen men and five women) were or had been in the Leadership Development Centre executive leadership programme and, of these, four men were appointed. Ten other members of the ELP/ALP (nine men, one woman) also applied for roles but were not short-listed.

Positive discrimination

Implementing key performance indicators (such as the proportion of women in various business groups and levels of management, pay levels and attrition rates between men and women in similar functions, and the ratio of women promoted to those eligible for promotion) is the first of four best practices identified by McKinsey (2007) as essential for the development of gender diversity. This will raise awareness of the gaps and define priorities for action, they say. However, quotas are not appropriate "as their secondary effects are viewed as unacceptable by our interviewees."

Other commentators also question the appropriateness of targets. Greer and Virick (2008) say a 'talent pool' approach is better than a targeted position-specific approach. Positive discrimination, or special programmes may be hampered by the stigma of special treatment and often fail when their champions leave.

On the other hand, research by Rutherford and Ollerearnshaw (2002) into private and public sector organisations in the UK shows that "despite reservations about terminology and fear of a 'quota' mentality, the leading organisations felt that they needed to set some specific equality and diversity targets or goals." Seventy-nine percent of respondents explicitly considered diversity and equality in setting organisation-wide objectives and many had senior executive and board objectives on diversity.

The UK diversity strategy also sets targets for representation of women, people from minority ethnic backgrounds and disabled people in the senior civil service, as do some Australian state governments. Australian women interviewed by Townsend (2009) did not want to gain or hold a position merely because of a target mandated by government. However, recently appointed executives noted that the targets probably did influence the decision-makers making their appointments.

Training and development

McKinsey (2007) says women's under-representation in some fields, especially engineering and management, deprives them of a large number of potential jobs, especially in top management. To speed up change, they say, requires redefinitions of 'men's jobs' and 'women's jobs' at an early age, giving greater prominence to career advice in secondary schools, and redesigning top executive profiles to enable leadership positions to be reached through other career tracks than those currently in favour.

The Commission's Career Progression and Development Survey (2005) says the two most significant barriers to career advancement for Māori and Pacific staff are not having the right experience or qualifications. It says supporting staff to gain further qualifications and access to study leave will improve career advancement opportunities for these groups, while providing opportunities for on-the-job training and experience in a range of tasks is also important.

Mentoring

Helping women to "master the dominant codes" and nurturing their ambition through coaching, network-building and mentoring is one of four best practices identified by McKinsey (2007) as essential for the development of gender diversity.

Most commentators agree about the importance of mentoring. Greer and Virick (2008) say mentoring is particularly successful when mentors are paired with those coming from the same group as the person being mentored. However, Hewlett (2010) warns that women's networks sometimes offer support without assisting women to successfully progress to the next level. She says what women need is a sponsor. "More than a mentor, this is someone in a senior position who's willing to advocate for and facilitate career moves, make introductions to the right people, translate and teach the secret language of success."

In 2010, the Australian Institute of Company Directors launched the ASX 200 Chairman's Mentoring Programme, involving 56 of Australia's leading ASX 200 chairmen and experienced directors mentoring 63 'highly talented' women over a period of 12 months. Townsend (2009) notes a similar scheme has been initiated by American Express.

The Commission's Career Progression and Development Survey 2005 shows nearly all public servants who had mentors reported that it had assisted their career development. Managers, women, Māori and Pacific public servants were most likely to be mentored, and most mentoring relationships were informal.

Flexible work practices

Implementing measures to facilitate work-life balance (including flexible working hours and career flexibility and support during breaks such as maternity leave) is the second of four best practices identified by McKinsey (2007) as essential for the development of gender diversity.

Townsend (2009) says some women are concerned that taking flexible work options early in their careers may slow their promotion prospects. However, such options are generally seen as positive, especially when accompanied by committed leadership from the CE and the HR director. She gives the example of eight new work/life balance policies introduced by the South Australian Department of Premier and Cabinet in 2007, which led to an increase of women in the senior executive from 32 percent to 41 percent the following year.

The Commission's Career Progression and Development Survey (2005) found that flexible working hours were highly valued by both genders, and was the work-life factor both were most satisfied with. However, results showed women still take more responsibility than men for the care of dependants and that this impacts more on their working lives.

A Human Rights Commission review (2009) reports that of the 77 Crown entities that reported on flexible work practices, a little more than half provided evidence of formal flexible work policies, many of which go beyond legislative requirements, and the rest said they offered staff a variety of flexible work arrangements.

Age

An Equal Employment Opportunities Trust (EEO) report on workplace ageing and gender (July 2009) concludes that changing demographics mean employers in all occupational areas need to adopt employment practices that are more attractive to older workers. This is backed up by a KPMG International study (2009) that says many public sector organisations appear worryingly slow to react to the challenges of an aging society. While New Zealand was not included in the countries surveyed, it showed only around a third believe that that its senior management is serious about this issue and taking active steps to address its implications.

Personal responsibility

Some commentators note that credit must go to women and minorities who do succeed in rising through the ranks. Senior UK women executives and CEs in a Catalyst/Opportunity Now study (2000) attributed their career success to consistently exceeding performance expectations, developing a style with which male managers were comfortable, and developing and adhering to their own career goals.

Kathleen Townsend came to a similar conclusion after interviewing women in the South Australian public service. "Overall, those who were successful at the executive level had realised that they had taken responsibility for their career advancement themselves," she says.

⁹ However, the overall percentage of women on state sector boards may be lower, as not all members are ministerial appointments.