By Peter Barraket:
There are quantifiable benefits for increasing diversity in your leadership ranks. A study by McKinsey & Company titled Diversity Matters concluded:
- Companies in the top quartile for gender diversity were 15% more likely to have financial returns above their national industry median;
- Companies in the top quartile for ethnic diversity were 35% more likely to have financial returns above their national industry median; and
- Companies in the bottom quartile for both gender and ethnic diversity were 25% more likely to underperform than companies in the other three quartiles combined.
By embracing and increasing diversity across your leadership ranks, not only do you increase the success of your leaders, you also get financial results.
One of the more common outcomes our clients are looking for, when they choose to work with us, is to increase the chances of leadership success in their work environments that are constantly changing. To that end, one of our first steps is to fully understand the leadership’s current and future work environment or context. From there we are able to build a success profile and devise steps to help them get there. We then with help their leaders to successfully align their workforce capability with their organisational aspirations.
Insights into how organisations can better achieve leadership success while increasing the depth of leadership strength can be drawn from a recent article published by SHL titled Leadership Diversity: A New Approach to the Gender Gap. The insights extend beyond gender diversity to also include both ethnic diversity and skill diversity.
One initial key observation is that companies need to consider the current work context that by now most people acknowledge is at ‘unprecedented’ levels of volatility, uncertainty, complexity and ambiguity (VUCA). This is something we have written about many times before. Research cited by SHL reports 66% of all leaders and almost 50% of leaders who move into new roles, fail to meet their objectives because they are not adapting quickly enough to the new world of work. Critically, they fail to take advantage of opportunities or move quickly enough away from threats.
SHL recommend that in this context, taking a data driven approach to defining and building leadership success while removing subjective measures of leadership performance provides the necessary clarity and certainty when assessing and developing leadership performance, skill and bench strength. Research tells us that only 13% of organisations have a strong leadership pipeline and this percentage is declining. Interestingly, while 77% of leaders effectively accomplish their own objectives, only 12% effectively contribute across the organisation to achieve others goals. This last statistic alone reflects a significant opportunity for organisations to increase leadership success by leveraging diversity across the organisation.
When assessing leader effectiveness, SHL suggest managers tend to ‘stereotype’ leaders using a leadership success framework that historically is made up from leadership characteristics that are primarily male-oriented. This creates unconscious biases against female leaders. Research cited reports 74% of organisations have a lower percentage of women flagged as ‘high-potential’ than in the general workforce. This represents a ‘failure of leadership management’.
Data collected by SHL using its Occupational Personality Questionnaire (OPQ) shows women performed better in 21 out of 27 workplace context challenges. For example: they report ‘Gender difference on OPQ scales that tend to be positively related to leader performance’ and note that while men recorded a significant positive difference for Persuasion; women had a significant positive difference in: Trusting; Affiliative; Democratic; Conscientious; Behavioural; and Caring. There was no significant difference between men and women in: Decisive; Achieving; and Controlling.
The SHL article presents four root causes of this failure of leadership management. By flipping those causes into solutions, what we have crafted here are 4 ways to build leadership success in a world laden with volatility, uncertainty, complexity and ambiguity:
- Throw out your current leadership models, recognise that VUCA is real and design a leadership model that suits.
- Avoid ‘one-size-fits-all’ leadership competencies – they do not take into account the complexity of todays work context and are a hand brake on adaptability. Instead, make flexibility and adaptability a core competency and attribute required of all leaders.
- Review current promotion and selection choices and ensure they provide enough diversity.
- When thinking gender diversity: Acknowledge and embrace leadership skill of women in the workforce
- For ethnic diversity: Embrace different ethnicity to help boost innovation, creativity and overall organisational outcomes
- For skill diversity: Develop more variety in your organisation’s skill profile and leverage that for greater leadership and organisational success
- Do not use gut instincts, instead listen to the research, make more diverse selection choices and get better results.
 V.Hunt, D. Layton, and S. Prince, Diversity Matters (London: McKinsey & Company, 2014).
 SHL 2019 Leadership Diversity: A New Approach to the Gender Gap. Version 2
 Gartner 2013 Succession Management Survey.
 Gartner 2015 Creating Enterprise Leaders.
 Gartner 2016 HIPO Study