Making a business case for diversity
Diversity in senior management and board leaders is important, because it brings diverse perspectives that can bring the company forward.
“If we want to make diversity an important imperative for companies, then it needs to be considered as a business imperative, not a social imperative,” said Ms Euleen Goh, Chairman, SATS, who was one of the speakers at the recent webinar “Leadership Diversity and Firm Performance: A Study of Singapore Companies”.
Ms Goh emphasised, “Don't have diversity for the sake of diversity, have good diversity. Therefore, the board’s consideration is not just to have the right female ratio. It's about understanding what we are looking for in diversity that would help the board.”
The event was jointly conducted by the Centre for Governance and Sustainability (CGS) at NUS Business School, consultancy firm Connecting the Dots and EDGE Strategy. DBS and the Securities Investors Association (Singapore) (SIAS) were supporting partners.
The event came on the back of a study that was led by CGS Director Professor Lawrence Loh. Analysing data from 577 publicly-listed companies in Singapore, the study found that a firm’s performance is highest when it has an equal number of male and female leaders. Firms also fare better when they have leaders with more than 10 years of industry experience. In contrast, firms with a high proportion of leaders aged over 60 do not fare as well. About 200 people attended the webinar.
Distinguished Professor Andrew Rose, Dean of NUS Business School, said that CGS’ research is timely given the unprecedented challenges that companies are facing among the many problems that the COVID-19 pandemic brings. He said, “Astute and qualified leaders with a diverse set of capabilities and attitudes and attributes are needed to take their organisation through such difficult times.”
Regulators have set the tone on leadership diversity. The Singapore Exchange Regulation had introduced rules for listed firms to set a board diversity policy. In his opening speech, Mr Tan Boon Gin, CEO of the Singapore Exchange Regulation, said that it is important for listed firms to demonstrate how the diversity targets result in the skills, experience and values necessary to support the company’s long term strategic objectives.
Deliberate in driving diversity
How diversity can be achieved was discussed among the panelists, who hail from the academic sector and various industries. Moderating the discussion was CGS’ Advisory Board member Prof Lutfey Siddiqi, who is Visiting Professor-in-Practice at the London School of Economics and Adjunct Professor at the NUS Risk Management Institute.
Ms Low Chin Loo, APAC Head of EDGE Strategy, said it is very important that at the middle and senior management levels as well as at the board level, managers are trained to take on an unbiased approach towards promotion. This extends to considering diversity as a key element during hiring.
To fellow panelist Ms Ng Ying Yuan, diversity is always a work in progress, even for top organisations. This is because humans are tribal by nature and tend to seek similarity. Ms Ng, who is Chief Operating Officer of Group Human Resources and Group Business HR Institutional Banking at DBS, said this is why efforts to drive diversity within a large organisation must be deliberate and institutionalised, rather than left to chance.
The end goal, she contends, is to have diversity of ideas and perspectives. While other forms of diversity, such as those related to demographics or experience, can serve as good proxies, companies need to be intentional in pursuing these goals, rather than chase some arbitrary number.
Women in family firms
The webinar zoomed in on women in family-run firms. These firms are significant in many parts of the world, accounting for 60 to 80 per cent of Gross Domestic Product (GDP) and jobs.
Mr Yuelin T Yang, Deputy Group Managing Director of IMC Industrial Group, shared several attributes of family firms that could affect leadership diversity. Family businesses can often be patriarchal and seniority-based, while management of these firms can sometimes let emotions override objectivity, or prioritise family over outsiders.
However, there was a 2014 study by EY and Kennesaw State University which showed 70 per cent of 1,800 family businesses considering a female for the next role as CEO. The potential reasons include women thriving in a more inclusive family firm environment and given more time to prove themselves.
Mr Yang urged more research to be done on women and family firms, including women who do not have family ties with the firm.
The woodpecker example
The discussion on diversity ended with a woodpecker analogy.
In his closing address, Mr Uantchern Loh, Vice President of SIAS and CEO (Asia Pacific) of Black Sun, asked the audience where they would find a woodpecker. The obvious answer is in the woods or among the trees. But unknown to many, some woodpecker species can also be found in the desert. Mr Loh urged for a mindset to look for diversity in places where one will not usually consider.
The next step is to create the right culture or environment for diversity to thrive. Mr Loh pointed out that there are over 230 woodpecker species in the world not because nature has a quota, but because environment and the evolution process made it so.
Rather than engineering a quota to reflect good diversity, having the right mindset and the right environment would do better in auguring diversity in today’s organisations.