MWi’s guest article, More Inclusive Leadership Helping to Advance Wisconsin Companies, by Lindsay Hammerer was featured in the May/June Board Leadership: Innovative Approaches to Governance publication.
Board Leadership is a bi-monthly journal targeting CEOs, board members, board chairs and executive directors. The article includes MWi’s research, case-study examples, and best practices demonstrating the value of diversity and inclusiveness at the boardroom level.
Lindsay Hammerer is chair of Milwaukee Women inc. and partner at KPMG. MWi is an organization of professional women determined to change the face and quality of leadership in the Wisconsin business community by increasing the number of women corporate directors. In this article, Hammerer presents research and case‐study examples demonstrating the value of diversity and inclusiveness at the boardroom level.
“The Power of 3” is a strong statement for the value of women on boards of directors across any industry. Research from scholars and organizations compiled by Catalyst in a December 2018 report titled “Quick Take: Women on Corporate Boards” showed that three women or more are needed to create a “critical mass” of women, which can lead to better financial performance.
Reaching this critical mass can substantially change boardroom dynamics and enhance the likelihood that women’s voices and ideas are heard. Companies with fewer women on boards had more than average governance‐related controversies, while diverse boards had lower volatility and better performance, and invest more in research and development. Institutional investors are recognizing the value of gender‐diverse boards as well by starting to vote against all‐men boards in U.S. companies.
Catalyst’s research on “The Power of 3” highlights specific data to make a business case for inclusive leadership. The research shows that companies with three or more women directors outperformed those with lower representation in three financial metrics: return on sales, return on invested capital, and return on equity.
That research examined companies nationwide, but for the past 15 years in Wisconsin, Milwaukee Women inc (MWi), a nonprofit organization that works to achieve balanced representation of women on boards of directors to maximize the performance of Wisconsin businesses, has studied its local businesses and published its own research. In 2018, MWi’s report, titled “The Power of 3,” examined specifically how the state’s top 50 public companies (WI 50) were faring against this model.
‘Power of 3’ findings
The research found that Wisconsin companies are continuing to make strides in advancing inclusive leadership. Following a five‐year upward trend, growth in diverse leadership continues to steadily increase for the WI 50, with 22% of Wisconsin’s top 50 public companies having three or more women directors, a 33% increase from the prior year. Over half of the WI 50 (52%) now have two or more women board members, compared to only 6% 10 years ago.
Looking across industry sectors (consumer cyclical, financial services, industrials, technology, and utilities), Wisconsin publicly traded utilities had the highest percentage of female directors (33%), exceeding both the national and regional averages. However, in other industries, Wisconsin ranked lower when compared to neighboring states, such as Minnesota, Illinois, and Michigan.
Here are a few additional insights from MWi’s 2018 Research Report:
- Almost all of the Wisconsin health care systems and four‐year higher education institutions have three or more women on their boards of directors (100% of the not‐for‐profit, higher education institutions and 92% of the health care systems).
- Compared with U.S. S&P 500 companies, Wisconsin’s S&P 500 companies have a higher number of female directors (26.7% compared to 21.2%).
The research report also ranked the percentage of women executives at the top 50 Wisconsin public and private companies, with 30% of the companies having three or more women executives. This is considered to be a critical measurement, because female executives are the pipeline for women board positions.
Leading by example
Model companies, such as Alliant Energy Corporation, a Madison, Wis.–based public utility holding company, and Quad, a printing and marketing company based in southeastern Wisconsin, are ensuring their commitment to diversity extends across the organization through action plans that define best practices and measure results.
In MWi’s 2018 Research Report, Alliant Energy Corporation topped the WI 50 list with the highest percentage of female directors, which it has done for over a decade. Quad topped the WI 50 list with the highest percentage of female executives. Both companies, which rank in the top 15 on the WI 50 list, are proving that greater representation of women on their boards and executive leadership teams has helped the companies make conscious, thoughtful decisions about the culture, strategy, and focus of their businesses. And, for these top companies, greater female representation extends beyond the leadership or C‐suite. For leading companies, diversity and inclusion are a focus throughout the organization.
By keeping diversity top of mind and focusing on a companywide effort to implement inclusive leadership and thought throughout their businesses, these companies and their other successful peers have risen as best practice examples. Other organizations looking to re‐examine their efforts and prioritize diversity can consider some of the action steps that have worked for these Wisconsin diversity leaders.
Building a diverse board
Foremost, valuing diversity needs to be top‐down. To encourage diverse boards, businesses should implement inclusivity efforts throughout the organization, and the CEO should lead this effort. In order to encourage support for diversity and a companywide culture change, the CEO should show a visible commitment to this culture and set measurable and achievable outcomes.
At Milwaukee‐based ManpowerGroup, Jonas Prising, chairman and CEO, believes this wholeheartedly. “Change starts at the top. Culture is not the sort of thing you can delegate. The CEO has to own it, communicate it, and measure it,” he said. “As a freshly minted CEO a few years ago, I sent personal letters to each top leader in the company outlining my goals for talent development and gender parity at ManpowerGroup. Senior leaders know that growing workforce diversity is one of their key performance indicators as well.”
In 2018, ManpowerGroup was recognized as a “Best Company to Work for Women” in the United States by the Women’s Choice Award. For the company, achieving gender parity in the workplace is about more than policies and percentages. It is about owning the culture and the desire to want greater inclusion. The company’s guide, “Seven Steps to Conscious Inclusion,” shares a few actionable steps to accelerate women into leadership:
- Change yourself first.
- Leadership has to own it; do not delegate it.
- Flip the question—ask “Why not?”
- Hire people who value people.
- Promote a culture of conscious inclusion; programs alone do not work.
- Be explicit—women when and where?
- Be accountable; set measurable and achievable outcomes.
With an improved foundation, companies can look at a number of other ways to improve board diversity.
Diversify the candidate pool
Boards can begin by looking at their candidates. By diversifying the candidate pool, there is a higher likelihood that a more diverse director candidate will ultimately be appointed. To get started, invite each current director to identify a diverse director candidate. Then, insist on having a minimum of two diverse individuals on the slate every time.
Consider your criteria
Also important is the criteria for board candidates. Look for board members whose skills meet a distinct need on your board, rather than simply appointing another CEO or C‐suite executive. Possible candidates may not hold these roles and may not have prior board experience. However, if they fill a need, their skill set and experience can still provide invaluable guidance.
MGE Energy, Inc., a utility holding company based in Madison that has three female board directors on its 10‐person board, reflected on this consideration when looking at improving diversity.
“We have a long history of outstanding women directors,” said Gary Wolter, chairman emeritus of MGE Energy Inc. and Madison Gas and Electric Co. “When I became CEO 20 years ago, one of my mentors was a female director who helped to shape my thinking. When you have good experiences like that, you think ‘Where is the next person with that skill set?’ The pool of potential women directors is growing, but not fast enough. One thing CEOs can do is look at their board membership criteria more broadly and consider the full range of skill sets that can add value to the board, such as customer service, community involvement, and organizational capabilities. Broader experiences lead to better decision‐making, and better decision‐making leads to better performance. There’s a straight line between diverse experiences and the bottom line.”
Build a pipeline
Even if you are not currently in need of a candidate, consider building a pipeline for future board openings. Begin reaching out and cultivating potential diverse director candidates. To help, leaders can use technology and databases, such as MWi’s new CV database that houses an ongoing pool of potential candidates, or any number of other boards of directors candidate databases.
Sponsor your team
Advocate for your own executive women and peers for outside director opportunities. This can include reaching out to a network of peers to showcase your internal talent or talking with your internal executive women about the value of joining a board of directors. Interestingly, a recent Women in the Boardroom study found that too many women are not open to the idea of board leadership. Eighty‐six percent of women agree that there are many women qualified for board service who do not self‐identify or realize that board service is an option for them. The talent pool is far greater than is currently being exploited. In addition, only 34% of women agree that women advocate for other women to find corporate board seats. The perception of board roles and advocacy for women must change in order to encourage greater improvement in board diversity and inclusive leadership.
Michelle Kumbier, senior vice president and chief operating officer of Harley‐Davidson, Inc. and an Abbott Labs board member, shared her perspective. “I pursued a corporate board position for my own personal development, to learn how other companies run their businesses and to bring those learnings back to Harley‐Davidson. My advice to women interested in serving on a board is to be visible. Assess your board readiness. Look at your strengths and inventory your value; do not concentrate on your gaps. Be sure you can sell yourself to show you are board‐ready,” she says. “Boards are looking for great women who can provide unique perspectives. You do not need to be a CEO.”
No matter the industry or organization type, diversity in leadership helps expand the pool of thought.
As Philip B. Flynn, president and CEO of Wisconsin‐based Associated Banc‐Corp explains, “The women on Associated Bank’s board of directors play a significant role in ensuring we are candid with each other, and our actions reflect the diverse needs of our colleagues and customers. Their perception is integral in helping us identify and generate solutions that encourage creativity, innovation, and positive change within our organization.”
Study after study has shown the benefits of diversity on boards. We encourage business leaders to read the data, consider the best practices, and challenge themselves first, and then their board and executive leadership team, to make an actionable change—a change that can expand board perspectives, drive better decision‐making, and improve performance.
To access the article, click here.
Thank you to Reputation Partners for securing and drafting the guest article on behalf of MWi.