Trends, trends, trends; New Year is always the time of predicting how the next 12 months will shape up. And the big look for the UK’s businesses in 2018 is one of diversity.
Our research says that ambitious entrepreneurs are recognising that this isn’t a case of ticking boxes. It’s a race to produce profitable businesses that grow, by creating genuine relationships with every customer and nurturing a company culture that attracts the best new candidates – and keeps them.
Take the somewhat bittersweet news of last summer, that the number of female CEOs on the Fortune 500 had increased from 21 to 32. That was a record for the Fortune 500; it represented 6.4% of the list.
Granted, the Fortune 500 may not be the most proportionate representation of today’s business landscape and even a small win counts as progress. Still, it felt about time that the importance of diversity in boardrooms and management teams is recognised for what it is – a potent recruiter, a facilitator of growth and a market maker.
Our latest Ambition Nation report suggests that attitudes are changing to that effect. It’s been a long time coming but we can see how entrepreneurs do now draw a direct link between diversity in senior management and the bottom line.
Of the 1550 companies we’ve spoken with to compile the report, published in partnership with leading commentators ExplainTheMarket, and which delves deeper into understanding the DNA of British SMEs, three quarters planned to increase gender diversity in their leadership teams.
There’s a simple reason why business growth and a diverse leadership team are inherently linked. We interviewed one leader of a company with a turnover in excess of £100 million, who put it pretty succinctly:
“Our leadership team is 60% female, we have a good mix of LGBT leaders and we are a pretty ethnically diverse top team. This gives us an inherent edge when it comes to that kind of ‘strategic empathy’ brands need to stay ahead of customer demand. It helps us develop how we tell stories to the world that truly engage people.”
At the core of finnCap’s offering is our ability to find the right investor and the right kind of investment to marry with our clients’ investment stories; it isn’t difficult to see the advantage of an investment story told by a management team whose values and influences reflect all corners of society.
Our qualitative research shows the business leaders recognise that diversity is a strategic imperative. It represents a critical advantage in terms of maximising growth opportunities, by opening up innovation and new ideas, finding long term investment, creating profitable customer relationships and perhaps most importantly creating a positive culture that attracts and retains the best talent.
Interestingly, it’s looking to be a point of competition. Said another company leader:
“More regulation is on the way. We want to get the diversity strategy right now to make our growth path smoother and our numbers better. Diversity is going to be a factor that holds back our growth if we get it wrong.”
Getting things right must start at the top. Indeed, we’ve found the growing perception amongst British business leaders is that hiring and retaining diverse management teams bolsters a rich pool of ideas that will be crucial to maximising growth opportunities over the next two years.
The challenge of change
As diversity in the boardroom becomes better seen as the driver of growth stories, CEOs are also beginning to recognise that this doesn’t come without its challenges. Not least, companies should be acutely aware of the steady millennial influx. People born between 1980 and 1995 will comprise half of the UK workforce by 2020, according to a KPMG survey from earlier in 2017, and half of those will be female, a greater proportion of female workers than ever before, according to a report by PWC.
While it’s easy to generalise, it cannot be ignored that this is a generation with a higher tendency to job-hop and that is less easily retained, feels more accountable to the wider world and more sensitive to the socioeconomic impacts of where they work, and in most modern Western societies has grown up in a diverse culture.
These are all universally true points to bear in mind in creating a diverse and dynamic business, and a key barrier to growth this year looks likely to be the mounting pressure to come up with practical solutions to diversify the look of your management team. Another company leader told us:
“We know we are not where we want to be on gender balance in the boardroom, but it is very hard to know how to practically make changes. No one would disagree with the principle, but what do we actually implement on Monday morning? That is so much harder to agree on.”
This is of course a question of culture change. Just as the business community as a whole wakes up to the fact that changing the culture of diversity actually brings tangible rewards, so too must individual companies set about creating that internal culture that reflects the society they operate in. That starts from the ground up – demonstrating a hiring process, employer brand and employee engagement strategy that supports and promotes diversity, and being transparent about recruitment processes and social responsibility.
It’s through our Ambition Nation initiative that finnCap is speaking to companies who are doing just that, and who can inspire others with what they’ve learned about adapting to the changing terrain of the investment landscape. With big changes can come trepidation, and that’s why we’re talking to as many scale-up companies as possible with Ambition Nation, to learn from and try and emulate strategies that work and that, ultimately, have created growth and secured the right kind of investment.
Those stories of creating a culture of diversity don’t create themselves overnight, but if the Fortune 500 is any measure, there seems to be plenty of room at the top for the companies that succeed.