Can you beat disruption without closing the gender gap? Why it s time for consumer product and retail companies to get serious about leadership diversity
About our surveys As part of the EY global Consumer Products and Retail (CPR) gender diversity program, a survey of senior leaders in the industry was carried out in the Americas, EMEIA and Asia-Pacific. The study was designed to explore trends and changes that are currently impacting CPR and the extent to which diversity of thought and experience plays a role in navigating those changes. In November 2016, the same survey was conducted in Australia to understand how the Australian CPR industry compares to other global regions on key metrics related to gender diversity. Ninety-five percent of respondents were board members, C-suite directors or business unit leaders. The female:male split was 38%:62%. Difference brings brilliance. If you all look the same and act the same, the output will be the same. Elizabeth Reynolds, Area General Manager, GSK Consumer Healthcare 1 Can you beat disruption without closing the gender gap?
Contents Foreword 3 Women are under-represented in Australia s CPR sector 4 Why gender diversity? 5 Improve corporate performance 5 Attract a Next-Gen workforce 6 Differences between male and female perspectives: unconscious bias in action 7 What can CPR companies do differently? 8 Questions to ask your organisation 8 Are senior leaders sponsoring rising female stars? 9 Do you have champions of gender diversity? 10 Are you using KPIs? 11 What can CPR women do? 12 What can CPR men do? 12 It s time to take decisive action 13 Contacts 14 Can you beat disruption without closing the gender gap? 2
Foreword Australia is lagging the world in leadership diversity at a critical inflexion point in market development This year, technological disruption and digitalisation continues to create ever more challenging issues for Australia s Consumer Products and Retail (CPR) sector incumbents. To be successful in navigating these turbulent waters, CPR companies are going to need to be agile and innovative in developing new products and services that meet the changing demands of their consumers. Their ability to leverage the power of diversity in their teams will separate the winners from the also-rans. In a sector where the vast majority of purchasing decisions are made by women, it makes sense that more than half of Australia s CPR employees and nearly 48% of its managers are female ahead of the global average. What fails to make sense is that this is not the case at the very top. In Australia, only 11.8% of CPR CEOs are female behind the global average of 19%. Compounding the lack of diversity is an average total remuneration pay gap of 13.6% across all types and levels of employment, which becomes as wide as 24.9% in full-time, key management personnel employment 1. Lack of leadership diversity has always been a problem for the sector. But it could become a crisis as disruption intensifies. Right now, 99% of Australia s senior CPR leaders admit the sector is in a period of monumental change. Local retailers are facing more challenges than perhaps at any time in history. Rapidly evolving technologies, innovative new competitors and morphing consumer behaviours are changing the market landscape and forcing businesses to evolve quickly and innovatively just to survive. Only 8% of local CPR leaders describe their leadership team as very prepared to meet the challenges of increasing competition and disruptive new business models. Against this backdrop, it is encouraging to see 97% of the sector s leaders recognise that diversity of thought and experience are crucial to ensuring their businesses survive the disruption. To this point, more than two-thirds (69%) say they need to do more as an organisation to attract, retain and promote women into leadership; almost three-quarters (74%) believe they need to dramatically change the way in which they manage talent in general. But how? As our survey reveals, Australian CPR sector thinking on this topic is out of step with that of the rest of the world. While many local companies are focusing on culture, competitors in the Americas and Europe are focusing on formal development programs and networking opportunities. Based on Australian and global surveys, in-depth interviews with female CPR leaders and the latest curated research from around the world, this report suggests practical steps for the sector s companies and individual women and men themselves Gender pay gaps Showing all full-time part-time casual Results for 2016 Total remuneration (all) male Base remuneration (all) male Managers (all total remuneration) Key management personnel male Other executives / general managers male Senior managers male Other managers male 13.6% pay gap 10.6% pay gap 24.9% pay gap 12.7% pay gap 24.7% pay gap 20.2% pay gap Source: Workplace Gender Equality Agency, Commonwealth of Australia. to improve leadership diversity. We hope it provokes immediate action that will dramatically boost the performance of local CPR businesses. female female female female female female Mark Phillips People Advisory Services Leader, Consumer & Industrial Products Glenn Carmody Consumer & Industrial Products Leader 1 Workplace Gender Equality Agency, Commonwealth of Australia. 3 Can you beat disruption without closing the gender gap?
Women are under-represented in Australia s CPR sector Despite the recognised need for gender diversity, women are still substantially under-represented at senior levels of leadership in the CPR sector. Women make up 58.4% of the total retail workforce; however, only 11.8% are CEOs lagging behind the global average of 19%. Looking within the CPR sector, female employment is highly concentrated in part-time and relatively low paid roles, such as clerical and administrative (79%), community and personal service (67.9%), and sales (63.5%). The percentage of women in leadership and management roles also varies considerably across sub-sectors. Clothing, footwear and personal accessory companies have the greatest percentage (53.7%) of women in leadership and management roles, compared with 18.8% for hardware, building and garden supply companies. Australia Global 11.8% 19% female CEOs female CEOs 47.9% female managers 37% female managers 58.4% female employees 46% female employees Source: Workplace Gender Equality Agency, Commonwealth of Australia. Source: Women in the workplace 2016 Sometimes it is about coaching your leader to be a better leader and help them understand how flexibility can work. Stephanie Nixon, Chief Financial Officer, Lion Can you beat disruption without closing the gender gap? 4
Why gender diversity? Improve corporate performance Women tend to be more cross-functional than men: they tend to look more outside their silos and therefore make more insightful decisions and improve the communication within the company. Loic Rethore, Managing Director, Nespresso Overwhelming evidence tells us that companies with a higher proportion of women on their senior executive teams perform better and are better equipped to navigate disruption than their less diverse competitors 2. In 2011, Catalyst research found companies with 3+ female board members had an 84% higher return on sales, 60% higher return on investment capital and 46% higher return on equity Yes and we have evidence for this compared to those companies with no women directors. Companies with a higher proportion of women on their board committees outperform their sector in terms of operating results (11.4% vs. 5.8%) and stock price growth (64% vs. 47%) 3. For profitable firms, a move from no female leaders to 30% representation is associated with a 15% increase in net revenue margin 4. Yes and we have evidence for this No 17% 17% No 17% 17% 66% Yes, but we don t have evidence for this 66% Yes, but we don t have evidence for this 15% Belief that gender diversity improves financial performance 4 Belief that gender diversity improves nonfinancial performance 4 net margin increase if companies had 30% or more female leaders 5 2. Women matter, McKinsey & Company 3. Ibid. 4. EY, Gender Diversity in Consumer & Retail Products Survey, Nov 2016 5. Is Gender Diversity Profitable? Evidence from a Global Survey Marcus Noland, Tyler Moran, and Barbara Kotschwar, Peterson Institute for International Economics & EY, February 2016 5 Can you beat disruption without closing the gender gap?
Attract a Next-Gen workforce Gen Z are entering the workforce now bringing in a generation of employees very different than any we have known before. Sector leaders need to understand who Gen Z workers are and what they want from an employer. Gen Z employees were born into a world where gender is increasingly more fluid. Most prefer non-gender-specific products and shopping at unisex stores. Gen Z consider gender to be a subjective experience and view conventional attitudes as insulting. For these employees, gender equality and orientation is a vital and nonnegotiable right 6. Theirs is the attitude of Canadian Prime Minister, Justin Trudeau, when he was asked to explain his genderbalanced cabinet: Because it s 2015. 7 Many retailers have already felt the full force of Gen Z as consumers. They are informed, equipped and have the highest expectations. Now Gen Z are about to become key players in retailers talent strategies as well. Just as Gen Z are less loyal retail consumers largely uninterested in traditional loyalty programs, cards and promotions they are also harder to retain as employees. 8 What Gen Z want are work opportunities that offer greater flexibility, more control, the ability to work from home and a greater variety of work. Critically, flexibility to balance work and life responsibilities are now as important to men as they are to women. Both men and women want the option to work remotely away from the office and flexible working hours. 8 Sector leaders can no longer assume that women alone want these benefits, or that the demand for flexibility is only driven by family-related needs. Soon every senior leader will expect flexible work options, and should expect that their teams are going to expect it. The internet has created a consumer who is very knowledgeable and who can get access to huge amounts of information very quickly. You have to know what is important to her if you are going to succeed. Rebecca Hard, General Manager, Sussan Work-life balance is important to both men and women Q. When considering job satisfaction or career goals, would you consider this one of the three most important job benefits? Balance work-life responsibilities 73% 73% Flexible working hours 63% 65% Able to take extended time off for personal interest 58% 58% Option to work remotely 53% 49% Source: Next-gen workforce: secret weapon or biggest challenge? EY 2016 6. EY, What if the next big disruptor isn t a what but a who?, Marcie Merriman, 2015. 7. https://www.theguardian.com/world/2015/nov/04/canada-cabinet-gender-diversity-justin-trudeau 8. EY, Next Gen workforce: secret weapon or biggest challenge?, Marcie Merriman, 2016. Can you beat disruption without closing the gender gap? 6
Differences between male and female perspectives: unconscious bias in action When it comes to the barriers holding women back, research shows a noticeable difference in opinion between the sexes, with male respondents often failing to perceive an issue as being important. While 27% of female respondents in the CPR sector see an organisational bias against women within their company, only 6% of male respondents feel the same way. Almost a quarter of women say senior leaders do not support women to reach leadership positions, compared with only 6% of male executives. These differences in perception are creating barriers that actually prevent women from reaching senior leadership roles. If men believe the problem has been solved, how can women continue asking for more or better solutions? The question of ensuring there are enough female candidates for senior leadership positions also reveals a fault line. Only 13% of women believe there is a strong pipeline of female candidates, compared with 32% of their male counterparts. Similarly, 18% of women said their organisation was ineffective at retaining women, whereas no male respondents believed this was true. 7 Can you beat disruption without closing the gender gap?
What can CPR companies do differently? EY research found that CPR businesses in Australia trail global efforts to achieve gender diversity Many local companies are still relying on creating a more inclusive corporate culture to help women break through into leadership positions. Our survey shows 76% of respondents in Australia said this was their No.1 priority, vs. 52% in the Americas and 50% in Europe. In contrast, companies in the Americas are placing a greater priority on formal sponsorship programs to identify and promote future female leaders; while those in EMEIA countries are investing in networking opportunities and leadership training for women. What Australian organisations have identified as the most important aspects for helping women reach leadership 76% Supportive corporate culture 48% Presence of strong female role models 59% Flexible working arrangements 41% Mentoring from senior leaders 65% Supportive corporate culture 38% Flexible working arrangements 46% Presence of strong female role models What global organisations have identified as the most important aspects for helping women reach leadership 44% Mentoring from senior leaders Source: EY, Gender Diversity in Consumer & Retail Products Survey, Nov 2016 Are we building a female talent pipeline? Identify Engage Develop Sponsor Promote Retain Questions to ask your organisation What can we do to become an employer of choice for women? How do we benchmark against competitors? What return to work programs will we offer to returning parents? What can we learn from sectors that are more gender diverse than ours? How is a lack of diverse leadership impacting our ability to innovate? What is our plan to achieve gender diversity in our leadership team? Do we have formal training and sponsorship programs to identify and develop potential female leaders? Are we assigning women to strategic roles, with profit and loss responsibilities, so they get the experience they need to progress to senior leadership positions? Can you beat disruption without closing the gender gap? 8
Are senior leaders sponsoring rising female stars? Sponsorship proactive, instrumental intervention to advance a person s career is critical to help women overcome career and progression barriers, such as informal networks between men. Traditionally, women have been offered relationshipfocused mentoring with a relatively junior mentor; whereas, men are more likely to be actively sponsored by a senior member of the management team. This type of sponsorship is highly effective in increasing objective career outcomes, such as promotions and pay increases, by providing proactive career-related support. It is vital to increase the numbers of women moving through the management pipeline to senior leadership. What can sponsorship achieve? Accelerate the careers of high performers Help individuals meet the unique challenges of executive roles and alleviate the perceived risks associated with moving into new areas with little experience Address the challenge of female representation at senior levels by targeting the career advancement of women in general and advocating the progression of high performing women in particular Guide an individual towards opportunities that can maximise movement towards career goals Develop the leadership skills and reputation of senior leaders who act as sponsors, since they are able to gain feedback and learn more about the way the organisation operates at all levels Make high performers visible within the organisation Women s Leadership Initiative (WLI) at GSK The WLI helps to accelerate female development for leadership roles through coaching and mentorship. The program extends around the world connecting people in different offices and cultures. Its vision is for GSK to be an outstanding healthcare organisation that embraces a culture of inclusion, with women and men working side by side, empowering women to realise their full potential without limitations. There s now not just a we need to do this because it s been mandated but actually we want to do this because it s bringing something different. Simone Anderson, Chief Operating Officer, Sunrice 9 Can you beat disruption without closing the gender gap?
Do you have champions of gender diversity? Gender diversity change initiatives only work when leadership, and particularly the CEO, is on board. The critical role played by executive leaders as champions for any type of organisational change agendas is well accepted 8. For example, the Male Champions of Change (MCC) program, which works with influential leaders, has redefined men s role in taking action on gender inequality. It activates peer groups of influential male leaders, supports them to step up beside women. The MCC demonstrates the power of male leaders to support the value of initiatives to improve gender diversity and actively promote them. Research shows that both men and women believe that men make better leaders of gender diversity 9. Women executives, themselves a minority group, subjected to intense visibility and scrutiny and operating within masculine cultures, can be seen as self-serving in advocating for gender diversity. Whereas, having a male champion re-positions gender diversity away from being a female s problem. It also places responsibility and accountability for change with those with positioning power 10. This is essential. We cannot expect women to fix themselves or come up with the solution. What needs to change is a system built by men, for men that can only be changed by its creators. The role of a champion is to consistently demonstrate that gender diversity is important by: Going on the public record about the issue Attending events Securing funding for female leadership development programs by putting pressure on decision makers. Currently, only one in four (24%) Australian consumer products and retail organisations has a structured program for identifying and developing women into leadership roles, compared with 62% in the Americas. Leaders need to make championing diversity part of their public identify. If high-profile and well-liked champions walk the walk in this way, organisations will accept and move more quickly towards gender diversity. Females need supporters not mentors. They need people to push their case so they get appointments. Diane Smith-Gander, Non-Executive Director, Wesfarmers Policy is a huge aid, but not the sole lever. The desire of leadership for change and their resulting actions are the key for success. Guy Russo, Chief Executive Officer, Department Stores, Wesfarmers Limited 8. Kotter, J.P. (2007), Leading change: why transformation efforts fail, Harvard Business Review, Vol. 85 No. 1, pp. 96-103. 9. de Vries, J.A. (2015), Champions of gender equality: female and male executives as leaders of gender change, Equality, Diversity and Inclusion: An International Journal 2015 34:1, 21-36 10. Blackmore, J. and Sachs, J. (2007), Performing and Reforming Leaders, SUNY, New York, NY. Can you beat disruption without closing the gender gap? 10
Are you using KPIs? Like any other business goal, companies are unlikely to improve gender diversity unless they set goals and measure progress. Despite 57% of Australia s CPR companies publicly disclosing their gender diversity performance, less than half (48%) have metrics to monitor their progress on increasing female participation in the senior management team and only a third (34%) have metrics for female representation in the senior management team. This compares to 86% and 57% respectively of CPR companies in EMEIA. That said, setting KPIs without changing other parameters will not improve performance. They merely help keep organisational focus on the goal of achieving leadership diversity. CPR companies that monitor progress in female participation in senior management teams 48% 86% Australia EMEIA 62% 67% Americas Asia-Pacific Actually achieving diversity like anything means that you need to believe it is important, and that doing it will make a difference to the business. Otherwise, you won t be committed to it. Holly Kramer, Non-Executive Director, Woolworths Limited 11 Can you beat disruption without closing the gender gap?
What can CPR women do? Be bold and confident. Take charge of the next phase of your career. Communicate what you want and have a plan. Seek guidance. Seek mentors to provide advice, guidance and coaching. Seek a sponsor, be a sponsor. Sponsors can endorse you for promotion and recommend you across wider networks. As you progress, help female colleagues navigate their career paths and endorse them within your networks. Be a role model. Female leaders can be one of the sparks that enables someone else to see an opportunity that they may not have otherwise seen. What can CPR men do? Men can close the gender gap by making diversity a personal priority. Be a mentor, be a sponsor. Be generous and share your knowledge and experience with female colleagues. Help female colleagues navigate their career paths and endorse them within your networks. Avoid groupthink. Consider whether your team has sufficient diversity of thought and experience to avoid groupthink and develop innovative solutions. Check your bias. Consider critically where unconscious bias impacts your decisions about who to work with, who to hire and how to network and collaborate. Give women the opportunity to succeed. Create a culture of diversity and inclusiveness that encourages both men and women to excel. It is so important that women are true to themselves and don t change to fit stereotypes or to be part of the boys club. Women are far more successful if they walk in their own shoes rather than trying to walk in the shoes of others particularly in this industry. Belinda Tumbers, Managing Director, Kellogg Australia and New Zealand Can you beat disruption without closing the gender gap? 12
It s time to take decisive action In a year of monumental change, diversity of thought and experience will be crucial to ensuring CPR businesses survive the ongoing disruption. To improve gender diversity and optimise their top talent, CPR leaders need to: Take a critical view of where you are now and where you need to be. Do not assume gender parity will take care of itself. Implement key enablers of gender parity from increased and more inclusive networking opportunities to formal training, sponsorship and mentoring programs. 1. 2. Set targets and measure against them. Establish concrete targets regarding gender diversity, and then measure the progress towards this target and make leaders accountable for them by using clear metrics to count the numbers of women at all levels and in all areas of your business. Become an employer of choice for women by asking women what they want. Implement formal programs to identify potential female leaders and ask your female employees how you could improve the senior leadership pipeline. 3. 4. Understand the challenges and the solutions from those who have lived it. Create opportunities for open dialogue between men and women. Decide what actions you will take now to create a more inclusive and successful organisation. 13 Can you beat disruption without closing the gender gap?
Contacts Glenn Carmody Consumer and Industrial Products Leader +61 3 9288 8467 Glenn.Carmody@au.ey.com Anne Giugni People Advisory Services Leader +61 3 8650 7624 Anne.Giugni@au.ey.com Lisa Nijssen-Smith Assurance Leader, Consumer and Industrial Products +61 2 9248 5697 Lisa.Nijssen-Smith@au.ey.com Richard Taylor Consumer and Industrial Products +61 2 9248 5278 Richard.M.Taylor@au.ey.com Mark Phillips People Advisory Services Leader, Consumer and Industrial Products +61 3 9288 8007 Mark.Phillips@au.ey.com Can you beat disruption without closing the gender gap? 14
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