Sunday, March 27, 2011

Today's Challenge

Up until about the 1970s and 1980s, for every 100 people we trained in business and law school, about 90-95% of the graduates were men.  Possibly half of them, at some point in their careers, went on to become entrepreneurs who built businesses, perhaps even took those businesses public, and built a board of directors. Most of them tapped that same pool of educated businessmen and lawyers to serve in the boardroom.

Today, in the 21st century, for every 100 people we train in business and law school, probably 50-55% of them are women.  Half of the 45-50% of male graduates might still build businesses, go public and build a board of directors. But, what of the majority who are now women graduates?  What percentage of those women go out and build a business at some point in their career? What percentage of those who build a business take that enterprise public and sell shares to investors at large?  What percentage of that subgroup builds a board of directors? 

Census data tells us that less than 3% of women-owned businesses in the U.S. reach the threshold of $1 million in revenues per year. (Currently, that means about 117,000 firms.) Women’s organizations which survey women-owned businesses estimate that about 13.6% of these top dollar firms even have a board of directors.

As men build boards of directors, they acquire the governance experience needed to help other businessmen chart a strategic long-term growth trajectory.  If women are not building businesses, not building boards of directors for their businesses, then where will women acquire the governance experience they need to serve? If the 50-55% of business and law school graduates are not building boards or hiring board members, shouldn’t we expect that the total supply of potential director board seat opportunities would decline?  This is exactly what the data indicates.

A new priority for 21st century women is to examine this challenge.

Thursday, March 17, 2011

Do Women Consumers Qualify as Directors?

Shall we revisit the theory that women “ought” to be corporate directors because they are the primary consumers in the economy? First, does anyone believe that the theory might work in the other direction?  If venture capitalists are great at investment, does that qualify them to be great consumption decision-makers?  Women who complain about the poor shopping skills of their otherwise financially-savvy mates probably would say, “NO!”

Let’s look at the boards of three prominent grocery companies, well-known for their incredible ability to deliver on consumer expectations:

            Whole Foods
            Bristol Farms
            Trader Joe’s

Would you expect that women were instrumental in the creation and strategic growth of these consumer-oriented firms?  Or did men figure out the business solution to address household demands?

Whole Foods has an 11 person board of directors with 2 women, one who represents the investment sector, Gabrielle Green of Rustic Canyon, and the other, Stephanie Kugelman, who comes from the advertising powerhouse, Young & Rubicam.

Bristol Farms is a private firm with venture capital holdings by Endeavor Capital. (Kevin Davis is principal from Endeavor, with Inna Pak in an investment advisory role.)

Trader Joe’s also is a closely-held private firm headed by Dan T. Bane as sole shareholder.  

As consumers, women make their demands, wants, needs and preferences known in the marketplace by their purchasing decisions.  That is significantly different from women as investors seeking strategic returns on capital.  That is why these companies have investors rather than consumers on their boards.  

Interestingly enough, not even those “personality cult” enterprises that focus on women – Martha Steward Living Omnimedia and Oprah Winfrey’s Harpo Entertainment Group – have a significant presence of women on their boards, either.

Until Claudia Slacik of JP Morgan Chase was added to MSLO in December 2010, there was only one other woman among seven men on the board.  And the Chairman is a man, Charles A. Koppelman.

Harpo historically has been a “one woman show” both live and corporately.

Rather than focus on trying to get corporations to add more women to their board rosters, perhaps we need more women building corporations and bringing women into their boardrooms.  That is something within our ability to control.

Tuesday, March 15, 2011

Machiavelli and Darwin’s Finches

Niccolo Machiavelli (1469-1527) was an Italian writer and statesman, a Florentine patriot and, most importantly, author of The Prince on The Art of Power – the most complete advice for leaders.  In Chapter 6, Machiavelli wrote the following "Concerning New Principalities Which Are Acquired by One's Own Arms and Ability:"

“And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, then to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

Does this not aptly describe those who wish to introduce “a new order of things” – specifically, an increase in the number of women directors on corporate boards?  As innovators, they encounter the resistance of “all those who have done well under the old conditions.”  And they find they have merely “lukewarm defenders in those who may do well under the new [order].” 

Machiavelli is describing the reality of human nature. The "ins" have little or no incentive to help anyone unseat them, while the "outs" are not strong or committed enough make change happen.  So, what do women advocates do? They argue that passage of a piece of legislation demanding quotas will somehow overcome this impasse.  Except that it takes the "ins" to pass the legislation and the "ins" to enforce the law should it ever be passed.  And the "outs" have insufficient power to accomplish either.

Instead of trying to change human nature, we might learn a lesson from Charles Darwin who observed the behavior and survival tactics of animals and birds during his voyage around the world on the H.M.S. Beagle.  He wrote about different types of finches in his research journal on the natural history and geology of the Galapagos Islands -- big billed finches and small billed finches, in particular.  In good times, the big billed finches tended to dominate and take most of the berries and nuts that grew prominently on upper branches of the trees.  The smaller billed finches had to scavenge around to find remnants dropped into the rock crevices below.  But, when the food supply was endangered (as in a drought), the big billed finches could no longer rely on a conspicuous bounty. They starved.  The small billed finches, already adept at finding sustenance in the niches, survived difficult times. 

The lesson for women advocates is to look for and capture the niche opportunities that are abundant beyond the reach of the big birds -- the "ins".  Finding sustenance in the smaller markets on the edge will make it possible to feast without competing directly with the big birds – the "ins".  Learning how to survive on the edges is excellent preparation for dealing with the challenges of greater scarcity.

Not Every Woman is Financially Savvy

Not every woman is qualified to serve on a corporate board.

Wells Fargo has studied women of all ages. Generally, they found women unprepared when it comes to financial planning. The firm conducted 1,756 telephone interviews of middle-income U.S. residents in their 20s, 30s, 40s, 50s and 60s, surveying attitudes and behaviors about planning, saving and investing for retirement. So, if women cannot plan strategically for their own financial futures, what are the odds that women can do so for corporations as directors?  It takes financial savvy to perform at the board level – not every woman can do that job equally well.

According to the sixth annual Retirement Survey from Wells Fargo & Company:

Women save less than men – a median of $20,000, compared to $25,000 for men. Just 54% of women said they are “confident” they will have enough saved to “live the life they want” in retirement, compared to 62% of men.

Women are unsure or unrealistic about what their annual withdrawals should be in retirement.  Almost 30% of women between the ages of 40 and 69 are “not sure or can’t estimate” how much they will need to withdraw from their retirement savings annually while in retirement. About 32% of women in their 40s and 50s estimate they will withdraw 11% to 30% or greater each year.

Women set their sights lower than men. Whether married or single, when asked how much they thought they would need to support them during retirement, women said they are aiming for a median of $200,000, whereas men predict they will need retirement savings of $400,000.

Women are wary of the stock market as a place for investment gains. Just 27% of women have confidence in the stock market as a place for investment gains for their savings, compared to 40% of men. If given $5,000 to “put away for your retirement,”40% of all women say they would purchase bank CDs instead of putting the money in the market, compared to 30% percent of men.

Women are much less likely to characterize themselves as the “primary” financial decision maker than are men (35% vs. 55% of men), across all age groups. Among married women, 83% say they are the joint financial decision maker whereas 58% of married men say they are a joint decision maker.

Women respondents indicate they are less likely to have a pension (40% vs. 48% of men) or a 401(k) available to them through their employer among those employed (71% vs. 76% of men).

Women are also less likely to believe that Social Security will be available to them (38% vs. 42% of men) when they retire.

These survey results are a concern especially since women often outlive men and need to be able to take care of themselves.

In response, Wells Fargo started a blog for women led by Laurie Nordquist, Executive Vice President and Director for Wells Fargo Institutional Retirement and Trust, called beyondtoday (blog.wellsfargo.com/retirement/) to help women plan for the future.

Source: Business Wire press release, dated February 02, 2011.


Learning from the Leaders


Burberry (37 per cent) - Iconic British luxury clothing brand
* Centrica (36 per cent) – sourcing gas and electricity for residential and commercial markets
Diageo (33 per cent) - consumer goods companies with portfolio of world-famous drinks brands
* Aviva (31 per cent) - the world's sixth largest insurance group and the largest in the UK
* Alliance Trust (30 per cent) - self-managed investment company with investment trust status
* Pearson (30 per cent) - an international media company with world-leading businesses in education, business information and consumer publishing
* British Airways (30 per cent) - airline
J Sainsbury (30 per cent) - leading food retailer with interests in financial services
* Victrex (30 per cent) – manufacture of high performance polymers

Executive search firms are not the only source of candidate lists. The Fortune, Forbes, FTSE top 50 and 100 women in leadership or power women represent natural executive search treasure troves.  So too are the International top women in leadership lists of each of the above.  Recently we now see the “up and coming” or “alternative” list from the same sources.  North Carolina law school has a diversity director database, as does CalPERS and NACD. If companies really want names of outstanding women, these resources are the obvious ones to tap. No quotas required.

Maybe we should learn from these leaders?

Look Carefully At The Arguments

Let’s stop dealing in the emotion of this issue – getting more women directors appointed is not an issue of “justice,” “wrong” or “evil.” It IS a question of competence. The latest tirade is from The Guardian. Before The Guardian gets a little too puffed in its own pants, let us remember that there are only 2 women directors out of a board of 11 (or 18%) at the Guardian Media Group (GMG). Also, couldn’t the GMG find a woman to replace departing president Carolyn McCall? GMG announced the appointment of Andrew Miller as chief executive officer in July 2010. Sorry, I don’t know the headcount at The Scott Trust Ltd., the owning entity.  But I would be surprised if there were even close to 18%.

“Almost every senior woman in business argues that quotas would devalue women's achievements.” If almost every senior woman is arguing against quotas, why not listen to the experienced women in leadership and recognize this likely adverse effect? Why is it that women directors are responsible for “helping” their sisters get into the boardroom by “correcting a situation that is clearly wrong.” Why aren’t more women in business reaching the $1 million a year mark and building boards for THEIR businesses and bringing women onto THEIR boards?

“Women who made it to the top in business state that nothing stopped them from making it to the boardroom.” Yet, innuendo abounds that women who have made it to the top “pull up the drawbridge,” thereby preventing other women following them. All the evidence points to the opposite – women in leadership strongly advocate on behalf of other talented women. 

There is a presumption that those who made it to the top should make it “easy” for others to follow. Are women today not as competent as those who made it to the top earlier? There are suggestions that women who made it should “lower the drawbridge” to make it “easy” for others to follow them. Isn’t this the “devaluation” mentioned above?

There are reportedly endless reports about how to "encourage" women into the boardroom. Doesn’t this suggest that women are reluctant bridesmaids who need to be enticed into the boardroom with favors and promises of special treatment?

Why are there more women as part-time independent directors? Aren’t women willing to put in the full time effort required to be a director?

The argument that “there is plenty of evidence that putting women on boards correlates with better business performance” is not clear as to the direction of the causation.  Do companies have better business performance and THEN bring more women on board? Or do companies bring more women on boards and, as a direct result of that action alone, produce better business performance? The fact that women repeat these superficial research arguments, without understanding the underlying causation, suggests that they might also be easily duped by fancy CFO and Auditor PowerPoint presentations.

Let’s not knock Laura Tyson – her work back in June 2003 probably was the most significant summary of the value of diversity up to that time. The Tyson Report represented the findings, not simply of one individual, but rather a 14 member panel of distinguished leaders (including 7 women).  Most of the articles since then have not added real substance, but rather only “fluff” pieces.

See my summary:

Friday, March 11, 2011

Tone at the Top

What exactly do we mean when we say an organization is defined by the ”tone at the top?”  You may have noticed that I have been unavailable for three months due to various challenges: one involving the City of Santa Monica, another involving the City of Los Angeles, and the third involving Cedars Sinai Hospital.  I’ve had a chance to experience, first hand, what “tone at the top” actually means. 

Cedars-Sinai, first, demonstrates an amazing commitment to quality that pervades the organization.  In five separate visits/stays there, my family has experienced leadership that starts at the top of the organization and ends at tiniest details of hospital service – down to every single person washing their hands regularly, religiously.  We saw five separate parts of the hospital and 95% of the personnel were all cut of the same cloth – charged with figuring out what “should be done” and then being a part of that solution.  We saw special clinical dedicated to asking the patient/family directly and personally what they experienced, were their contacts with the hospital according to “protocol” and “procedures” – meaning the expectations that start at the top and trickle down throughout every person, on every floor, of every section. We saw staff literally dashing to their next duty – not meandering, not roaming and chatting.  Rather, a STAT inside every one.

Yes, there were a few who did not meet this exacting standard – there are humans who don’t get it.  But, there were many more others who consistently out-performed relative to expectations such that we suspect those who had a priority of “going on break,” rather than find a wheelchair for a patient ready to leave for home, will not be at Cedars for very long. 

Yes, we could talk about improvements we would like to see in the patient information technology system.  We wish we hadn’t been there five times.  But if it should have to happen, we are thankful for the people of Cedars and for the incredible “tone at the top.”

Second was the City of Santa Monica regarding a second “crisis” more along the lines of property damage due to the rains.  The tone at the top came from the leadership of Building and Safety and their inspection process.  If you have to go through the trauma of repairing, rebuilding, inspecting, testing and re-inspecting, at least you can hope for the quality of people and processes we experienced in Santa Monica. Sh*t happens, and sometimes the best you can hope for is a pretty good electronic scheduling system, relatively thorough inspectors who respect the value of your time, and B&S staff who understand their own system and can explain it to you quickly. 

Then there is the City of Los Angeles.  For starters, has anyone every tried to communicate with The Tone At The Top, SeƱor Tony?  The man denies the existence of communications technology.  Email? Phone? Messaging? None!  Your only choice is to listen to his boring message on the 311 line or watch the dumb video on his web site.  Tone at the top includes the President of the City Council who regularly appears on local radio and TV to advize citizens to call 311 and open a Service Request to get the city to deal with problems from the December rains.  The real reason for opening Service Requests is that City personnel detest any and all forms of communication with vile humans called constituents.  It’s like the short-order cooks at your local greasy spoon who insist that waitresses put their orders on the spindle so the cooks don’t ever have to come in contact with anyone, but can do what they want when they want. Has anyone ever heard back from a Service Request?  Not in my lifetime!

Tone deaf at the top.  Pervasive all the way through the organization.  The real priorities of city personnel become apparent when you physically go to an office to request a service or public documents.  On the counters you will see – not documentation to facilitate your access to city-monopolized solutions – but rather newsletters describing the status of the union’s pension fund. 

Corporations have the opportunity of behaving like a Cedars, a City of Santa Monica or a City of LA.  Home Depot was like LA, but is becoming more like Santa Monica.  Johnson & Johnson was a Cedars, but is moving away from that leadership role. Where is WalMart today? P&G? and a host of all those other leading firms?  Where is the SEC or the FDIC in terms of leadership today? 

Leaders DO set the tone at the top.  And we (the constituents, the clients, the customers and the patients) are the ones who see the results every day in our every dealing with the entity. That is the lesson from the past three months.

I’m BA-A-A-C-K!