Melbourne Business School News Why Chief Executive Women is calling for 40:40:20 targets

Why Chief Executive Women is calling for 40:40:20 targets

One of Australia's most influential business groups is calling on organisations to set a new target for gender balance in leadership.

Target and staircase graphic | Melbourne Business School

Despite some progress in the past few years, women are still significantly under-represented in leadership positions in the Australian workforce.

Women make up just 22 per cent of CEOs, 37 per cent of key management personnel and 42 per cent of managers in Australia, according to November 2023 figures from the Australian Government's Workplace Gender Equality Agency.

The same figures show that 34 per cent of board members are women, while 1 in 4 boards have no women at all.

It's what the agency calls 'seniority drop-off', where the proportion of women decreases as the level of management increases.

To address this, Chief Executive Women is advocating for all executive leadership teams to be comprised of 40 per cent women and 40 per cent men, with the remaining 20 per cent flexible to any gender.

"Like anything, it's unlikely for change to occur without first making a commitment," said CEO Marie Festa.

"Companies that set a 40:40 or better target are three times more likely to achieve gender balance than those without."

Chief Executive Women is Australia's peak body for representing prominent and influential women leaders from the corporate, public service, academic and not-for-profit sectors, with members who oversee more than 1.3 million employees and almost $750 billion in revenue.

As well as creating opportunities for women leaders through scholarships like the CEW and HMST Scholarship at Melbourne Business School, it also engages with all levels of Australian business and government to advocate for gender balance, and is making the call for 40:40:20 targets one of its key priorities this year.

Why 40:40:20 works

Ms Festa said there were compelling reasons for businesses to address gender balance, alongside the benefits to society as a whole.

"Looking at it through the lens of a shareholder, investment in gender equality leads to outperformance for business," she said.

"Research in Australia and around the world has found that companies with gender balanced leadership teams perform better on average.

"They deliver greater profits, have stronger talent attraction and retention, achieve higher returns, drive better ESG outcomes, have lower risk profiles, and better credit ratings."

Setting a 40:40:20 gender target for executive leadership teams gives organisations a clear measure of success, while also allowing them to respond to shifts in circumstances.

"This flexibility is necessary given that people come and go from companies, and the fact that not everyone fits into these categories," Ms Festa said.

Marie Festa, CEO of Chief Executive Women

How to achieve balance

Ms Festa's advice for companies who are serious about reaching a 40:40:20 target is to consider linking performance on achieving the target to compensation.

"Over 60 per cent of the gender-balanced companies interviewed in our 2022 Take It From the Top report linked Diversity, Equity, and Inclusion metrics to executive performance and compensation – so that's one powerful way to shift the onus for change."

Providing emerging women leaders with sponsorship and having senior male leaders role-model inclusive, respectful behaviour are also effective ways to support talent pipelines for women.

"Women are half as likely to have a sponsor as their male peers, according to the Harvard Business Review," said Ms Festa.

"Despite this, high-potential women who are sponsored – specifically by senior male leaders – are more likely to receive growth opportunities needed to prepare for executive roles."

Ms Festa pointed to BHP and Cromwell Property Group as two examples of businesses that have significantly improved their gender balance by setting targets.

"BHP is a well-known example of a company that set its gender targets and have since met them, which is quite an achievement in a sector that comprises just 17 per cent women," she said.

"Cromwell Property Group is another example — it is an ASX-listed company that in 2022 had no women in its leadership team. The company set a target of 40:40:20 gender diversity at all levels of the business, and now women represent 44 per cent of its executive leadership team."

Social and cultural barriers

Melbourne Business School Professor of Organisational Behaviour Isabel Metz said Australian organisations were under persistent pressure from government, shareholders and their own employees to rectify gender inequalities in the workforce.

But despite these pressures, their efforts had been limited.

"Australia's ranking in the global gender equality index was 26 in 2023 (out of 146 countries), down from its original 15th place in 2006," Professor Metz said.

"It is clear that Australian organisations can do much more to increase women's participation in the workforce."

Professor Metz said barriers to achieving gender equality in the workplace stemmed largely from cultural norms and beliefs, such as social gender roles in which women are expected to fulfil the role of primary carer, which results in more women than men working part-time.

This in turn leads to a second barrier – the perception that women who work part-time are less committed to work, precisely because social gender roles suggest they are more caring and nurturing, and less assertive and agentic.

"This perception of women as caring and nurturing also clashes with the stereotype of who is a leader," said Professor Metz.

"We tend to think of leaders as strong, assertive and agentic amongst other attributes. And these attributes are usually ascribed to men.

"When I ask students to name prominent leaders from today's world or from the past, it typically takes at least seven or eight names before a woman is mentioned – sometimes longer."

And these students are not alone.

"When academics were asked to list up to five names of experts in their field and five names of rising stars, female experts and rising stars were under-represented on the lists of male respondents.

"That is, the proportion of female experts and rising stars did not match the actual representation of senior academic women in those fields. In addition, women tended to appear late on the lists."

According to Professor Metz, these findings suggest that the names of male peers are more salient in men's memories than the names of equally accomplished female peers.

"Given that men continue to dominate decision-making roles, these discoveries enhance our understanding of the many and often difficult-to-detect barriers that women face to achieving equal participation in the workplace."

Professor Metz was one of five Melbourne Business School experts who shared advice this week on the best ways to invest in women to mark International Women's Day.

You can learn more about International Women's Day at the UN Women Australia website.

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