The double bind of sexism

Sexism is a cultural challenge that is entrenched in many Australian businesses. It is completely counterproductive, as many businesses are currently struggling to attract and retain talented people in a very competitive market.

Women outnumber men in Australia and have high workforce participation rates. The Australian Bureau of Statistics regularly calculates the sex ratio – which measures how many males there are per 100 females. In the most recent reporting period, Sydney and Melbourne’s wealthiest urban areas were shown to have some of the country’s highest proportions of women – with 94 men for every 100 women in North Sydney and Melbourne’s inner south.

Sexism can be overt behaviour by individuals, or embedded in the cultural assumptions and work practices of a business. Whether or not you directly spot it occurring in a workplace, you can certainly measure the outcomes it produces.

2012 Australian Census of Women in Leadership
2012 Australian Census of Women in Leadership
Female Executives within ASX 500 companies

The 2012 Australian Census of Women in Leadership report shows that a mere 9.2% of key management executives at ASX500 companies are women. This compares with 14% for US Fortune 500 companies, and 19% for companies in the New Zealand NZSX100. The ASX500 companies with the highest proportions of female executives are in pharmaceuticals, telecommunications, retail, and transport.

The disparity in achievement within the public sector is striking, with women comprising 35% of all directors across government boards at a federal level. 56% of ASX500 companies have no women at all on their board of directors, and 63% of ASX500 companies do not have any women in key executive roles.

It is quite clear that few Australian businesses are seriously addressing the sexism embedded in their workplace cultures.

One of the most interesting recent academic reports into the underlying factors causing the gender “glass ceiling” was published by Terrance Fitzsimmons from the University of Queensland Business School, titled “Do Australia’s top male and female CEOs differ in how they made it to the top?”. Drawing upon the results of a large number of previous academic studies, Fitzsimmons outlines the “double bind”, a core dilemma faced by female leaders who make it to a position of power.

In a nutshell, female leaders are viewed negatively by their direct reports when they are consultative, and also when they are assertive. In contrast, male leaders are perceived as more competent when exhibiting exactly the same behaviours. These perceptions can be seen played out in the daily media reporting of the federal election battle between Julia Gillard and Tony Abbott.

In response to the failure of the business community to improve female participation at leadership levels, some commentators have started openly demanding legally enforceable gender quotas for businesses. While binding targets are not likely to be introduced by any Australian government in the short term, the federal government have introduced several measures to combat workplace sexism and gender discrimination, with the most noticeable being the Workplace Gender Equality Act 2012. The main thrust of this federal legislation is to promote transparency, equal opportunity and equal pay in the workplace.

Workplace culture has a very significant effect on employee productivity, innovation, and retention. The entire organisation can greatly benefit from a culture that is more cohesive, flexible, and diverse. It is also crucial to remember that women are not the only people facing discrimination when applying for promotions within a business. People with disabilities, members of the LGBTI and Indigenous communities, and even older workers face very serious prejudice in recruitment processes.

Workforce recruitment and retention programs within many ASX500 companies are clearly failing. Business leaders need to lead by example, immediately speak out against sexism when it occurs, and take personal steps to ensure they hire, mentor, and promote a diverse range of people within their teams.

Homeless multinationals and taxing decisions

The digital economy has generated many changes in how we shop, stay in touch with friends, and manage our daily routines. Despite this, it seems that politicians around the world are only just starting to realise that the digital world has truly changed the economy.

The recent Australian federal budget was the usual mix of promises and projections. One of the more interesting facts presented was the Treasury estimate that since the 2008/2009 budget, federal government revenues from tax receipts have fallen by $170 billion dollars.

When it comes to tax revenue and government budgets, there will always be some level of political debate. It is now pretty obvious that traditional sources of government revenue are now insufficient, even when the Australian economy is powering ahead strongly. Particularly when you look at the backlog of infrastructure investments needed to keep the economy productive.

Painting by Carl Barks
Painting by Carl Barks

Whichever politicians end up running the country after the September federal election, there will be some very tough decisions to make on taxation.

In an interesting coincidence, the announcement of the shortfall in tax revenue has coincided with Treasury bureaucrats kicking off consultations regarding the tax treatment of multinationals doing business with Australians.

At first blush, the multinational taxation consultation process seems to be a rather belated reaction to major political rumblings aired in the G20 and OECD. The issue that is generating the angst is “base erosion and profit shifting” (BEPS), a rather dull way of saying tax avoidance.

BEPS is seen as a global issue worthy of the attention of the G20 for one simple reason – it is entirely legal, and can be used to avoid almost all corporate income taxes.

Businesses that are able to transact with clients online across international borders are the most likely to be able to profit from BEPS, but it is certainly not the only way corporate leaders minimise tax bills.

The UK parliament has recently been examining in minute detail how Google’s internal employee workflows have been structured to shift the legal location of a business transaction. The inquiry heard that despite employees, clients, and work occurring in the UK, Google has successfully claimed that business transactions are legally based in a foreign country.

Amazon has also recently received a huge amount of negative media attention for their UK tax affairs, which seem at face value to be far less adventurous than Google’s. Amazon is reported to have paid just £2.4m in UK corporate taxes last year on sales of £4.3b, while also receiving £2.5m in UK government grants.

But the biggest revelations to date have been thrown up by the US Senate, which recently grilled Apple CEO Tim Cook. The inquiry heard claims that a single Apple owned entity reported profits of USD $30 billion between 2009 and 2012, with no country receiving any tax on that income. Another separate Apple entity managed to pay a tax rate of 0.05% on $22 billion in revenue for 2011.

Perhaps the most important revelation has been that major entities used by Apple to conduct their worldwide business were described as “homeless” for tax purposes, with no country able to collect tax on their corporate income. This “homeless” status undermines some of the most fundamental principles underpinning the international tax and trade treaties relied upon by OECD and G20 nations.

Now business leaders are of course supposed to focus their attention on generating profits and pleasing shareholders. Minimising corporate tax bills can be an effective way to boost cash flows, profits and shareholder returns.

CEO bonuses usually depend entirely on achieving profitability targets and increasing shareholder returns. So it should be obvious that corporate leaders will structure business workflows and organisational design to maximise their bonus.

The result can be bizarre workflows spanning multiple international corporate entities and legal jurisdictions. When tax considerations trump customer service in decision making, it can make high quality customer service very difficult to deliver, and consumer rights unclear. In this digital age, corporate reputations can be quickly tarnished, and very expensive to repair. It has never been easier for the public to learn the financial affairs of large corporations.

Multinationals usually base major operational centres in locations which offer high quality infrastructure and workforces, all of which depend on a stable social environment with sophisticated government services.

If there is no government funding for infrastructure, crime prevention, education, or healthcare, then someone else will end up paying the price. There is a very good reason why there are so few successful multinationals headquartered in third world countries.

While BEPS is currently attracting media scrutiny, it remains to be seen how much impact that attention will have on actual corporate behaviour. While executive KPIs reward elaborate tax avoidance strategies, there will be little chance of corporate driven change.

On the other hand, politicians can always change the rules of the tax game. The international scale of the BEPS problem is already monumental, and politicians of all stripes are going to need corporate scapegoats to deflect inevitable community anger. Now is the time for corporate leaders to rebalance the risks they are taking with their tax affairs.

Taking the lead on customer service

2013 looks set to be a bumpy ride for many Australian leaders, with both businesses and governments facing some sobering challenges.

The Australian Bureau of Statistics kicked off the year with the news that retail spending had been virtually flat from September through to November 2012. Western Australia was the only exception, with the boom state managing only modest 0.6% trend growth.

Trend figures for household goods and clothing show shrinking revenues. The sector is dominated by imported goods, so revenues are no doubt influenced by the high Australian dollar and continued price deflation.

ABS_retail_turnover_by_state_Nov2012
ABS Australian Retail Spending Nov 2012

The one bright spot on the retail landscape was grocery retailers, who have managed to buck the trend and achieve consistent revenue growth. Over the corresponding period, there were also a number of major insolvencies amongst Australian food manufacturers.
In response to these flat retail figures, the Australian Retail Association decided to embark on yet another puzzling crusade, attempting to blame poor retail performance on the “dreaded” Carbon tax. Their fundamental argument appears to be that the Federal Government should now take responsibility for teaching businesses how to reduce costs through energy efficiency.

I suspect many ARA members thought that they were paying their annual subscriptions for access to retail industry expertise and training resources. If anyone is responsible for helping Australian retailers learn how to increase profits through efficiency, it is the ARA – not the Federal Government.

Unlike the carbon tax, customer satisfaction is a very critical issue that directly affects retail revenue and profitability.

The huge popularity and growth of online shopping is generating new expectations and service delivery heartaches for many organisations. Both traditional and online customer service channels should now be on the radar for all businesses and government agencies.

A November 2012 US survey of online shoppers by VHT showed that 60% of online shoppers experienced frustration or problems with online purchasing processes and had difficulty getting help. 50% of the people surveyed indicated that they wanted an easy way to request help from a human customer service employee while carrying out an online transaction.

In a separate survey of the US retail industry in Nov 2012, Motorola found that while people are in a store shopping, a large proportion would rather find product information themselves online using their phones instead of asking a shop assistant for help.

The preference depended heavily on customer age, with 46 percent of Gen Y and 36 percent of Gen X shoppers preferring to avoid the sales assistant. In contrast, older shoppers were found to be four times more likely to increase their spending if directly helped by a shop assistant.

Interestingly, the same study indicated that 70% of US shoppers would buy something in-store that was out of stock – if the sales assistant could process the transaction on the spot, and organise home delivery. US shoppers also expect retailers to offer free basic delivery for online orders. Few Australian retailers have implemented either of these simple customer service measures.

Governments across Australia are also facing the challenges posed by rising customer service expectations.

The NSW government has regularly commissioned reports into community satisfaction with service delivery, with the most recent NSW community satisfaction report published in March 2012. Consistent with previous reports, there were significant differences between the preferences and expectations of the general community and businesses.

NSW_Gov_customer_service_preferences

In recent months, the NSW government has outlined a broad strategy to lift service satisfaction levels by creating streamlined customer service “one stop shops” within the newly formed Service NSW. In addition to offering a single online portal for transactions with the NSW government, it is expected to operate a 24/7 call centre with a single contact phone number, and 18 shopfront locations around the state.

The consolidation effort will be very significant, with Computerworld recently reporting that current NSW government customer service efforts involve 380 shop fronts, 30 contact centres, more than 900 websites and 8000 published phone numbers.

To put the scale of the effort into context, the NSW government estimated in 2007 that 45% of their full time employees were involved in providing frontline customer service.

Achieving long term improvements in customer service involves a lot more than rolling out a great website and a well run call centre. It needs a sustained effort to change the culture of the organisation, and involve every member of the team.

Customer satisfaction KPIs and measurements should be built into workflows and prominent on executive reporting dashboards. Everyone within the organisation should be directly rewarded when customer satisfaction targets are achieved.

Simplifying product and service offerings can be a key component in lifting customer satisfaction levels, while also offering opportunities to reduce ongoing costs.

For many organisations, the popularity of online shopping and phone technologies have already shifted their customer perceptions of what constitutes “excellent service”. Keeping up with these rapidly inflating customer expectations is likely to require significant changes to business processes.

Some US CEOs get directly involved in social media when customers raise specific complaints about services. Even Rupert Murdoch has responded via Twitter to customers running into difficulties with newspaper subscriptions. Leaders need to visibly walk the talk, and show they are serious about customer satisfaction.

How to lead through uncertainty

In a market economy there will always be both winners and losers. That is the name of the game. But bad news attracts eyeballs in the media, and it is a pretty safe bet that your daily serve of news will be full of negative distractions.

In recent weeks the economy wrecking carbon tax has finally vanished from news headlines, and the death of the mining boom was recanted in the space of a single day. After a month of feel good Olympic reporting, it was almost inevitable that we would be due for another dose of doom and gloom. Stepping ably into the breach, both NSW and QLD state governments choose to announce major workforce reductions.

Actual business conditions are of course a positive story, and less likely to attract eyeballs. The ABS announced last week that the economy experienced annual growth of 3.7% for the June quarter, led by the mining, banking and healthcare sectors. Reinforcing the broad impact of our economic strength, CommSec analysed ASX200 company results and found 86% were profitable in their most recent period.

Boat on icebergOf course some industries are feeling pain due to the high Australian dollar. But the reality is that we are at full employment levels, and GDP growth and household savings are booming. Real labour costs are trending upwards, rising 1.4% in the quarter, which is hardly surprising given a full employment scenario in an economy growing strongly.

So why are measures of business confidence falling when operating conditions are good?

Perhaps it comes down to a general mood of uncertainty and poor corporate leadership. Job security is well and truly a thing of the past for most of the Australian workforce, and undoubtedly has an impact on workforce morale and productivity.

The latest ABS analysis of workforce mobility paints a truly Darwinian picture, with high rates of employee turnover across the entire economy. For those employees who recently moved into a new job, 57% changed industry and 42% completely changed occupation. These figures point to massive shifts in the workforce, and the difficulty in sourcing skilled employees. The industries which currently have the highest proportion of employees with more than 10 years of tenure included agriculture (54%), education (35%), public administration (34%), and manufacturing (30%).

Across the entire economy, the ABS analysis found that senior executives were by far the most likely group to still be working at a business after 5 years. It seems that many businesses are still deliberately shedding their most experienced frontline and mid-tier employees, while desperately hanging onto their leaders. It will be interesting to see whether the recent state government workforce cuts follow this same trend.

From a leadership perspective, the best way to deal strategically with uncertainty is to spread your risk, and make smaller moves that can be easily completed in short time scales. You should certainly avoid embarking on any grand plans.

I have often heard leaders cite uncertainty as an excuse to maintain the status quo. In reality, maintaining the course is likely to be one of the riskiest possible options in a truly uncertain environment. Strategically, you could liken it to the captain of the Titanic deciding to speed through a stretch of ocean filled icebergs, rather than slow down and adjust course.

In uncertain times, teams look to leaders for their certainty. When you find yourself navigating uncertain waters, you should expect to make frequent adjustments to your plans, and keep a watchful eye on both your clients and the market. Shared adversity can be a strong glue to help build a cohesive team environment.

Taking the risk out of diversity

The top ranks of Australian big business have garnered a well-deserved reputation for being a boys’ club. In 2011, 250 of the top 500 ASX-listed companies had zero women on their boards.

Despite the ongoing lobbying of the Diversity Council of Australia, appointments to directorships at ASX-listed companies have long been the almost exclusive domain of a rather homogenous group of men.

A 2011 research report by the Reibey Institute into the board composition of the 500 largest ASX-listed companies found that a mere 235 individual women held directorships in our largest public companies. Those women held a grand total of 10 chairperson roles and 307 directorships.

A more sensible team balance is clearly needed by many companies, and it is not just a matter of hiring more women. Skills and age diversity are also relevant, and are also lacking on many boards. Boards are meant to represent shareholders – not the interests of the incumbent management team.

While the DCA regularly promotes studies which attempt to link company performance with board diversity, a lot more research needs to happen before we really understand the numbers.

A very controversial recent study by the German Bundesbank looked in-depth at how diversity within executive leadership teams impacted overall risk management within the German banking sector between 1994 and 2010.

The uproar created by the study was intense. The study effectively found that German banks which had higher levels of female executive participation at a CxO level (between 1994 and 2010) had taken measurably higher risks.

While hyperventilating critics paint the report as another piece of misogynistic propaganda, it is worth looking deeper. If anything, the study findings argue that CxO level executive experience and qualifications are absolutely crucial to organisation-wide performance. The conclusion presented is that mandated quotas for female participation led to people with lower levels of experience being appointed, resulting in the adoption of higher levels of risk.

The simple reality is that many Australian businesses could benefit from taking a few more risks. Attracting a more diverse range of people (and skills) to your executive team will give you a wider set of experience to draw upon when you are facing challenges.

Diversity is not a compliance issue. It is a leadership issue that needs to be dealt with seriously by every level of your organisation. Sensitivity to workforce and customer diversity should be embedded into business processes, employee retention programs and hiring policies.

Quotas are the real risk to business performance, as they can sideline team members who have the highest levels of skill and experience.

The shifting balance of workplace relations

Workplace relations is about to become a lot more important for businesses that are looking to grow, and it has little to do with political sabre rattling from Canberra.

The ABS employment figures for February 2012 indicate an unemployment rate of 5.2% unemployment, with an additional 7.3% of people being classed as underemployed, or looking for additional hours of work. With Australia’s workforce participation rate effectively stable, we are clearly at full employment, and skill shortages are already quite painful for some industries.

shifting balanceThe figures indicate that many organisations have reduced their employee work hours, rather than completely firing people when business slows down. Being able to flexibly adjust employee hours is a quick mechanism to pump up profitability when business hits tough times.

But there are some rather serious consequences to be considered. The report went further, indicating that 56% of all underemployed part-time workers preferred to work full-time hours. In effect, almost 4% of the workforce would happily shift to a full time job – if the opportunity came their way.

In the current business reality of full employment – which is unlikely to change anytime soon – many businesses will clearly soon find themselves struggling to hang onto their casual and part time workers.

To make matters worse, a newly announced research study by the University of Sydney Workplace Research Centre has indicated that blue collar skills shortages are likely to become worse.

The study, which was union funded, points out a rather simple fact. That wages being paid to apprentices are falling well short of market rates. The consequences for businesses have been pretty dramatic,  with 12.5% of job vacancies for electrical apprenticeships in the Sydney region being unable to be filled. Critically, out of those who are eventually recruited, 40% of apprentices drop out before completion, with pay rates being cited as a major cause of drop out.

For any business that currently relies on casual and part time employees for key sections of their operations, this means that employee retention strategies are not just going to be necessary – they will probably be a matter of survival.

Warring factions and conflicted leadership

Leaders require supporters. This is especially true for executives managing large organisations, and is sometimes forgotten by people surrounded by the trappings of success.

Amongst any group of people, you should expect disagreement. The strength of relationships between group members will vary, and factions will inevitably form around issues – even if they are short lived.

Sun TzuThe traditional hierarchical command and control structures used by most business are designed to entrench executive power. This is usually achieved via restricting access to information and resources.

These control mechanisms are clothed in the guise of budgeting processes, chains of approval for supplier payments, and performance management KPIs. While they are certainly effective, there are downsides to relying entirely on rules and processes to enforce decision making. Unfortunately, these elaborate structures also encourage patronage and conflict, rather than cooperation and innovation.

While it feels like every tedious moment of the federal government leadership drama has already been rehashed by the media, I think the entire episode has ended up serving very little practical purpose – beyond generating some extra work for a few journalists.

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”

Sun Tzu

As Australia’s most celebrated sinophile, I imagine Kevin Rudd is well aware of the teachings of Sun Tzu. It is also worth considering that amongst Rudd’s many critics, there are few people who seriously doubt his intelligence, or his  ability to count votes. Going through the motions of a hopeless leadership challenge was obviously useful for someone.

If there is any lesson for business leaders to learn from the incident, it is that appearances matter enormously when dealing with external stakeholders. Ostentatious displays of power are a proven tactic for leaders that need to distract and reassure stakeholders, and keep up appearances.