MPW Insider is an online community where the biggest names in business and beyond answer timely career and leadership questions. Today’s answer for: What do you think is the most significant barrier to female leadership? is written by Paula Loop, leader of PwC’s Governance Insights Center.
Companies need to have the right talent in place in order to stay relevant and get ahead — from entry-level positions to the C-suite and the boardroom. One option to help promote more women in the workplace is through succession planning, especially on boards. But only 44% of directors “very much” agree that they’re spending sufficient time on director succession, according to PwC’s 2015 Annual Corporate Directors Survey.
Boards need (and can) do more to increase this number. Effective succession planning requires routine assessment of board members’ collective attributes, experience, expertise and, most importantly, diversity. And by diversity, I mean gender and ethnic diversity, as well as diversity of skills, backgrounds, personalities, and opinions. Boards should consider the company’s strategy when thinking about director succession and upcoming board member retirements. What aspect of diversity will the board need to help the company deliver on its strategy and stay one step ahead of the competition?
Once the board lays out its succession plans and considers the diversity it needs, the board should proactively get ahead of the search for new directors. Currently, women account for only 20% of all S&P 500 directors despite making up 47% of the U.S. workforce and controlling or influencing nearly three-quarters of household spending and more than 50% of personal wealth in the U.S. With the average S&P 500 board having eleven members, that’s about two women per board.
Typically, boards look for a candidate that has been a CEO or held another executive role, as boards often want current or former CEOs as directors. But a mere 4% of S&P 500 CEOs are female and only 14% of the top five leadership positions at the companies in the S&P 500 are held by women. That doesn’t make for a big pool of potential candidates. The pipeline for that pool isn’t an encouraging picture, either: young women aged 25 to 34 are more likely than young men of the same age to be college graduates or have a graduate degree, and account for almost half of the students in JD, MBA, and MD programs, but the number of ethnically diverse and female executives fell from 2013 to 2014.
Adding to the problem is that boards typically seek recommendations from sitting directors when looking for new board members. This can create a similarly small pool of potential candidates. So how can more women become part of these pools to begin with? I believe good networks are key. Women need to start building their networks early in their career. They need to meet senior executives and ask them for introductions to other senior executives, as well as CEOs and board members. They need to make it known that they want to have leadership roles at their companies and, ultimately, board roles. They need to continue to foster and improve those relationships so that when the time is right they leverage them.
Twenty-seven percent of directors say they don’t believe there are enough qualified diverse candidates available. Perhaps they’re not looking hard enough. I believe that there are many untapped highly qualified and diverse candidates just a few steps down from the C-suite. In fact, most of the women in these roles are functioning like CEOs and running large segments of the business. They’re driving strategies and dealing with risks. These people have the skills to be board members, they just need to know how to get there. And having the right networks is the best way to do so.