Germany’s Drive Towards Gender Equity: Making it Happen
By Stephen P. Kelner, Jr., PhD.
President, Ascent Leadership Networks
On November 20, 2020, Germany passed what is being hailed as a landmark moment for Europe’s biggest economy.[i] The coalition government agreed on a mandatory quota for women on the management boards (the C-suite, in Anglo-American-ANZ terms) of listed companies. This move requires listed companies with management boards of more than three executives to appoint at least one woman to the C-suite.[ii] The Federal Minister of Women, Franziska Giffey, described this as “setting an example for a sustainable, modern society. We are exploiting all of our country’s potential.”[iii]
While we agree with Minister Giffey, research shows that Germany’s 30 largest companies only have women in 12.8% of senior leadership roles, in contrast with countries such as Sweden (24.9%), the UK (24.5%), or the US (28.6%). In other words, many German companies now face dramatic changes mandated by law.
For those companies and others preparing to tackle gender equity at a leadership level, we have some comfort and practical advice for dealing with those changes.
Capabilities > Experience
To promote anyone to the C-suite, we always recommend a rigorous assessment, focusing on capabilities, not just experience.
One reason countries have not had more executive women without imposing quotas can be traced to the overuse of experience as a key hiring criterion. When you emphasize experience alone, women get stuck in a vicious cycle: with fewer women holding boardroom experience, they become a minority in any recruitment slate. This means they are less likely to be selected simply by the numbers.
Experience is certainly important, but we know that capabilities – core executive characteristics such as Strategic Thinking, Aligning for Change, and Leading Groups[iv] – are far better predictors of success in executive roles than experience. As far back as 1998, David McClelland identified seven competencies that accounted for 75% of success in a multinational company’s executive ranks,[v] and found that they predicted success two years ahead with 81% accuracy.[vi] In my own work at two executive search firms, I found that, using capabilities, we could predict executive growth with 85% accuracy over a five-year span, and in collaboration with McKinsey found that key leadership capabilities predicted company growth compellingly, both identified across thousands of executives worldwide.[vii]
The challenge for selecting new C-Suite candidates is therefore not to look for experience alone, but to look for capabilities that will enable the best use of experience. We know from our work with developing executives that it is far easier to acquire experience than develop capabilities.
Recommendation #1: look first for capabilities that enable the best use of experience.
“Ready Now” versus “Ready to Go”
Every day, executive recruiters face the same challenge: Clients want a person ready to do the job now, and therefore ask for candidates who have already had the same scope of role. Unfortunately, those candidates typically want a bigger job. So, the available candidate for a role is often not “ready now” in the sense of “been there, done that.” Instead, they tend to be “ready to go” – they may have the capability for the role, or close to it, but they come from the next role down, or a smaller version of that role.
The question becomes identifying which candidates are truly ready to go, where perhaps they only need incremental experience or capability growth to fully meet the role.
If you use the kind of scaled capability we do at Ascent,[viii] you can evaluate not just whether the person is qualified or not, but how close they are to needed targets, and whether they have potential to close any gaps quickly. We know how long it takes someone with the raw talent and potential to develop executive capabilities; with accelerated development, a person with great capability can make up for limited experience with great speed – and will be highly motivated to do so.
Gender-Based Leadership Quality Differences
There aren’t any.
In the history of over 45 years of capability research, and in my own past 30 years in rigorous, empirical assessment of tens of thousands of executives globally, I can say categorically that we find no significant differences between men and women in comparable roles on any leadership capability.
Women and men are equally capable of leadership roles.
However, if you look at many companies, you will observe that men tend to be in “line” roles, managing the business, and women tend to be in “staff” roles (e.g., HR or Chief Counsel), working internally. There are many reasons for this, but none of them relate to actual leadership potential. As above, this can become a vicious cycle: given more candidates, it is more likely that women get selected in these roles and not the others – and the reverse becomes true for men. This means qualified candidates or even outstanding ones are overlooked in both genders.
Recommendation #2: When you focus on capabilities, you can safely ignore the candidate’s gender.
Assess and Develop
You may already have a star candidate in your company in capability terms.
With a sufficiently nuanced assessment coupled with strong development, you might not only find a woman who is “ready to go,” but also someone who already shares the culture of the company, as well as a deep internal understanding of how things work. This means you skip most of the year that an external candidate may require to get up to speed.
Of course, if you have the development plan in place (with or without external help) leveraging a rigorous assessment, you can shorten that year even for an external candidate, so there’s really no downside to bringing both elements to bear, though the nature of the development plan may be different (for example, closing gaps versus onboarding). The only question is whether you already have your candidate at hand or not.
Even if you don’t, you can at least evaluate your overall company bench strength, and begin to develop future candidates.
Recommendation #3: Assess the people you have.
The Future Is Bright
We encourage you to seek out the untapped talent in your organization. You may find many good candidates using these criteria, in your company, ready to go.
If you don’t have the assessment and development resources at hand, outside firms like ours are happy to provide them. In fact, some studies show an advantage to working with an outside firm with no political stake in the hiring process. We find neutrality to be a benefit, especially when working closely with inside professionals, giving our clients the best of both worlds. Either way, there’s no real bad news: the same principles can be applied to outside recruits or inside candidates.
For the companies seeking to adjust their gender balance – whether German or not - we hope these principles and recommendations provide some comfort for you. And to the women soon to be in leadership roles, congratulations! There are so many of you out there, ready to go. We look forward to seeing you bring your leadership capabilities to your companies.
[i] They already have similar quotas for supervisory boards, which are similar (but not identical) to boards of directors.
[ii] https://www.cnn.com/2020/11/23/business/germany-quotas-women-boards/index.html
[iii] https://www.bmfsfj.de/bmfsfj/aktuelles/alle-meldungen/einigung-auf-verbindliche-vorgaben-fuer-mehr-frauen-in-vorstaenden/162534 Accessed 11/24/2020. Translation courtesy of Google Translate.
[iv] We have identified six that are account for 85% of any executive role, as well as having some others for more refined models if desired. All are behaviorally scaled, which makes them much more precise for assessment or development purposes.
[v] McClelland, David C. – Unpublished paper in the possession of the author. McClelland also created the competency concept (McClelland 1973).
[vi] McClelland, D. C. (1998). Identifying Competencies through Behavioral-Event Interviews. Psychological Science, 9, 5, pp. 331-339.
[vii] https://www.scribd.com/document/130323050/Return-on-Leadership
[viii] We have eight levels per capability, defined precisely by a separate set of behavioral indicators in each. This is obviously a core component of our assessment and development work.