If this is the Asian century, why are boards and executive suites so lacking in leaders from culturally diverse backgrounds?
If you didn’t already suspect that Australia’s business leaders are overwhelmingly from Anglo-Celtic backgrounds, a recent study by the Diversity Council of Australia (DCA), titled ‘Capitalising on Culture’, has confirmed it.
The study delved into the background of board members and executives of the top 200 ASX companies, revealing that while a third of the Australian community is of culturally diverse backgrounds, just over 20 per cent of directors and CEOs were similarly culturally diverse.
Those leaders identified as culturally diverse were largely Northwest European in origin. In terms of representing the 10 per cent of the Australian population who have Asian backgrounds, the top tier of the top 200 currently fail dismally, with only 1.9 per cent of senior executives and 4.15 per cent of directors having Asian cultural origins.
The DCA used ‘name analysis’ to determine the cultural origins of business leaders.
“Name analysis is very reliable,” says the DCA’s outgoing CEO, Nareen Young.
“I was sceptical about it at first, because I’ve got an Anglicised last name [Young’s cultural heritage is Aboriginal Australian],” she says.
Deeper investigation into the methodology convinced her of its rigor.
“First, we found it was developed on the back of a substantial body of research into name patterns and their meaning. Second, the provider we used, OriginsInfo, had a 99.5 per cent coverage rate (meaning this percentage of names in any given list could be successfully coded) and an 85 per cent accuracy rate.
Third, we were clear about what name analysis could and couldn’t show – it was an indicator of cultural or ancestral origins, not of country of birth.”The DCA report argues that a key strategy to thrive under the economically uncertain times is to ‘capitalise on culture’, increasing the cultural diversity of a company’s executive and workforce.
It cites recent Australian research (undertaken by Asia-focused think tank AsiaLink) that the higher the proportion of senior leaders who have cultural training, speak an Asian language or have lived and worked in Asia, the more likely business performance will exceed expectations.
While the Gillard government’s Asian Century white paper recommended imposing a quota on Australia’s top 200 companies that would require one-third of board members to have ‘deep experience’ in Asia by 2025, Young dismisses quotas as being “too controversial”, and says the Council is in favour of targets.
“What’s required is serious change in the culture of corporate Australia,” says the federal race discrimination commissioner Dr Tim Soutphommasane.
While the business proposition for cultural diversity is well established, he notes “there needs to be leadership in making cultural diversity a priority, and there need to be mechanisms for ensuring that there isn’t just lip service to the idea.”
Young cites the big banks as leaders in this field.
“There are a number of things we are doing to promote a more inclusive culture at Westpac,” says Jane Counsel, head of diversity and flexibility, group people capability.
“One of those is our unconscious-bias training program, which is available to all employees and highlights how personal beliefs may restrict diversity and inclusion.”
“We know that around 20 per cent of our employees affiliate with a non-Western culture and our employees speak at least 33 different languages,” Counsel says.
Targets are also on the agenda for PricewaterhouseCoopers Australia (PwC). By July 2016, PwC aims to increase the percentage of its partners of Asian cultural background to 5 per cent.
“Developing workforces that have a deep understanding of and connection with the many different cultures throughout the Asia Pacific region is absolutely critical if Australian businesses are to take advantage of opportunities for growth across the region,” observes PwC CEO Luke Sayers.
With 17 per cent of PwC employees identifying as being of Asian cultural background, “it is incumbent on the firm to provide the right development opportunities and organisational culture for these people to join our leadership ranks.”