Giles Parkinson talks with Diane Grady on the role of boards and on the cultural changes needed to more effectively utilise female staff.
Developing the best business culture
Diane Grady’s initial ambition when she left university in 1970 was not to enter the business world at all: she actually wanted to be a journalist. That would prove easier said than done. But it was the paths she took in the dogged pursuit of her goal that would lay the stepping stones towards a successful career as a consultant, independent company director and ultimately as a mentor to women aiming to become directors.
Grady’s first stop after completing a Batchelor of Arts in European intellectual history in California was New York. She says she was armed with a relatively good contact book, but had no idea how to use it. “I went to the personnel departments and filled out forms. After a while, I realised I just wasn’t getting anywhere.”
So the second stop was winning an East West Centre Fellowship to do a Masters degree in Chinese studies at the University of Hawaii. This led to a study tour of Asia, which in turn led to a job as a journalist with a Taiwanese magazine –?which she describes as the local version of Australian Geographic. What followed was a fascinating three years reporting and documenting many of the ancient customs and festivals that still existed in that country at that time.
She returned to the United States in a renewed attempt to get work with a mainstream publisher, this time in Boston. Again, she found it impossible, until a professor at the Harvard Business School advertised for a journalist to write business cases believing that it was easier to teach a writer about business than a business expert about writing. It was not an easy decision. “I had gone to university in the late 1960s in San Francisco and I was not really pro-business,” she says. Nevertheless she decided to give it a go. It proved a revelation.
“In writing these case studies, you’d go out and visit companies, interview managers, collect data and write a story for use in class discussion at Harvard,” Grady recalls. “I found that business was a lot more interesting than I had thought. I met a lot of people who were very committed to whatever they were doing, and who found their work fascinating. It was not the paper-shuffling vision that I had had. There were challenging problems and interesting people involved in solving those problems.”
Her analytical skills, combined with her natural curiosity and communication abilities, probably made the next steps in her career seem quite inevitable. First, she completed an MBA at Harvard, and then found herself drawn to the problem-solving challenges at McKinsey & Co. They offered her a job and asked where she wanted to work. “I was born and raised in Arizona, which is seriously hot, and had just spent four winters in Boston. I said ‘I don’t care as long as it is warm’. They gave me two choices: Sydney or LA. I took Sydney – sight unseen.”
So Grady, with expertise in a Chinese language and an Asian experience that McKinsey Australia thought would be very useful, became the first woman consultant hired by the firm in this country. It was a pioneering step and not the first she achieved. She later became the first woman outside the US to be elected as a McKinsey partner, and the first female partner anywhere in the organisation to have a baby. “They elected me while I was pregnant, which was a brave thing to do, I suspect. Then I had another baby, which pushed the barrier even further, but it all went well.”
Grady spent 15 years at McKinsey specialising in growth strategies and change management for clients in consumer goods, financial services and retailing industries, before being tempted to become a company director. Lend Lease, with a long reputation of being one of the most respected and innovative companies in the country, was seeking someone with strength in strategy and organisation, someone who could challenge conventional wisdom, but who wasn’t a consultant. Grady readily met the first three criteria, and a meeting with then chairman, Stuart Hornery, allayed fears about the last.
Grady was a non-executive director of Lend Lease from 1994 until 2002 and was also on the board of Wattyl from 1994 to 2006. She remains a non-executive director of Woolworths (since 1996) and Bluescope Steel (since it was spun out from BHP in 2002). During that time she has cumulatively spent 32 years as a chair or member of the various remuneration committees, which has given her a particular insight into some of the key challenges facing the modern board.
For a start, Grady would prefer that these committees were described as people policy committees (as they are at Woolworths), because that better explains what she believes should be the focus of their work – ensuring human capital is as robust as financial capital. She says: “Boards should routinely review people strategy for fit with business strategy, but many do not. Two areas, in particular, where boards need to go a lot further are corporate culture and succession planning. If you look at big failures in business, most can be traced back to one or two issues – failure in getting the right leader or failure in getting the right culture.”
Grady readily admits these are not easy areas for directors to assess or influence. The perception within many Australian companies is that culture is management terrain, and many boards simply do not have enough contact with people within the business, customers or suppliers, to get a good grip on the issues. Culture surveys are common, but they are often unwieldy documents with too many questions and little useful insight.
Grady says boards too often rely merely on financial information – what she regards as ‘lagging indicators’, rather than ‘leading indicators’ that could give them a better view of prospects for company performance in the future. “For example, if directors knew how customers view a company or the depth of the talent pool, they would have better information about how a company is likely to perform over time than quarterly results provide.”
She suggests that perhaps non-executive directors should ensure that they are the guardians of the long-term outlook for the company. “They need to be making decisions that will be affecting companies in the longer term, in a way that senior executives sometimes don’t because their ‘tour of duty’ is, on average, for a shorter period.”
She believes that Woolworths – undoubtedly one of the most successful companies of the past decade – has been able to address these issues because it has allowed its board members many opportunities to spend time with people in the business. These include informal idea-sharing sessions; strategy conferences that last two to three days; and management conferences that include everyone from the store manager up. The board attends. “You get the opportunity to rub shoulders with staff and thereby you are able to get a feeling for the culture and the talent.”
At Woolworths, Grady says the board began the succession planning process five years before the retirement of Roger Corbett. A large number of senior executives were evaluated, developmental needs and opportunities were identified, and potential successors were tested. “Too many times boards only start on the process within the window of the CEO leaving,” she says.
Grady is thankful that she has mostly served on small boards where the directors are cherished as a value-adding partner rather than an arms’ length judge and critic. “When you have seven directors rather than 11 or 12 you have more opportunity to engage in open conversation.”
Indeed, she places boards on a spectrum. At one end is the more traditional view of boards as primarily governance bodies – “a necessary evil to keep the company on the straight and narrow, but not real contributors in taking the company forward.” At the other end of the spectrum are boards where directors are viewed as value-adding partners with management. “This is not to say they never have to step back and make tough performance management decisions. Engaged boards only work, however, where there’s mutual respect and management welcomes director participation.”
When Grady made a decision to become a professional director rather than a full time consultant, she says her choice was influenced by the desire to be close to her growing children who, by that time, were old enough to articulate their feelings about her travel commitments. She resolved then to spend roughly 40 per cent of her time as a director, 40 per cent with her husband Chris Komor and their daughters, and 20 per cent on various not-for-profit type interests. “I wanted to make sure I had a diverse portfolio,” she says.
The not-for-profit groups included the board of the Sydney Opera House Trust (she’d like to take some of the credit for improving the food offering), the Australian Institute of Management and Ascham School.
The CEO Kit
But her biggest involvement with the not-for-profit sector has been with Chief Executive Women (CEW), where she was president for two years and recently chaired a taskforce that developed The CEO Kit to guide companies on how to address gender imbalance within their organisations, and promote female talent. “CEW started as a networking group, but we decided it needed to have a higher purpose, so we chose to focus on creating leadership opportunities for women.”
Grady says The CEO Kit helps companies identify issues and collect data relating to the retention of women. “If they are not measuring it, chances are it’s not getting done.” After stepping down as president of CEW, she decided to form a taskforce of senior women with a range of experience to develop metrics for companies in this area. Two years later, CEW published a 90-page kit that is effectively a diagnostic guide built around five core issues.
“It helps companies get underneath the surface to discover what’s really happening with their female talent. When organisations get the facts, most are surprised at what they learn. For example, they often find their pay equity policies are not working; or the time for promotion for women is significantly longer than male peers; or that women lack organisational support such as mentors who are available to male colleagues. The CEO Kit was pre-tested by 10 large companies and provides advice on how to retain women based on both their experience and our international research.”
Grady notes that when companies have a critical mass of women at all levels – from the bottom to the top –?that is, women accounting for at least 30 per cent of jobs at all levels and functions – then the culture starts to change. At 40 per cent, research shows it is no longer an issue. “I’m hoping that the skills shortage will stimulate companies to think about the huge pool of female talent that is underutilised, and so take initiatives to retain women. This will typically require cultural change because most organisations have historically been designed for and run by men. Creating cultures where women as well as men thrive is not going to happen simply because companies think it’s ‘the right thing to do’. It will only happen if it is a business imperative.”
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