Australia needs a massive cultural shift on human capital

Hubs, incubators and start-ups are all phrases looming large in the innovation policy sphere right now but you have to ask, who is in on them?

The most disruptive thing you can do for innovation is to mix things up on the people front. That means different genders, racial backgrounds, sexual orientations, ages, ways of thinking and disciplines.

Diversity matters because the more different lenses you can bring to complex decision making and developing new products and services, the less likely you are to get blindsided.

The Australian government's $A1.1billion innovation policy statement was an important circuit breaker for innovation in Australia.

It promised a systemic approach to tackling shortcomings across four areas: support for startups and venture capital funding, the risk taking policy regime, boosting collaboration between business and universities and developing and keeping top talent.

It is in the latter two - collaboration and human capital where Australia needs a massive cultural shift.

TOO MANY MEN

Scratch the surface of Australia's risk-averse innovation culture and you'll find it suffers the 'too many men' problem. It's a pretty much impermeable wad of Anglo blokes used to doing things a certain way, who wouldn't know what collaboration really meant if they tripped over it.

here's also a huge dearth of the basic management, communication and information-sharing skills required. For Australia's chief “disruptor", Malcolm Turnbull, it's the kind of mining boom Australia really needs - one that digs deep to put its all its talent to work.

As we show in New Women New Men New Economy(Federation Press), getting agile and boosting innovation has to start with increasing gender diversity.

Organisations that include more women in leadership roles perform better financially, they innovate and solve problems better and they get closer to their customers.

We show that if you don't find ways to get women in on the conversation you aren't innovating adequately or looking after the best interests of shareholders. Organisations where women do well create the kind of cultures that help people collaborate more, innovate faster and more readily adapt to rapidly-changing operating conditions.

The data is so strong you can no longer get away with the argument that your situation or organisation is different or that it's too hard. Ignoring it is plain stupid.

Credit Suisse studied 3000 companies in 20 countries over four years and found organisations with more women in leadership showed a 27 per cent higher return on equity and 42 per cent higher dividend payout ratio.

“There's a strong out performance of companies that have women in management," said Stefano Natella, Credit Suisse global head of equity.

And there's an even more compelling figure. McKinsey & Co recently found companies with higher levels of racial and ethnic diversity were 35 per cent more likely to have financial returns above the median.

“We live in a deeply connected and global world, it should come as no surprise that more diverse companies and institutions are achieving better performance," said McKinsey's 2015 Why Diversity Matters report. It argues that most organisations, (including itself) must do more to take full advantage of the opportunity that diverse leadership teams represent.

“That goes for talent pipelines: attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of organisations."

All the research tells us the current default is shaped by assumptions that restrict leadership roles, access to capital and opportunities for women.

After examining research and case studies from around the world, we honed down four dimensions that you need to factor in to help innovation flourish in context your competitive strategy. (We also examined the critical interaction between individual behaviours, organisational systems and knowledge sharing.)

We think of it as a kind of CODE, a handbook for an Agile Australia.

CODE FOR THE NEW ECONOMY

Creativity ignites competitiveness in a world where talent and ideas rival capital as a driver of innovation and growth. It is now a core competency for business success.

There are simple steps as leaders we can take to create environments where people can think, plan and act with imagination. Creativity is not some special gift but is a team sport.

In an Open world, there's no place to hide. When things are moving fast and disrupting business as usual, you need to open up and share knowledge and ideas to accelerate innovation.

It's fine to say we need to collaborate more but we still have a couple of generations of bosses and managers with little clue how to make the connections and cross disciplinary partnerships that go with it.

“How did you go bankrupt?" the character in the Ernest Hemingway novel was asked. “Two ways: Gradually, then suddenly," was his reply.

Diversity boosts performance and problem-solving. Diversity is now a 'must-have' thing for business success, not just a 'nice to have' one.

Increasing the number of perspectives on new services, products and problems leads to better outcomes. Look around at the people in the room and at the table: if they pretty much all look the same, you are missing vital cultural intelligence that will help your organisation adapt. You need to get comfortable with mixing it up.

Equity creates thriving teams and communities that build long term value. Research underpins why win-win is beating the traditional I-win, you-lose mindset most managers have grown up in.

Think of equity as being fair to employees, customers and the community - and that means the generations to come. No matter how tough the negotiation, you need to find the-win win.

Smart leaders now realise diversity doesn't happen, you have to design it in. That's especially the case in a corporate world still gummed up to the max with gender and racial inequities and stereotyped mental models which suffers deeply from delusions of merit.

WHO GETS THE TAP ON THE SHOULDER?

Australia's elite economic agency Federal Treasury always imagined itself a collaborative, collegiate type of place. When secretary Martin Parkinson got his team to look at the data and hold focus groups with staff he found it was internally competitive and the nature of the policy discussions were overtly masculine. The men got the taps on the shoulders and the development opportunities.

“That's what made me start to think, what is going on here?" he reflected later, becoming a powerful advocate for gender equality through Australia's Male Champions of Changeprogram.

Google is among hundreds of companies now methodically addressing the systemic and behavioural blocks to diversity through hiring, promotion, pay and performance evaluation.

The company's training materials on the role of unconscious biases created and reinforced by our environments and experiences, start with the warning - we're all just a bit sexist and a bit racist, we have to work through that.

“Combatting our biases is hard because they don't feel wrong, they feel right," writes Google's head of people operations Laslzo Bock in his blog, “You don't know what you don't know".

In Sydney, Taiwanese-born Telstra executive Jeffery Wang, who runs the Professional Development Forum, says leaders need to start to value cultural diversity.

“People don't fit neatly into boxes," he says. “A truly inclusive culture creates an environment where people from all sorts of backgrounds and ways of thinking can contribute. That doesn't just happen by itself."

When it comes to getting Australia out of the innovation stall zone and into the #ideasboom, we need to focus less on the fish and start talking about the water.

Australia suffers a drought in venture capital but barely 4 per cent of it is invested in women, even though the proportion in new businesses is 50-50. Those numbers alone tell you plenty. Start-up hubs and incubators like Fishburners, Stone and Chalk and Blue Chillt are belatedly starting to ask “where are the women?"

Any serious go at sparking Australia's start up culture needs to create an environment that puts our rich diversity of human capital to work. To kick start Australia's #ideasboom, first we have to outgrow the era of #stupid.

Published Dec 15, 2015, ANZ Blue Notes  Narelle Hooper is co-author with Rodin Genoff of New Women, New Men, New Economy: how creativity, openness, diversity and equity are driving prosperity now (Federation Press).

4 WAYS DIVERSITY PAY$

In the era of mass connectivity and mobile talent, here are 4 dimensions that will maximise your organisation’s chances of survival.

AMID the swarming thousands craving water food and shelter in Europe wifi and mobile phone power was in high demand.

This is the mass connectivity that we’ve heard so much about at work in our world - and it multiplies massively. There are an estimated 65 million people on the move.

Even in trouble spots word and movements spread fast thanks to cheap, ubiquitous technology, making people and their aspirations more mobile. There are 7 billion mobile phones on the planet, nearly two billion of them smart phones. That number will hit 5 billion with 80 billion connected devices worldwide by 2020, according to Forbes Magazine.

We truly have become what The Economist describes as a planet of “phono sapiens”.

What has this to do with us here and our daily challenge of trying to run our businesses and manage our teams? Plenty.

Talent, not capital, will be the key factor linking innovation, competitiveness and growth in the 21st century, says World Economic Forum executive chairman Klaus Schwab. In the forum’s Human Capital Report 2015 - its first - he describes how technological, geopolitical, demographic and economic forces are profoundly reshaping labour markets. How nations and organisations develop their human capital throughout life drives competitiveness.

Rather than the traditional economic divide between emerging and developed nations, Schwab says, we should think instead of nations as innovation rich or innovation poor.

In this context, with both a massive pool of latent human capital and a growing shortage of talent, government, business, educators and individuals need to do three things. They need to better understand the global talent value chain, re-think the notion of business as a consumer of ‘ready-made’ human capital, and proactively seek out, engage and develop people’s potential.

Those who don’t, might have pause to reflect, like the character in the Ernst Hemingway novel. “How did you go bankrupt?” he was asked. “Two ways. Gradually, then suddenly,” was his reply. 

Its more critical now that the people eating our lunch aren’t just the usual suspects, they come from everywhere and there is no place to hide. We see the impact of “jugaad” innovation from Africa, South America and India’s Silicon Savannah at work - approaches that are “fast, frugal, flexible and inclusive”. This has brought cheap, mobile phone Apps such as the money transfer platform M-Pesa and the solar power service M-KOPA, to millions. Such thinking inspired the likes of the Commonwealth Bank in its purchase of South African start up TYME (take your money everywhere).

In China, Siemen’s engineers developed cheap, easy to use CT scanners promptedby a shortage of doctors. They produce results faster, put out less radiation and use less energy while slicing nearly a third off the cost of treatment. They’re now being commercialised in the US. 

For a genteely aging and declining western nation such as Australia, in what Tufts University calls the digital innovation Stall Zone, we are seeing the inevitable decline in productivity and standards of living.

In our work over the past two years we’ve identified organisations who set out to make the most of their human capital to adapt faster and create new products, services and markets. We’ve examined the systematic approach of Scandinavian countries in using gender diversity to drive innovation which has sparked new products and markets.

We’ve seen more than 1000 leading companies sign on to the UN’s Women’s Empowerment Principles and scores of CEOs who are championing gender equality and inclusion because its fair - and it drives better performance.

Why does gender diversity matter for innovation and growth? Decades of research shows that organisations with more women in leadership roles do better - societies too.

Advocacy group Catalyst outlines 39 pieces of research that show how diversity (including gender, racial, sexual orientation and cognitive difference) boosts performance. Credit Suisse’s landmark study of 3000 companies across 40 countries is suggestive of what is known in the medical world as the The Dose Effect (see graphics). That is, the more women in senior roles, the better return on equity. Organisations with greater gender diversity in operational roles showed a 27 percent higher return on equity and a 42 percent higher ratio of dividend payouts. It also found that women CEOs made fewer acquisitions and more divestitures than their male peers.

Add to that McKinsey and Co’s 2015 research that showed listed companies with higher levels of racial and ethnic diversity were more likely to have financial returns above the national industry median than those who do not. The figure is striking - 35 per cent more likely.

And, confounding the notion of the solo genius at work, London Business School research has found that gender-balanced teams create conditions that maximise experimentation, necessary for boosting creativity.

The data is in and it is compelling. Organisations where women do well also do a number of things well. They’re inclusive, open, fair and tend to have a mindset focused on the longer term. But what we know also know is that unless you intentionally include women, the system will unintentionally exclude them.

Put simply, if you are a leader or a board focused on performance and risk, it is time to step up.

In New Women, New Men, New Economy: how creativity, openness, diversity and equity are driving prosperity now! we’ve identified the four dimensions that organisations need to invest in to maximise their competitiveness in a resource constrained, globally-connected economy. These dimensions help create a culture of innovation and build the trust of employees, customers and the community, now critical if your organisation is going to be sustainable over time.

They are: Creativity - once the domain of arty types is a core business competency and can be learned. Creativity is the first stage of the innovation cycle. Creativity ignites competitivess.

In an Open world there’s no place to hide so you need to be prepared to share and build on information - fast. There are plenty of people trying to build walls to constrain this mass human mobility but our need for human connection will defy them. As Martin Luther King Jr said we need people who build bridges not walls to help us tackle our big challenges.

Diversity boosts performance and problem solving. Its about inclusiveness and getting the best of all the different perspective around you. And, Equity - fairness, helps teams thrive and creates long term, sustainable value and community. We call this the New Economy CODE.

But what’s important is the glue that binds these four dimensions together. These are organisational intelligence - the capacity to generate new ideas and adapt quickly to changing circumstances; agile and responsive systems and behaviours that build collaborative and trusting environments.

To get our heads around this requires us to recognise that the future of business is different so we have to do things differently. This means busting powerful social norms and assumptions around how we work, lead and what it means to compete; conventions which patently no longer fit the world we’re in.

That’s why we’re seeing movements like the more than 100 CEOs whose organisations employ more than 1 million people championing gender equity. Australia’s world leading Male Champions of Change program recognises that diversity creates a powerful performance dividend - and its the right thing to do.

Things you can do right now:

1: Intuition borne of years of business experience can be unreliable in this new environment, so look for data to test against your assumptions and reflect that in this environment, we don't know what we don't know;

2: Mix it up - skills, perspective and experience. Insist on 50-50 gender split and diversity - in the room, around the table, in your team;

3: Make innovation and experimentation everyone’s responsibility and find simple ways to ensure you figure out which problem you are really trying to solve. We start with the strengths: what’s working and how can you build on it and then you can focus on what you can improve.

Narelle Hooper and Rodin Genoff, co-authors New Women New Men New Economy (Federation Press, Sept 2015).