Management Issues

Making the business case for gender diversity

There is still much work to be done, but the evidence shows that gender diversity – and broader diversity efforts as well – is not just the right thing to do, but the smart thing to do.

John Hofmeister, President, Shell Oil Company, Houston

At one level, the business case for gender diversity is as simple and as obvious as not arbitrarily discarding resumes without looking at them. As the hiring executive, you would be outraged at the lost potential if half of your applicant pool were arbitrarily discarded. The price of ignoring gender diversity is high, and it is measured in lost potential, lost opportunities and lost credibility. It is so obvious that there seems little reason to discuss it in 2006, more than 30 years after women began entering the workforce in large numbers. Yet, women are still under-represented in the oil industry compared to other industries.

While women make up more than 46% of the overall US workforce, they are only 22% of the petroleum and coal production industry and less than 21% of the refining industry (see figure). This includes all levels; the percentage of women in management, especially in engineering roles, is even smaller. To change that, we need to be talking about it.

Within Shell, we emphasize two aspects of this issue: diversity and inclusiveness. Inclusiveness is the idea of encompassing all groups, whether defined by gender, ethnicity, culture, age or some other demographic grouping. Inclusiveness means that we want to draw from a talent pool reaching every aspect of humanity. As a marketer, we want to approach the market in the fullest way possible.

Diversity goes beyond inclusiveness to actively promote and pursue a workforce and customer and vendor relationships that represent all segments of society. That requires effort, investment and accountability.

THE BUSINESS CASE

At the outset, let me note that the case for gender diversity is, in most cases, similar or identical to the case for cultural, ethnic and other kinds of diversity. Because Shell has been recognized for its success in attracting, retaining and developing women in the organization, however, we can use our experience in this area to illustrate the broader concept of diversity.

Ten years ago, Shell in the US energized its efforts to attract, retain and develop a diverse workforce. While some progress had been made before 1996, we tend to see that year as the watershed in our diversity journey. From that point, we have made significant progress, most dramatically in increasing the presence of women in our professional and management ranks. An environment of diversity and inclusiveness provides multiple benefits that have become even more crucial to our success as we strive to meet today’s energy challenge.

ACCESS TO THE BEST TALENT

The convergence of the “great crew change,” as a significant percentage of our senior-level experts approach retirement, and an unprecedented growth in energy demand, has created a huge talent crunch. This is true across the industry.

Having an environment that embraces diversity helps drive us to broaden our search for talented individuals beyond our traditional views. But perhaps more importantly, it also makes us more attractive to the high-caliber women graduates entering the field and to mid-career professionals looking for opportunities to grow. Surveys show that new graduates tend to see energy and petrochemical industries as “sunset” industries, so we already have one reputation barrier to overcome. By having, and being known for, welcoming diversity and providing an environment where all kinds of people can contribute, thrive and develop, we strengthen our appeal to people who share those same ideals. The more diverse we are, the more appealing we become to other diverse professionals. One of our executives recently pointed out that there is a “tipping point” at which diversity becomes self perpetuating.

Shell’s commitment to diversity has had a visible payoff in the number of extremely talented women who have achieved senior-level positions in the organization. These women, including Lynn Elsenhans, my predecessor as US country chair and now global head of Shell’s manufacturing business, Fran Keeth, executive vice president of Shell for chemicals globally, and Catherine Lamboley, chief counsel for Shell Oil Co., make Shell more successful because of their business acumen and leadership. I can’t say that they are successful because of Shell’s diversity initiatives – I believe they all would have risen to the top wherever they chose to build their careers. But in part because of our commitment to diversity, they chose to stay within Shell (or in one case, to return to Shell) and we benefit from their achievements and from having these women as role models.

DEVELOPING UNTAPPED POTENTIAL

An internal climate of diversity and inclusiveness also strengthens our ability to develop the talent we already have. In an inclusive environment, people of diverse backgrounds feel more empowered to speak up, which creates more opportunities for them to grow and develop.

It’s not enough to bring talented people on board if we don’t nurture that talent. Our retention rate for women is still below our retention rate for men, and we continue to seek ways to keep more women contributing to our future. We want to find ways to enable both women and men to have more flexible career tracks to handle family and other personal priorities without losing ground.

Our emphasis on diversity has also taught us to look for leadership talent that might not be evident within an employee’s formal job description. We have people who are plant operators or staff professionals within Shell, and active leaders in their communities or affinity groups in their off hours. Our employee networks, including our women’s networks, have proven to be excellent vehicles for surfacing that untapped potential.

Leadership talent is a valuable resource. In the past, we tended to confine our top leadership tracks to people with strong engineering and technical backgrounds, but we have learned that for some roles, leadership and management skills are more critical, backed by a good working knowledge of the technical aspects of the business. Fran Keeth has an undergraduate degree in accounting, an MBA and a law degree, a non-traditional path to leading a major petrochemical company.

INCREASED CREATIVITY AND INNOVATION

Diversity and inclusiveness also make us more competitive by increasing our ability to innovate and solve problems. I think executive performance is unisex, and I would never attempt to stereotype how women and men approach problems or perform on the job. But I believe that having diversity of gender, as well as other types, improves problem-solving performance, and a number of studies back this up. Some studies show that a diverse group takes a little longer to form a cohesive team, but in my experience, the time difference is negligible – minutes or hours – and the results are exceptional.

We have found that in a diverse group, where everyone feels comfortable and all ideas are heard, we are more likely to challenge established norms and get the best ideas on the table.

HIGHER STAKEHOLDER CREDIBILITY

Ignoring half of the qualified candidates for a position is nonsense; it is equally foolish to ignore or alienate half of our potential customers or stakeholders. Being diverse and inclusive helps us reflect and reach out to customers, partners and communities that are themselves becoming increasingly diverse.

Shell’s retail fuel stations are designed to appeal to both genders, but we take special care to make sure they reflect the attributes that draw women: bright, clean stations and well-trained staff. We know that more than half of gasoline purchases are made by women, and a design and experience that attracts more women customers is a competitive advantage.

But approaching the market fully means more than just researching what appeals to women. It also means that when customers or shareholders think about Shell, they associate our brand with values that are congruent with theirs. This includes respect for people of different genders, cultures and backgrounds.

When Shell Oil Co. received a Catalyst Award in 2004 for accomplishments in advancement of women within the organization, it increased the awareness of our diversity and inclusiveness efforts and brought us new opportunities to partner with women-owned businesses. I suspect it generated a few credit card applications from women as well; I know that at one recent event for the Hispanic community, a speaker said that those present should do business with corporations that support Hispanic businesses, and that meant, “buy Shell gas.” I believe that a reputation for diversity and inclusiveness is a strong component of a powerful brand.

Our diversity and inclusiveness strategy has strengthened our ability to work well with a range of customers, because we approach them all with a higher level of sensitivity. Even in our wholesale business, where the distributors and owners might typically be male, the businesses are often family businesses. I found at a recent wholesaler event that the wives, while less visible, are very involved and influential in the business, and our diversity adds value to our relationships with these businesses.

We also benefit when we seek out and work with women- and minority-owned suppliers. We gain access to talent, greater innovation and increased credibility within the communities where we operate. We not only hold managers accountable for increasing supplier diversity, but also work with many of our primary suppliers to help them build increased diversity in their second-tier suppliers.

The business case for diversity extends beyond our organization. As we cope with the community and reputation issues surrounding high energy prices, every aspect of how we manage our businesses is under scrutiny. Every time we are seen to be doing the right thing – and that includes creating opportunities for people from all backgrounds to thrive within our organization – we add to our credibility with these key stakeholders.

MORE TO BE DONE

We’ve come a long way, but there is more to be done. We don’t yet fully reflect the diversity of our communities, especially in our leadership. We are committed to achieving a 20% representation of women in Shell’s senior leadership at the global level, and we are only halfway there.

We face special challenges as a global business, as we balance sensitivity to different cultures and regions with persistence in our efforts to be inclusive. In the US as well, there is room for improvement. A recent study on the progression and retention of women at Shell identified a number of recommendations that we are implementing to accelerate our progress.

As we move forward, it is with a clear understanding that this is not only the right thing to do, but the smart thing to do, and that the benefits we have seen so far from our commitment to diversity will only expand as we continue to attract, retain and develop a workforce that is more diverse in every way. 

THE AUTHOR
	John Hofmeister has served as president of Shell Oil Co. since March 2005. The Houston-based company is an affiliate of the Shell Group. Hofmeister joined Shell in 1997 as director of human resources, based in The Hague, The Netherlands, and in London. He previously worked for Allied Signal Inc. and for Northern Telecom Inc. in executive positions in human resources, and for 15 years with General Electric. He is a Fellow of the National Academy of Human Resources and serves on the boards of the API, National Urban League and the Greater Houston Partnership. He earned bachelor’s and master’s degrees in political science from Kansas State University.