Diversity in the workplace is good for business. Research shows that organizational environments in which there is diversity in all forms—gender, ethnic, and cultural—have greater financial success. Why? Diversity generates more opportunities to foster positive human interaction and tap an increased variety of viewpoints and perspectives, which leads to better experiences for customers, employees, and investors.
Real estate has historically been a male-dominated field—to such a degree, in fact, that in the late 1980s and early 1990s few women became involved in the business. Even today, especially on a proportionate basis, the number of women either running real estate firms, or in line to do so, is extremely small and Ferguson Partners Ltd. has been involved in recruiting most of them. Real estate firms that proactively take measures to promote diversity in their organizations will benefit tremendously in the long term.
A number of studies in corporate America have demonstrated the value of enriched, diverse workplaces:
McKinsey’s “Diversity Matters” study looked at the relationship between the level of diversity (defined as a greater share of women and more mixed ethnic/racial composition in the leadership of large companies) and company financial performance (measured as average EBIT 2010-2013). The analysis found a statistically significant relationship between a more diverse leadership and better financial performance. As the global world becomes deeply interconnected diversity matters. It should come as no surprise that more diverse companies and institutions are achieving better performance.
In a study done by Credit Suisse, it was concluded that, relative to share price outperformance of companies with women on the board, the evidence suggests that more balance on the board brings less volatility and more balance through the cycles.
In today’s fast paced and dynamic real estate environment, a key challenge facing firms is how to best structure Boards of Directors to optimize performance. What is the proper number of Board members? What types of backgrounds should Board members have? How often should the Board meet? What is the proper level of compensation? The variables for consideration are innumerable. But which characteristics actually impact performance, and to what degree?
To help address this issue, Ferguson Partners Ltd. and FPL Associates collaborated to conduct an analysis of the relationship between REIT performance and a wide range of distinct Board characteristics. The objective was to provide direction to firms on which variables matter and which tend to have little bearing on performance. The results were definitive, with one factor standing out as highly correlated with firms outperforming their peers: whether or not the boards have female members. Across three-, five-, and ten-year time horizons, those firms with at least one female Board member who had served at least three years, materially outperformed their counterparts with no female representation.
The success of companies can be at least partially attributed to the fact that they are hiring diverse talent who are helping drive customer and employee satisfaction. Successful diverse companies are found throughout corporate America and the real estate industry should be no exception. Companies that wish to remain competitive in the industry need to have frank discussions immediately about gender diversity and the barriers that exist in recruiting, retaining, and developing diverse talent. The conversation needs to begin at the Board and C-suite levels and not just remain an issue for chief human resources officers.
Diversity Practice Consultants:
William J. Ferguson, Chairman & Chief Executive Officer
Gemma Burgess, Managing Director
Erica Hirsen, Director
Trina Wright, Vice President