Is it time for start-ups to confront their problem with diversity?

Brand new research shows UK start-ups have alarmingly low female representation on their board of directors, which could be causing the economy to suffer...

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Research conducted by Approved Index shows that the number of women on start-up boards has been in decline over the past five years, leaving female representation at a meagre eight percent in 2014. This is in contrast with the 22.8% portion of females found on FTSE 100 boards, which while still below the 50/50 split we should aspire to, suggests that pressure on FTSE 100 companies to diversify has been successful, whereas start-ups are not feeling the responsibility to do the same. 

The results of the research point to some apparent cracks in the government’s current plan to battle a lack of diversity within business. Their goal has been to increase the number of female board members by putting pressure on businesses to voluntarily make changes, rather than introducing quotas.

Thus far the campaign is on track for success with the target of 25% female representation on FTSE 100 boards by 2015 looking safely in sight. However, what the research unveils is that perhaps a top down approach fails to address the fundamental issues lying buried beneath. Are we in fact patching up a leaky roof while the foundation continues to crumble? If these young, fast growing start-ups represent FTSE companies of the future, business in Britain seems doomed to repeat the same mistakes and continue to overlook women in more senior roles.

The issue seem to be one of accountability. Larger, more established companies are subject to public scrutiny, while start-ups, heralded as the saviour of the economy, are left unmonitored, and unaccountable.

By now we all know that companies perform better when their board of directors look less like the cast of grumpy old men. Credit Suisse’s recent study of 2,400 businesses found that firms that had female representation on the board continued to outperform those that didn’t, while research from Thomson Reuter found companies with all male boards tended to be more volatile. This re-enforces the fact that gender equality has truly tangible effects for business, the success of our economy and of course, society as a whole. 

Still, women continue to stand second in line when it comes to entrepreneurial empowerment and cold hard investment. 

Still, women continue to stand second in line when it comes to entrepreneurial empowerment and cold hard investment. And when you look at it like this, start-ups begin to mirror an old boys club which is far more difficult to penetrate than that of their larger and older corporate brothers. In start-ups, female employees are seemingly overlooked for promotion and seats on the board in favour of male counterparts just as they have been in more established companies. The problem we face is there is currently no encouragement or incentive from government or society for smaller companies to change their board make-up.

That’s not to say there aren’t companies out there doing it right. When talking to Laima Ulozaite, marketing manager at Approved Index (part of the UK’s fastest growing tech company) she said, “Part of the reason we conducted this research in the first place was because we feel diversity has been a key factor in our success.

We are lucky enough to have some incredible female role models on the board. I think this is not only vital to inspire and empower our hugely talented female staff, but also diversity is our secret weapon in problem solving throughout the business.” She continued to say, “It is really saddening to see that so many start-ups are falling short on board diversity. Hopefully we can set an example and drive some real change.” 

But what action can we take to drive real change across all types of businesses, from start-ups to big corporations? It has to start from the bottom, from the earliest stage in education. From the minute young girls enter the school environment, we need to make sure we are sending them the right message, encouraging and empowering them and giving them the tools and confidence they need to fire up an entrepreneurial spirit. We need to have more community and financial support available to female entrepreneurs, and we need to demand more accountability from all businesses, not just those sitting at the top. Businesses need to start propelling change by taking measurable actions and setting up challenging but attainable targets. And they need to start doing this right now.

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail from gettyimages.

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