A new “open letter” report to business warns that the application of a merit-based system for hiring executives is hindering Australia’s progress on gender equality and diversity in the workforce.

Report launch roundtable

The warning comes with the release of a joint report by Male Champions of Change and Chief Executive Women called In the Eye of the Beholder: Avoiding the Merit Trap.

The report argues that the ingredients of merit include performance and potential, but an assessment of potential – in recruitment and promotion – is highly subjective.

“Merit should be investigated to uncover biases. If we continue to define ‘merit’ as people ‘like us’, who have done what we did we will get more of the same,” the report said.

“There’s a common barrier that intervenes between the belief in and application of a merit-based system, particularly when it comes to making unbiased decisions about people. To make progress on gender equality and reap the benefits of diversity, it is critical for us to confront the often unintended obstacle that our use of ‘merit’ presents.

“The ingredients for merit are both performance and potential. Past performance can be assessed as long as performance benchmarks and outcomes are clear. However, evaluating potential is subjective. In many recruitment and promotion decisions, what adds up to merit for some is invisible or detrimental to others. This allows bias to cloud judgement on key decisions.”

President of Chief Executive Women Diane Smith Gander said at the release of the report that past performance was not always a predictor of future success.

“Leaders who are doing the hiring should open the aperture and hire people for the synthesis – not the summary – of their past experiences,” Smith Gander said.

“We want to see an increase in women’s representation in leadership in Australia and we want it to be significant. The problem that I am seeing at the moment is that as we are taking those actions we are getting some push-back. And the pushback that we are getting is this concept of merit.

“What we need to do is absolutely accept that everybody in business should be judged on their merit. But we don’t want it to be a factor of ethnicity or a factor of gender that people are being judged on.”

Smith Gander said the research showed that the more an organisation described itself as a “meritocracy” the greater the gender bias in that organisation actually was.

“So something is really wrong,” she said.

Elizabeth Broderick AO, the convenor of Male Champions of Change, said when she talks about merit she always asks the question that if 50 per cent of women make up the population why are we not seeing them in equal proportions in organisations.

“That tells me that there is something other than merit operation,” Broderick said.

A roundtable discussion about the report included executives from some of Australia’s major corporations.

“Merit is a trap – it is the ultimate card to play in preventing change. It is endemic across all organisations. The higher you go, the trickier it gets,” CEO of the Jetstar Group Jayne Hrdlicka said.

“We make small changes to the system because no one believes it’s broken. But if we only tweak, we never get change. To move 180 degrees we have to have someone holding up the mirror at every stage of the process asking ‘why do we think that?’”

CEO and managing director of Merryck & Co Meredith Hellicar said institutional merit was not the same as individual merit.

“If you choose a senior executive team based only on individual merit, you get a monologue,” Hellicar said.

Chief Executive Women represents more than 370 of Australia’s most senior women from the corporate, public, academic and Not for Profit sectors. Its mission is “women leaders enabling women leaders”.

Male Champions of Change is a coalition of CEOs, secretaries of government departments, non-executive directors and community leaders. Established in 2010 by then Australian sex discrimination commissioner Elizabeth Broderick, its mission is to step up beside women to help achieve a significant and sustainable increase in the representation of women in leadership.