There is a clear correlation between empowering women and GDP growth, as well as achieving gender equality, as Lisa Kaiser Hickey discovers.
Goldman Sachs’ Global Economic Report 164 states that investing in female education creates a “growth premium” that can further GDP growth by about 0.2% per year. GDP is also driven by demand by consumers, and the world’s women make up 70% of consumer purchasing decisions. Harsh Purohit of Cognito
Advertising in India brilliantly illustrates the dichotomy, noting: “If companies do not relate to gender diversity, then in many cases they are actually missing out: either on 50% of the resource pool or the consumer pool.”
Problem starts with quotas
Quotas have increasingly become favoured tools for waging the gender equity battle. These fiercely won – and fiercely fought – quotas require distinct percentages of women to be included in corporate purchases or in corporate boardrooms. Quotas are the means by which Norway has achieved
40% women on corporate boards, and the way that the US Government targets purchases to women and minority firms.
Many countries have followed the Norwegian example by setting quotas for women’s participation on corporate boards. However, an extensive study published in the Northwestern Journal on International Law and Business reveals that success is mixed. On the tangible side, there are more women on boards and, in Norway’s case, the quota was quickly met. However, these women have generally missed the internal leadership progression and/or education that would have better prepared them for existing and/or future board service.
Quotas are not long-term solutions. To begin with, nothing crushes the entrepreneurial spirit like quotas, which pre-empts the natural inclination of the entrepreneur to deploy creativity and innovation in the evolution of a sound business model. For decades, entrepreneurs have known that solving problems are the very essence of a company’s success or failure. Problems lie in every single aspect of the corporate management. Solving problems is simply an exercise in creativity: thinking beyond boundaries, brainstorming and evaluating alternatives are the sequence by which we function as CEOs and – whenever we incorporate the ideas of others – as leadership teams. This process ensures ownership of both the problem and the solution. The same process applies to taking advantage of opportunities (see box “One Billion Reasons for Change”). Quotas, by their very nature, are edicts for results that fail the creativity test and thus fail to win ownership by either the CEO or the leadership team.
Quotas that force gender equity on companies pre-empt creative evolution of, and adaptation to, change in the organization. Innovation is grounded on creative idea generation and a process of problem-solving, but innovation cannot actually happen unless the employees of the organization are empowered to think creatively.
Long-term change depends on the corporate culture. When McKinsey and Company studied the drivers of cultural revolution in high-performing companies, they found such revolution was led by a committed CEO. Yet Booz & Company, a global management consultancy, shows disconnect between how culture is viewed versus the way it is managed. The November 19 2013 home page of booz.com stated: “Less than half of participants saw their companies effectively managing culture. More than half said a major cultural overhaul was needed and 96% of respondents said some change to company culture was required.” Creativity was not perceived to permeate the culture described by 96%, as they and their ideas could not rise. It follows that these respondents were likely to be in a working environment in which they could neither trust nor excel.
CEOs manage culture by advocating, acting and persuading others to follow their example. In McKinsey’s 2012 Global Gender Agenda, it was noted: “When a CEO is the chief advocate and ‘storyteller’ more people… believe that the story matters and begin to adopt the CEO’s mindset and behaviour. Intensely committed CEOs make their goals clear and specific, tell everyone about them, get other leaders involved and manage talent to help make things happen.” When the CEO sets the pace, policy and process shape structures and work context. Ultimately, “an organization’s governing principles and values affect everything it does”, according to the IFC.
Why the CEO matters
The CEO is ultimately accountable for the performance of the company. An enlightened CEO will consider every means by which the performance of the company can be advanced. Assuming that the revolution of corporate culture to embrace gender balance only results in advantage to women is faulty thinking – it benefits every person as well as the corporation’s sustainability and profitability.
In addition to treating gender equality like any other business imperative, McKinsey suggests three other priorities for advocacy by the CEO and leadership team. First, measure the data on internal gender balance. Usually there are shortfalls in the work environment that are causing imbalances. Second, tirelessly mentor without bias and encourage the leadership team to do the same. Last, seek and demand diversity of thought so that the best ideas come forward. As McKinsey’s report notes: “A wide range of global companies made real advances in gender diversity over the past five years. They know that this is hard work – a journey measured in years rather than months. But they also know that improving the pipeline of female talent is possible, with rewards that include tapping the best brains, improving customer service, increasing employee engagement and everything that comes with these benefits.”
The CEO leads change
Whether CEOs regard gender equity as a problem or an opportunity, creativity is required. Indeed, the World Bank states: “Market forces cannot on their own dissolve the ‘durable inequalities’ in rules, norms, assets and choices that perpetuate the historically established disadvantages of certain social groups,” change-makers are required.
The first action to take is to correctly define the problem, lest needless hours of conversation be spent on brilliantly solving the wrong problem. Consider posing: “How might we add value to our services/products?” Obtaining the most creative pool of ideas will be optimized when the question is posed to a diverse and representative population (gender, internal/external role) of the organization’s stakeholders (not to be confused with shareholders).
Next, the generated ideas must be pared down in terms of how they address (solve) the problem and whether the organization realistically has the capacity to achieve them. This, too, is an exercise for smaller groups of the original idea generators.
Third, remain committed to development and implementation of the emergent best ideas, and be prepared to accept that your diverse and representative population of idea-generators will want the inclusion of women as a driver of added value.
The business rationale
The natural distribution of population between men and women has no inequity. On a worldwide basis, however, women do not participate in equal measure in the workforce, compensation, leadership or even in basic opportunities for health, education, wealth retention or property rights. United Nations Platform for Action Committee recently quoted the United Nations saying: “Women do two-thirds of the world’s work, yet earn only 5% of the world’s income and own less than 1% of the world’s real property.” The book Half the Sky: Turning Oppression into Opportunity for Women details the destructive behaviours around the world that diminish and disenfranchise women. Yet as co-author Sheryl DuWunn notes: “Our focus has to be on changing reality, not laws.”
Organizations that have as their driving diversity focus to hire and promote women are operating from a clear business rationale:
- Sustainable profit management
- Social justice and fairness
- Widening the talent pool
- Synergies with CSR
- Consumer demand
- Investor demands
- Addressing obstacles
A UK-commissioned study of the FTSE 350 noted that 30% of corporations without gender balance attribute the cause to attitudes and 30% attribute the cause to work environment. These are both perfectly manageable by a committed CEO.
Attitudes are learned, and thus can be re-learned. To change attitudes, the CEO must iterate and demonstrate the values intrinsic to corporate success. These are closely related to the business imperatives (see box “The Bright Thing to Do”). Changing attitudes comes from the actions and advocacy of the CEO.
Work environments are easily managed in four buckets, according to McKinsey’s research:
- A policy of corporate transparency with gender-diversity key performance indicators (KPIs)
- Working schedules and benefits that support work-life balance
- Adaptation of human resources for gender-diversity support
- Teaching women to network; providing coaching, training, mentoring
Corporate transparency is the degree to which corporate actions are revealed to the public. Certain items of transparency are dictated by regulation, but most other items are dependent upon the corporation’s internal policies. The “public” can be both internal (line employees, management staff, board) and external (shareholders, governments, public at large). Within the McKinsey context, informing others of progress against gender-diversity goals is in the form of metrics. IFC studies concur with McKinsey on the critical nature of gathering, monitoring
and reporting progress on gender equality data.
Working schedules and benefits include gender-equal leadership opportunities and gender-equal pay. The International Finance Corporation’s report data asserted that: “Employers should pay employees equal remuneration for work of equal value regardless of gender. It was expected that organizations adhere to this principle, ensure that they have due diligence processes in place regarding this issue and
that they implement mitigation measures where a gender wage gap is found to exist.”
While equal pay for equal work addresses a fundamental fairness issue, it also helps avoid risk of legal or societal challenge of pay gaps. In a 2011 International Labour Organization webinar, other examples supporting the case for equal pay were simply and clearly made: consider the twin issues of employee turnover and successful recruitment. Equal pay diminishes employee turnover (why stay at firms with uncompetitive wages?) as well as supports employee recruitment (why not take jobs that are offering more competitive pay?).
Working schedules and benefits also include family-friendly policies to provide flexibility to workers who are care-givers of children and elders. Provision of such policies widens the labour market options of companies by attracting the unemployed or the casually employed.
Human resources systems must adapt processes and procedures for gender balance. This translates into matters large and small, including the adaptation of anti-discriminatory policies to gender-neutral terminology on forms and instructions to the provision of gender-equal health and safety protections and equipment.
Finally, a core competency of profitable gender-equal companies is their commitment to developing their workforce. All employees benefit from on-the-job training, coaching and mentoring. Goldman Sachs’ Global Economic Paper 164 states the cautionary adjunct: they “have noted strong evidence that education, particularly post-primary education, has been a positive effect on women’s labour force participation and, in
many cases, on job opportunities. There is already a great deal of policy focus on education, although some concerns about the quality of education and the need to go beyond primary education. What has had less attention is the potential of vocational and technical education for increasing women’s productivity and employability. Yet the available data suggests that in most contexts, women have fewer training opportunities than men and that the training they do acquire reinforces a gender stereotyped distribution of skills.”
Goldman recommends that training for women in particular also includes finance, communications skills and management.
Corporate governance must be developed in every dimension. “Respect for gender equality and transparency on social, environmental and economic factors have been widely recognized as essential components of corporate governance principles,” asserts the IFC. The GRI study found that stakeholders believed values and governance ought to be the starting point for organizational practices and reporting related to gender. Promotion of gender equality is exemplified through sound corporate governance. The following excerpt from the IFC’s study clarifies this point: “In response to public interest to institute good corporate governance practices, organizations are encouraged to pledge their commitment to international frameworks for human and workers’ rights” (Organisation for Economic Co-operation and Development 2004b). Gender equality features in the international framework of human rights and the ILO conventions pertaining to workers’ rights, as well as a wide range of policies supported by governments across the world. Gender equality is considered as a positive contribution of organizations towards the realization of human rights and is recognized as being relevant for business, not just in an organization’s workplace, but also in the context of its operations.
Business case reasons for including gender-equality considerations in policies that determine an organization’s governing principles and
organizational culture are increasingly being considered by companies: governing boards have the duty to protect stakeholder value which cannot be achieved if a) the full potential of women is not recognized and/or
realized, and b) the organization is not being protected from potential business risks associated with, for example, negative reputation or litigation risks related to undesirable gender practices.
The concept of protecting stakeholder value resonates with CEOs, yet many of the most salient actions they can take are unvisited: an optimal mix of diverse leadership skills and a leadership population representative of the market(s) signals the public that gender diversity is valued and promoted.
Further, there is considerable evidence (studies by Harvard Business School, Brown and Anastasopolous and Credit Suisse) that the greater the number of women on a board, the better the corporate governance, risk aversion and board performance.
In the absence of laws to the contrary, CEOs should model
international best practices to craft worthy governance practices of their own. A United Nations Conference on Trade and Development study points out a number of awards, ratings and rankings use good governance practices as selection criteria. Likewise, a corporate study by Credit Suisse summarizes its findings that greater diversity diminishes corporate volatility as shareholder value and price increase.
Not only can the engagement of enlightened CEOs lead the world to realize its full economic potential, they can also lead it to achieve its social potential. The only sustainable way forward is a world where all people freely enjoy fundamental human rights and the opportunities to pursue their own paths. Such a world will weave equality, social responsibility and environmental integrity into the very fabric of survival.
Lisa Kaiser Hickey is president of The International Alliance for Women
Empowering the third billion: women in the world of work 2012, D A Aguirre and K Sabbagh (2010).
Corporate Culture Is Critical to Business Success, Yet Mismanaged and Underleveraged. Booz & Company (2013).
Gender diversity and corporate performance. Credit Suisse (2012).
The gender dividend: making the business case for investing in women. Deloitte (2011).
Half the sky: Turning oppression into opportunity for women worldwide. Kristof, N and WuDunn, S (2010).
The global gender agenda. McKinsey and Company (2012).
Women on Board for Change. Sweigart, Anne (2012).
Guidance on Good Practices in Corporate Governance Disclosure. United Nations Conference on Trade and Development (2006).