6 Surprising Reasons Why Companies Should Want Gender Equity and Now
Updated: Dec 14, 2020
Gender Equity Now
Gender issues are everywhere in the news, but what do they have to do with economics? As it turns out, a great deal. The lack of gender equity may be slowing down the economy and curtailing companies’ financial outcomes.
First, a brief definition: gender equity “does not mean that women and men will become the same, but that women’s and men’s rights, responsibilities and opportunities will not depend on whether they are born male or female.” (Source: UN) That sounds fair.
There are three surprising economic benefits of gender equity and three economic reasons why now is not too soon to start focusing on this issue.
Why Gender Equity: Improved Profitability and Economics
I’m a researcher. When I explored the economic impact of equity, I was surprised to discover that fundamentally, gender equity is not just the right thing to do, it’s the smart thing to do.
1. Gender equity increases profitability.
According to the Peterson Institute for International Economics, an increase in corporate leadership to 30% female is associated with a 1% increase in net margin, which translates to a 15% increase in profitability for a typical firm. What’s interesting is that they said that no matter how they manipulated the data, increasing female leadership was good for companies, hands down. There was no way to create a different outcome. That’s mathematically powerful.
Interestingly, nearly a third of the companies they looked at didn’t have any female leadership, and 11 companies had all-female leadership. Ultimately what improves profitability is a balance.
2. Gender equity increases return on equity.
Credit Suisse research over several years found that having women in management leads to a 19% higher return on equity and 9% higher dividend payments. This result is fascinating because they were looking at it from an investor lens: if you want to invest in a company, what indicators might you use to predict returns? Ensure that there are women in management.
3. Gender equity creates a more productive sales force.
Salespeople are a company’s rainmakers. They bring in revenue, and a company that doesn’t do that won’t be in business very long. Research has found that companies with a 45% or greater gender-diverse sales force—that is, close to 50-50 or parity—have higher sales revenue and higher profitability, by quite a margin in fact. Their revenue was almost double.
What’s interesting about that is that most CEOs come out of sales. In 2015, 90% of new CEOs had sales experience, and 100% of them were men. Currently, it’s harder for women to get promoted in sales, yet most power positions are filled by people who’ve been promoted in sales. Not only is sales force gender equity good for business, it’s good for gender equity in the boardroom as well.
Why Now: Gender Equity Attracts Talent
Yes, we can talk about the social issue of gender equity, and that’s great. Certainly there’s a need for organizations to take on socially moral issues. In his 2018 letter to CEOs, BlackRock’s CEO Laurence Fink urged leaders to expand their focus beyond financial measures to making a positive impact on society as a whole.
Gender equity is more than a social issue, however. It is also about labor economics. Women are leaving the workforce; they have been since 2014 and are projected to continue to leave through 2026. If you look at the future of work and the future talent pool, we are facing a 40 million person global workforce shortage by 2020, with a 5 million shortfall here in the US.
That’s only a few years away, when our economy will have jobs it will be unable to fill. Here in Colorado we are experiencing this already. We have the lowest unemployment rate in the nation, and our growth in 2018 will be restricted because of our lack of qualified talent.
1. Women hold more college degrees.
Women are fast becoming the most educated cohort in the US. Women make up the majority of university students in nearly 100 countries, and run slightly ahead of men in completion. Over generations, that could become a quite significant shift. It doesn’t bode very well for organizations when your most educated cohort is not staying and progressing through the ranks.
2. Working moms are most productive.
Once they have children, women tend to get mommy-tracked. That is, there is this perception that they’re not as committed to their work because they have children, which is false. A research study by the Federal Reserve Bank shows that the over the course of their career the most productive employees in the workforce are working moms.
3. Women are not leaving for motherhood.
There’s an urban myth that women are leaving the workforce to care for their children, but that’s actually not true. A study out of Harvard Business School found that 90% of women who leave when they have a child actually leave for other reasons. It’s typically because they already have faced the headwinds of being a female in the workforce and those headwinds get stronger once they have children. It’s socially acceptable for them to say they’re leaving because they’re having a child, so they do.
Falsely attributing the departure of women to motherhood overlooks the real reasons. We need to look at these issues now. There’s a myopic focus on having more flexible workplaces. Those things are good to have, but that’s not the primary reason women are leaving. They’re leaving because they find it very difficult to move up the corporate ladder and to procure leadership positions. Anecdotally, when I worked in a corporation, my senior leaders assumed I wanted flexibility. What I actually wanted was opportunity. You can put in place all the flexible workplace policies you want, but it’s not going to solve the issue.
What can we do?
Three Action Steps towards Equity Now
1. Make a public pledge.
It’s not an end, but it’s certainly a means. Employees view a public commitment as a first step. Consider these two stellar pledges: Paradigm for Parity and the CEO Action for Diversity and Inclusion.
Companies’ commitment to inclusion is on the increase, with 78% of CEOs today stating gender equality is among their top 10 issues. We saw a 32% increase in commitment to inclusion between 2014 and 2017. So equity is becoming table stakes for CEOs and their companies because they want to attract and retain talent.
2. Look closely at your company’s stats.
Something my company, Pipeline™, does is show companies where they sit with gender equity across their workforce. Then we show them what their economic gain could be through the additional revenue they can capture by closing their gender equity gap. For many, gender equity is a massive economic opportunity.
3. Include men in the conversation.
Gender equity is not only a women’s issue. Much of the historical (and current) focus on increasing gender diversity has been focused on “fixing” women—the idea that women’s lack of competence and confidence are the reasons they’re not progressing in an organization, and so we need to fix women. First of all, that’s false.
Second, gender equity is often used as a synonym for women’s rights, even though women are only half the story. The other half are men. Gender equity is fundamentally an economic issue, and we need to get men involved for many reasons. Gender equity impacts men. Not only because they currently hold the majority of leadership positions, but because many men also desire a different role in the world, too—48% of working fathers would like to stay home. Men care about these issues and should be included in the conversation.
Some of this is happening. Focus is moving away from employee resource groups where, for instance, women at XYZ Company would talk to other women. We need to bring in men and women and allow them to be imperfect in the conversation. We need courageous conversations where everyone can speak honestly and openly, even if something’s said which may not be appropriate, or may minimize, or if someone interrupts—that’s part of the conversation. We need to create space for those conversations to happen. Soon.
Gender equity has become something of a binary issue, where you’re either for or against it. But it’s really more of a continuum where you sit somewhere along it. I believe most of us can agree that gender equity is a pressing issue with the potential for powerful economic and social impact.