We have a problem. A big problem. An issue that directly affects roughly half of the world’s population and that indirectly affects 100% of it. Stated simply, the problem is that we, as a global business culture, do not know how to maximize one of our greatest resources: women. The even bigger problem is that most of the world’s business leadership is in denial about this fact. Recruiting and retaining female talent should be the number one item on every CEO’s agenda.
It’s important that to highlight the specific angle of this article. While the moral issue of diversity is clearly important, the moral discussion is not the purpose of this article. The purpose of this article is to focus on the effect that the gender gap has on businesses and their bottom line and to identify what challenges or barriers companies face in closing that gap and retaining female talent.
The Business Case for Investing in and Retaining Female Talent
So, let’s begin by asking ourselves the big question: Why should companies invest in retaining female talent?
Well, first and foremost, because diversity within an organization affects the company’s bottom line. Yes, that’s right. It is an accepted fact, based on numerous studies, that businesses that have women in the highest echelons of their organizations perform better than more male-dominant companies.
Ban Ki-moon, Former Secretary-General of the United Nations, references in his 2014 article Equality Means Business a study showing that among Fortune 500 companies, the companies with better representation of women in management “delivered a total return to shareholders that was 34 percent higher than for companies with the lowest representation.”
Among Fortune 500 companies, the companies with better representation of women in management “delivered a total return to shareholders that was 34 percent higher than for companies with the lowest representation.”
Likewise, a McKinsey analysis found that gender-diverse companies are statistically 15% more likely to outperform their less diverse counterparts in achieving above-average returns. A particularly interesting finding of this same study is that in the UK, for each 10% rise in gender diversity among senior executives, EBITA increased by 3.5 %.
Grant Thornton, in their research on the value of diversity in business, highlight that companies listed in the UK, US and India that have male-only boards are “foregoing potential profits of $655bn.” How’s that for bottom line?
If studies then show that the greater the diversity in a company, the more profitable that company is, what are the specific factors that make this true? Why is it that more diverse companies are more profitable? Here are three potential reasons:
1. Two heads are better than one.
2. Women are more highly educated
3. More diverse organizations attract better talent
Two heads are better than one
Global organizations face global problems, and the more diversity of perspective a company can pull on to resolve these problems, the better their chances of making correct conclusions and sound decisions to solve them. It is precisely the variations in perspective that permit companies to approach problems in a more comprehensive fashion and to improve their decision-making.
Sacha Romanovitch, CEO of Grant Thornton UK LLP, on the subject of their research, states “We know that businesses with diverse work-forces can outperform their more homogeneous peers and are better positioned to adapt to a rapidly changing global business environment. Within the context of increased uncertainty and complexity, firms must resist group-think and welcome a range of perspectives in order to grow and meet the challenges of today.”
While the value of diversity in decision making applies to diversity across the entire human spectrum, the gender gap is a clear one that represents half of the population. The inclusion of women at senior executive levels is a clear, and easy, win for most organizations.
Women are more highly educated
PwC has been doing some exceptional work in diversity research, particularly in the area of female millennial talent. In their 2015 study, the authors highlight that, in addition to the fact that we are experiencing a historically unprecedented number of women entering the workforce, these female Millennials also boast better formal qualifications than males in the same generation.
Women now form the majority of the university population in 93 countries (as compared to the male majority in only 46 countries) as female enrollment in universities has increased almost twice as fast as that of males since 1970. Female millennials “earn more bachelors’ degrees than men and have the edge over men of 56 to 44% in masters’ degrees. Female millennials matter because they are more highly educated and are entering the workforce in larger numbers than any of their previous generations.”
Female millennials “earn more bachelors’ degrees than men and have the edge over men of 56 to 44% in masters’ degrees.
While this study specifically refers to millennials, born between 1980 and 1995, it is a safe assumption that it is in the interest of any organization to attract the best talent possible as regards education. This shift from men to women as regards educational preparedness for the workforce should, therefore, also encourage a mindset shift for recruitment in our organizations.
More diverse organizations attract better talent
The makeup of the workforce has changed, and while organizations are making long strides to adapt to the needs of today’s workers, there is still a way to go. The reasons that people join stay or leave a company have changed over the last generation, and businesses must be conscious of these reasons. To attract the best talent in the workforce, it’s important to know the worker.
As the focus here is female talent, some of the areas cited as most important for women are outlined here so as to encourage increasing gender diversity in a way that is tangible for all talent.
Competitive salary: In the same study previously referenced by PwC, the top reason women would leave their current employer is finding a job that paid better elsewhere, at 43%. While the gender pay gap is difficult to measure, it is a fairly well-known fact that it exists. Looking at the EU as a whole, in 2015, women’s gross earnings averaged 16.3% lower than men’s. In the US, the pay gap is 20% lower for women than it is for men.
Since, as a general trend, women are paid considerably less than their male counterparts, it is only reasonable to expect female talent to be more inclined to move companies in a continual attempt to put a crack in the glass ceiling and to improve their own economic well-being in an environment that is negatively biased (whether implicitly or explicitly) against them.
Carrying out a review of the gender pay gap in your organizations is an important first step to ensure equity in this area, and to help attract the best talent, female or male.
Work-life balance & flexibility: PwC’s research indicates that work-life balance and flexibility are valued highly by Millennials regardless of gender, with 97% of millennials (male and female) stating that this was important to them. The same study also debunks the commonly accepted myth that most women who leave their current employer do so to start a family. Interestingly, only 19% of millennial women stated this as a reason for leaving an employer, and, interestingly, 18% of millennial men stated this reason themselves. Women rank work-life balance and flexibility as the second reason they would leave their current employer while starting a family, ranks sixth (for both men and women).
Career progression opportunities: PwC also found in their research that 32% of women would leave their current employer due to lack of opportunities to progress in their career trajectories. This study divides female talent into three segments dependent on their work experience: career starters, career developers, and career establishers. Both career starters and career establishers named opportunities for career progression as the most important employer trait, while all ranked the lack of progression opportunities as the most likely reason for leaving an employer. An astounding 53% of female millennials find this the most attractive characteristic in an employer.
Some interesting research by LeanIn.org and McKinsey finds that, despite the fact that career progression is the most important aspect of an employer for women, they are 15% less likely than men to be promoted from within. To deepen the paradox further, women in leadership positions are much more likely to stay with the company than men. At senior VP level, women are 20% less likely to leave, and at C-suite they are roughly half as likely to leave as men.
Another commonly held myth is that women with children are less interested in working toward achieving higher positions, but this study shows that women with children actually are 15% more likely to want a senior executive position than women without children.
This data provides a clear rationale for organizations to review their promotion policies to retain female talent, particularly at higher levels in the company.
Both men and women value diversity: The research and consulting firm, Great Place to Work, have been able to demonstrate that employees look at their work environment, colleagues and superiors and that they internalize that view. If they see themselves in that image, they derive from it a sense of hope that their ideas will be respected and heard, which in turn nurtures the commitment they hold to the organization, helping organizations to create formidable teams to enable growth and progress.
Additionally, a Catalyst.org study looked into how men and women valued diversity in an organization and found that there were no significant differences between them. Both women and men value diversity in an employer.
The Road Ahead for Female Talent
It’s not only about attracting female talent to your organization but all talent. Increasing female representation in all areas, particularly the higher ones, of your business will only help you to do so.
The profitability and, in the long term, the survival of companies will ride on their ability to commit to diversity and inclusion. Making concerted efforts to close the gender pay gap, launching flexibility and work-life balance initiatives for all employees, and ensuring internal promotions are carried out with gender equity are some of the measures that organizations can begin to implement to ensure they thrive in the modern global business environment and well into the future.