Want economic growth? Elevate more women to the top
5 min read . Updated: 08 Mar 2023, 12:19 AM IST
PremiumThe male-female empowerment gap exerts a toll on business too, creating systemic competitive disadvantages for companies that are unable to promote their talented women to leadership positions.
Two powerful women leaders – Norway’s Erna and IMF’s Christine – had put up a case for accelerating gender equity in labour market to trigger up to 9% and 27% GDP growth for Japan and India respectively. What stronger economic impetus is needed for a world that is alternatively looking at a recession or stagnation?
Economies like India will be more impacted with the growing gender inequality post the pandemic. There have been various reports that estimate annual loss of over USD 47B for the subcontinent region as a direct result of lower women participation in labour market. At a policy level, this borders on a crisis of international competitiveness.
The male-female empowerment gap exerts a toll on business too, creating systemic competitive disadvantages for companies that are unable to promote their talented women to leadership positions. In nearly 100 countries, more than half of college and university graduates are female. These graduates go on to take up entry-level jobs at rates equivalent to men, and yet as each cohort moves up the management ranks, the female contingent thins until their numbers become quite scarce at the top levels. Not only is this extremely costly, as valuable human talent walks out the door, but also it is shown to have a negative effect on business performance. In a patriarchal India, where even women parliamentarians represent less than 15%, this will further erode its growth potential.
Remarkably, enterprises with top quartile representation of women in C-Suite greatly outperform male-only leadership companies. Many research firms including the MSCI had found that enterprises in their Index with strong women leadership generated an ROE (Return On Equity) of 10.2%, as against 7.4% by others. Investor groups, venture capitalists and activists are beginning to wake up to this reality and are pushing for more inclusion of women.
Why are there so few women at leadership roles? Research data blame it all on women’s personal choices. It seems they desire to take time off to raise kids and family. Other studies say women are less ambitious than men. It appears, in many cases, the women executives are not given enough opportunities for line management jobs that are critical for a senior role; they get concentrated in HR, IR, MR and such functions. All that may have some substance but it cannot explain why half the population fails to make progress.
What can enterprises do on this Women’s Day to nurture women employees to the top? Playing lip service to equity will not make business sense any more. Here are some specific and concrete actions that can help:
Reflect client demographics: As client organizations are becoming more diverse, it is not right not to have client-facing teams, such as sales or support teams, reflect the same diversity. The same holds true for organizations selling household products, medical products and many kinds of services where the primary decision-makers are women. Avoid male-dominant R&D teams making decisions for people whose experience they don’t understand.
Embrace the ‘Rule of Rooney’: Not the English footballer Rooney but the former owner of the Pittsburgh Steelers. This rule, placed into effect by the USA National Football League, stipulated that at least one member of a minority group be interviewed for most senior job positions that are open. A similar rule could require that at least one woman be interviewed for all board and C-level positions.
Encourage men to take part: A major reason why most diversity and anti-bias training fail is that people resent it. Instead, give powerful men a role in identifying and mentoring high-potential women, measure their progress, and reward them when aligned corporate targets are achieved.
Insist on “blind" candidate screening: By removing gender-identifying information from candidate resumes and other screening documentation, it is more likely that candidates will be judged on their merit. Symphony orchestras have benefited from this. After they introduced blind auditions, in which artists played behind a curtain in a carpeted room, the number of women landing roles in symphony orchestras increased dramatically. More recently, code written by women was judged to be of higher quality – but only if evaluators didn’t know their gender.
Agree on candidate criteria first: When evaluating candidates, establish the clear priority of criteria for subsequent evaluation first, rather than knowing who the candidates are and changing the criteria later.
Execute rules of engagement: Women suffer from what is called the “double bind." When they act aggressively, they are labelled as rude. A recent study of performance reviews found that the word “abrasive" was used in a good quarter of reviews of senior women. Astonishingly, it was never once used for men in the same positions. At the other extreme, women who are too friendly or talkative get dismissed as lightweights. Two other issues are that women are interrupted before having the opportunity to make a point, or that a man appropriates their idea as his own and gets the credit for it. Implement a “no interruption" policy among teams to let women explain their POVs.
Ignore previous salary information: The BBC was in the news not just for the Modi documentary. It had been paying women editors much less by looking at previous salaries. To avoid gender pay gap, create packages reflective of the job requirements.
Don’t just ask women to behave more like men. Companies have the power to change how they promote female talent, and now is the time to do so.
Rita McGrath & M. Muneer are, respectively, a professor at Columbia Business School and founder of Valize; and co-founder at the non-profit Medici Institute. Twitter @MuneerMuh