Another selection from George Starcher’s latest publication on gender equality in business, “Toward a Partnership of Women and Men“. The last entry discussed the obstacles towards women’s participation in leadership positions. Now we are going to examine the so-called “Business Case for Gender Balance”, for as Starcher duly notes, “While some authors have focused on the moral case for equality of women and men, it is clear that without a convincing business case focus, little progress can be expected in bringing many more women in the leadership of major corporations.”
He begins the chapter citing three reputable studies which highlight a positive correlation between corporate financial performance and gender balance, including this one:
More recently, McKinsey & Company (2007a) found in two studies that greater gender diversity in top management correlates with “organisational excellence” as measured by nine criteria: leadership, direction, accountability, coordination and control, innovation, external orientation, capability, motivation, work environment and values. … The authors of this report do not claim causality, that is, that the better financial performance is due directly to the greater proportion of women in top management, but correctly conclude that these results do argue in favour of greater gender diversity.
The European Commission also sponsored a study on “The Business Case for Diversity: Good Practices in the Workplace. 2005″, which found, among other things that while few of the participating companies had diversity policies and practices in place, “most of the companies in the survey (83% of the 495 responding) agreed that gender and diversity initiatives have a positive impact on business.”
Some of the perceived benefits of diversity mentioned by the respondents include “access to new labour pool”, “benefits from enhanced reputation”, “commitment to equality and diversity as company values”, “innovation and creativity”, and “improved retention and motivation”.
Starcher then goes on to further analyse some of these benefits:
Access to new talent pool. In 1998, McKinsey & Company released a landmark report entitled “The War for Talent.” This study was based on a survey of seventy-seven companies and six thousand business executives. It concluded that the most important corporate resource over the next twenty years will be human capital: specifically the education, skills, and experiences of talented professionals. Fully 75 percent of executives interviewed said their companies were chronically short of talent already. This talent shortage continues to grow in most major markets and professions. At the same time, other studies have shown that women constitute the most significant untapped source of new managerial and executive talent. It is easy to understand why access to this new talent pool is, according to the EC report, (2005, p. 29) the most important perceived benefit of gender balance and major reason for recognizing its strategic importance. Many professional service firms have led the way in developing policies and practices for recruiting and retaining female talent not only because their turnover was a major cost but also because it became their major constraint to growth. Some estimates show the cost of replacing professionals to be in the order of magnitude of 150% of their annual salary – a very high cost when firms have an annual turnover of professionals in excess of 15 to 20 percent. … For example, TNT, an Austrian company, has a worldwide diversity and inclusion strategy. It calculates that as a result of effective management of diversity and inclusion, it has seen a reduction in yearly staff turnover from 25% in 2000 to 10% in 2003, and a similar reduction in absenteeism.
Enhanced marketing opportunities. Even management gurus are stunned when they see and ponder statistics about women as customers. According to Tom Peters, women are “instigators-in-chief” of most purchases, making 83 percent of all consumer decisions, including 50 percent of traditionally male categories such as cars, consumer electronics, and PCs; 80 percent of healthcare products, and 92 percent of vacations. The conventional wisdom that management consultants urge on companies that “the customer is king” is actually dead wrong. The customer isn’t king, she’s queen. Recruiting and promoting women to key positions allows companies to gain a competitive advantage because it leads to deeper cultural adaptation to the marketplace. (Thomson and Graham, 2004). In developing and designing new products, in penetrating new markets, in reaching new market niches and populations, gender balance and diversity can be a powerful competitive advantage in understanding customer needs, habits, and requirements. In 2001, former PepsiCo CEO Seve Reinsmund required that half of all new hires be either women or ethnic minorities. This diversity push helped better understand tastes of new consumers. (Yang, 2006) Contrast this with Nissan, whose President Carlos Ghosn told 500 powerful women at their 2007 Deauville, France conference that women directly make or influence two-thirds of car purchases in Japan. Studies also showed that 80% of women buyers would prefer to have women salespeople in the showrooms, as would fully one-half of men. Yet, women represent only 10% of sales people in Japan and only 1.9% of Japanese car industry managers (Wittenberg-Cox and Maitland, 2008). Needless to say, this imbalance is being changed, and share of market at Nissan is increasing, but it illustrates how women can make an important difference in designing as well as in selling consumer products. Years before, Volvo created an all female team to design a new car by and for women, and with great commercial success.
Improved image and reputation. Gender balance contributes importantly to the corporate image and reputation and strengthens links with all stakeholders. Not only does good reputation facilitate attracting, motivating, and retaining talent; investors are paying more attention to gender balance and diversity. Some managers of investment funds and rating agencies are including gender in their assessment of companies’ corporate responsibility.
Greater innovation and creativity. In a recent survey of CEOs by McKinsey & Company, the question was asked, “What single factor contributes most to the accelerating pace of change in the global business environment today?” The most prominent response was “innovation in products, services, and business models.” It is well known that diversity enhances creativity and innovation, and that innovation is increasingly critical to competitive success. This notion has been developed by business writer James Surowiecki (2005), whose basic premise is that diverse teams make better decisions. He gives evidence that homogeneous groups become progressively less able to investigate alternatives, and says that diversity expands the set of solutions and allows the group to conceptualize in novel ways. More recently, a study (2007) has shown that there are a number of critical innovation factors that are influenced by the proportion of men and women in a team. According to the study the best gender mix is about 50% men and 50% women, and a slight majority of women (60%) creates optimal conditions in relation to the self-confidence of the team. Furthermore, structuring teams in a way that either men or women have only a “token” status is detrimental to the performance and innovation of the team.
Lower risk. Particularly in the USA, the increasing cost both in money and reputation of litigation and sex discrimination cases is a powerful incentive to create more diversity at all levels and to monitor policies and practices carefully to ensure equal treatment.
Ethical and moral reasons. Many companies have adopted equality, inclusion and diversity policies and practices in no small measure because they want to be doing the right thing and to be perceived as doing the right thing. They are influenced both by public opinion and by employee expectations which have emerged along with the growth in corporate responsibility consciousness throughout Europe.
So where does this all lead us? The significance of the movement towards greater equality is apparent in the chapter’s opening quote:
Woman’s lack of progress and proficiency has been due to her need of equal education and opportunity. Had she been allowed this equality, there is no doubt she would be the counterpart of man in ability and capacity. The happiness of mankind will be realized when women and men coordinate and advance equally, for each is the complement and helpmeet of the other. (‘Abdu’l-Bahá)
