Gender diversity among leaders is proven to have concrete business benefits. So why do so many companies still not prioritize developing and retaining great women leaders?

Whenever the subject of gender in the workplace is discussed, one constant question inevitably arises: why are women – a substantial part of the workforce and general population – so unequally represented in most parts of most organizations? Why is it that so many women either self select out before moving into the very top echelons of organizations or are not even given an opportunity to fill these leadership roles?

It makes no sense to lose female talent while good talent today is so hard to find and retain.

Theories and initiatives abound, but organizations are still stuck. The world is full of self-aware global organizations that have good intent and policies to nurture talent. Despite this, progress on increasing the proportion of women at senior levels is woefully slow and painful – no organization has yet cracked the code.

What is going on?

Sheryl Sandberg is the chief operating officer of Facebook and is on Forbes’ list of the most powerful women in the world at number six. She tells a story about visiting a client and meeting their senior executives in the boardroom. During a break, she asked to be directed to the ladies’ restroom and no one knew where it was. There were no women in the room other than her and no senior women in the company. She was astounded that even today, there are still global companies with no women at the top.

When I was a professor teaching MBA students at the London Business School in the 1990s, the young female participants assured me that my ‘feminist ideals’ were out of date. The message was, ‘relax, that was in your day, we’re beyond that today. Equal opportunities have arrived’.

But evidence suggests this is not true. The Grant Thornton International Business Report (IBR) 2013 showed that women hold only 24% of senior management roles globally, just getting back to levels last achieved in 2009. (Interestingly, this is roughly the highest level of female participation achieved in the best business school MBA programmes.) The proportion of female CEOs increased from 9% in 2012 to 14% in 2013, and only 19% of board roles are held by women. The statistics are stuck. And while there is a saying at work that everyone agrees with – ‘what gets measured gets done’ – 55% of the 3,500 executive respondents to the IBR disagree with quotas. Women seem particularly concerned that a quota system could be used to question the validity of their appointment and that they would be accused of being in place just to make up the numbers. And Brussels dropped its plans for women board quotas across the EU in October 2012. So there is a lack of regulatory push behind equality.

Why care?

Why should leaders worry about the gender mix in organizations at all? Why don’t they just treat it as the natural order of things? After all, men have a tradition of work (fathers, grandfathers, great grandfathers and men back through the ages have been raised as breadwinners), while women do not always have a female role model working outside the home, because many women choose to raise children and run the household for the family.

Most of us care about the gender mix for reasons of equity and fairness. Why should one gender be advantaged over the other? But there are also financial business reasons to care about.

Dr Roy Adler, a professor of marketing at Pepperdine University, reported in 2007 that a study tracking the profitability of more than 200 Fortune 500 companies over 19 years found that the 25 firms that most aggressively promoted women to executive positions had 34% higher profits as a share of revenue than the industry median. What’s more, 10 firms with excellent records of promoting women – including Google, Apple and Johnson & Johnson – posted much higher profits than even the firms whose records were merely very good. Catalyst research conducted between 1996 and 2002 also showed a strong correlation between the number of females in top executive positions and the financial performance of their Fortune 500 companies.

Good business sense

An article in the McKinsey Quarterly in September 2008 demonstrated again that companies with more women at senior levels have higher levels of organizational and financial performance. More recently, a March 2011 Research Report from Catalyst showed a 26% difference in return on invested capital (ROIC) between the top quartile companies (with 19% to 44% women board representation) and the bottom quartile companies (with zero woman directors). An April 2012 McKinsey report – a three-year multi-country study from 2008 to 2010 of 180 publicly traded companies – showed that financial returns were higher in companies that had greater diversity (female and culture) on their executive boards. The findings were remarkably consistent. Companies ranking in the top quartile of executive-board diversity had return on equity statistics (ROEs) 53% higher than those in the bottom quartile. At the same time, Earnings Before Interest and Tax (EBIT) margins at the most diverse companies were 14% higher, on average, than those of the least diverse companies.

With such strong and consistent evidence of the positive impact that female leaders have on financial results, why are we still stuck? What is stopping us from getting more women onto the roster? There are three primary reasons. The first is unconscious bias at play. Discrimination is not intended or enacted out of malice – companies generally play by the ‘fairness and equity’ rules. Most senior men are puzzled as they look around the room and see only other men looking back at them. They have no clear idea why it has happened that way and shake their head in puzzlement over why policies designed to play fair by female employees are not working. They tend to conclude that it must be because the women have chosen to opt out.

In fact, the villain of the piece is unconscious bias. Whenever there is a majority or predominance of one type, whether of gender, age or race, the minority has to play by the unwritten rules of the majority. Historically, we have more senior men than women in senior executive positions. Women are playing by male rules and losing. Organizations designed as hierarchies with ladders to climb suit the male need for competition, but work less well for the female leader’s inclusive style. This is not personal prejudice, like everything else in this article; it is based on research. A meta-analysis by Eagly and Johnson in 1990 of 160 studies found that women use more participative and transformational management styles compared to men. (Previous research has shown that the transformational style is most effective when companies rely on innovation to stay competitive.)

Men and women lead differently

Groups asked to describe the attributes of a male leader come up with the adjectives strong, arrogant, intelligent, ego-driven, bravado, powerful, dominant, assertive, single tasking, focused, competitive, stubborn, physical, self-righteous and direct. When asked to describe a female leader, the adjectives change. The list became multi-tasking, emotional, empathetic, strong, intuitive, compassionate, relationship-building, verbal, consensus-building, collaborative and gossipy. Our expectations and experience of male and female leaders differ. Male executives look at women being affiliative and inclusive, rather than competitive and egotistical, and do not understand or value what they see, despite the positive outcomes. So when it comes to promotion, women do not come first, or even high, on the list.

The second reason is that companies are not making progress in micro-inequities. The impact of women failing to get on the promotion or candidate list, when judged by male standards of acceptable executive behaviour, is that their ranks are depleted, gradually and unnoticeably. A micro-inequity – a list without a female candidate – becomes a macro-inequity when multiplied a hundred fold and eventually leads to a lack of women in senior levels of leadership.

The third reason is that even when women ask, they do not get. Originally, we thought that women didn’t get ahead because they didn’t ask, but just kept their heads down working hard and doing a good job (for example, see Harvard Business Review, October 2003). It is true that women do soften or generalize requests for promotions, raises or moves. But we do ask. Among others, Professor Tim Judge at Notre Dame’s Mendoza College of Business has undertaken research that shows that when women ask for more, they are more likely to have their motives questioned, which can neutralize some of the advantages. Harvard uses a case study of an employee getting restless and wanting to move on. When the case is given a male name, the class (men and women) concludes that they had better agree to his demands, in case they lose him. When the case has a female name, the class recommends that the employee is told to spend more time in the current job and not to be so ambitious.

The fact is, women went through a phase of trying to out-tough the men, but it does not work. Male and female expectations of female behavior mean that women playing at being like men lack credibility. It is a lose-lose game.

The language of sacrifice

The situation is further complicated because somehow, women choosing to work outside the home have become tangled up in the language of sacrifice. There is no talk of a man choosing to ‘sacrifice’ something through being at work, even though a tough job, lots of travel and long hours may mean he rarely sees his children or wider family. When a woman looks at the same situation, she talks about balancing her innate desire to support her family against job demands and then considers what she will need to ‘sacrifice’. The language is emotive. Is it because women feel out of control? Do they have no choice? There is a need for more research on this issue.

Anne-Marie Slaughter wrote an article for The Atlantic in July/August 2012 that received huge amounts of coverage and comment. She titled it ‘Why Women Still Can’t Have It All’ and the opening line ran: ‘It’s time to stop fooling ourselves, the women who have managed to be both mothers and top professionals are superhuman, rich or self-employed’. Is that the sacrifice? What about women who choose to remain unmarried, without a partner, without children or with a husband who looks after the home? If this is how we frame the issue, as a sacrifice between children and work, we limit the debate. Do men even consider the notion of ‘having it all’?

The real battle now is that ennui has set in. After years of concentrated effort, with so little progress to show for the investment, women and business are giving up. Businesses shrug and point to everything they have tried, from equal opportunities policies to appointing a head of diversity and inclusion, and conclude, ‘we did our best’. Women sent on all-female development programmes are suspicious and resent the idea that they need to be singled out for special treatment. ‘We are executives first and our gender is immaterial’ is the complaint that we have heard repeated over the generations of continued lack of progress.

Rising to the challenge

In May 2012, the Financial Times ran an article on healthcare company Novartis entitled ‘Women take the fast track’. It started contentiously, with a picture of CEO Joe Jimenez smiling out from the page, over the opening paragraph: ‘In May 2010, a New York jury ordered Novartis to pay $250 million in punitive damages… in what the plaintiffs’ lawyers claimed at the time was the largest gender discrimination case in the country.’ Yet Jimenez personally and Novartis as a corporation believe in gender equality. They decided to take a different approach to this challenge, with a new strategic initiative to develop female leaders. It was not without risk or controversy.

The good news is that the initial results look promising. Indeed, in July 2013, Diversity Journal profiled Novartis receiving an Award of Excellence for its innovative Executive Female Leadership Program.

What can leaders and managers do?

How to address the issue of gender equality

  • Treat the issue as systemic. It is not because women are not as talented or because they choose to drop out for family reasons. It is much more complicated than that. Acknowledge and address unconscious bias in the system and train the male majority to confront and address it. We all have bias, it is nothing to be ashamed of.
  • Deal with micro-inequities. If we all ensured that a woman’s name is on every candidate list, progress would be accelerated.
  • Get sponsors for women – not mentors, but sponsors who will shepherd them through a system currently biased against them.
  • Allow flexible working. It helps men and women deal with the demands work places on us in a world where the conference call can come in at any time of day from the other side of the world.
  • Put quotas in place. What gets measured gets done.

The next issue of Dialogue will cover the journey Novartis AG started to ensure that women are as well represented at all levels in the company as they are in society.

Liz Mellon is chairman of Dialogue’s editorial board.

An adapted version of this article appeared on the Dialogue Review website

Illustrations: Eva Tatcheva