The business case for gender equality
Gender equality is a success factor for both women and men. When the talents of women and men are merged into a culture that puts skills, professionalism and profitability first, the result need not be a redistribution of power and resources. Instead, women and men working together can create a win-win situation and a bigger cake to share. Read below about how women in top management help improve profitability, competitiveness and customer focus.

Correlation between women in management and profits
Accessing the full talent pool
Investing in diversity
The customer perspective
Minimising risks and costs
Aiming to be the employer of choice

Gender equality is fundamental to democracy and equal participation: a basic human right that is enshrined in the law of all EU member states. Many companies and organisations therefore regard gender equality as an important means of showing that they live by the rules and take their share of social responsibility.

Another reason for companies to actively seek out women managers is that it gives them a competitive edge and boosts profitability. This is probably not so well known, but an increasing number of studies and company practices show a link between equality and profitability. Some of these are discussed below.

Correlation between women in management and profits
There are a number of studies that show a link between gender distribution in a company’s management and its profitability. Researchers at Cranfield University in the UK have found a consistent and growing correlation between share price and women in management. The researchers monitor the 100 largest companies on the London Stock Exchange and annually publish the Female FTSE Index They showed that of the 20 companies with the highest market capitalisation in 2003, eighteen had at least one woman on the executive management team. Of the 20 companies with the lowest market capitalisation, only eight had a woman on the executive management team.

Researchers have also investigated the link between good corporate governance and women on the executive management team. A measure of good corporate governance was devised based on eight classic indicators, including how boards are appointed, constituted and trained. The companies were then ranked. Companies with good corporate governance had at least one woman on the board.

A long-term study by Roy Adler of Pepperdine University in the US shows the correlation between women in executive management and short and long-term profitability. An extensive 19-year study of 215 Fortune 500 companies shows a strong correlation between a good record of promoting women into the executive suite and high profitability. Three measures of profitability were used to show that the 25 Fortune 500 firms with the best record of promoting women to high positions are between 18 and 69 percent more profitable than the median Fortune 500 firms in their industries.
One explanation might be that companies with good profitability can afford to experiment and promote women to senior positions. Another is that companies are more profitable because they have made more intelligent decisions, one of these being to ensure that there are women in executive management so that they have access to the best brains – brains that will continue to make intelligent decisions benefiting the company.

How should we interpret these findings? Researchers are cautious about drawing conclusions. Nobody is saying that women in business are cleverer than men: instead it is a question of using the overall pool of talent. It is the mix – diversity itself – that yields better results. Wise executives might do well to keep this in mind as they consider promoting talented people to the executive team.

Accessing the full talent pool
The main argument for bringing more women to the top is that performance improves when companies recruit from the population’s overall pool of talent and not just from half of it. In the modern global economy, successful companies are characterised by a high level of creativity and skill. We often talk about a knowledge economy that is totally dependent on the combined skills of the workforce. Doing without top women managers, therefore, means doing without the knowledge, experience and creativity of half the population. This is a major waste of resources.

Suggestions that men make better managers, that women have the wrong educational background and that women are uninterested in a career have been shown up as myths. A large American study of leadership behaviour found certain differences in leadership styles and practices between male and female managers, but the differences were subtle, and when overall leadership efficiency was assessed, the gender differences disappeared. Studies also show that almost as many women as men wish to pursue a career.
This unexploited management potential probably exists in your company – you just have to find it!

Investing in diversity
The diversity argument is based on giving the company access to a greater spectrum of experience from the different networks and backgrounds represented in a mixed staff structure. Diversity includes gender, ethnic origin, language, religion, sexual orientation and individual characteristics. The most important difference is between the sexes, since it cuts across all other groupings. Since W2T is about women, we are not focusing here on the diversity concept in a wider sense.

Instead, the core of our diversity argument is that decisions will be better with women at the top, not because men and women are so fundamentally different or because women managers are cleverer, more empathetic or have better morals than male managers, but because they bring other kinds of experience and other perspectives to the role. Men and women have different social roles and work in different social areas and positions, and therefore have different experiences and values that benefit the decision-making process.

There is also research showing that mixed groups are more effective than homogeneous ones. Homogeneous groups may make decisions more rapidly, but there is a tendency to withhold information that does not fit and therefore a risk that the wrong decision – or a poorer one – will be taken.

The Swedish Business Development Agency NUTEK has found a correlation between equality and profitability. More than 13,000 companies were studied and three measures of equality were used: promotion, parental leave-taking and representation.

In the study, indicators of equality were compared with productivity, and return on total capital, net value added and net profit were used. The study found a correlation between gender equality and two of these three variables.

The report is five years old, so further study in this field is a promising task for researchers.

The customer perspective
Mixed teams at all levels are important for producing goods and services that satisfy the customer’s needs and expectations. “In consumer businesses, the more a company mirrors its markets demographically, the better positioned it is to sense and respond to evolving market needs”.

Companies need to find out what women customers and users want, and are therefore increasingly dependent on a gender balance in their staff.

Women have an important role as consumers and financial decision-makers. In the US, for example, nearly half of all shareholders are women, half of all computers are bought by women and women are responsible for 83 per cent of all consumer purchases. Similarly, the end customers of many European companies are women.

Catalyst 2002.Making Change: Creating a Business Case for Diversity

Companies that supply goods and services to other companies or public bodies also cite gender equality as a competitive factor. Companies participating in the W2T project report that demands for a gender equality plan are common in public procurement rounds. They also report that contracts have been lost because the sales team has been too male-dominated.

Minimising risks and costs
Investors and owners are also showing increased interest in diversity issues. Discrimination in all its forms is a factor in risk assessment. It is becoming more common to request further information in annual reports about the equality work of companies and what steps are being taken.

First, there is the risk of litigation that companies face when failing to meet legal requirements. Apart from the direct outlays in working time, legal costs and possible fines, there are major indirect costs such as bad publicity and damage to the brand. Women have power in society as decision-makers, owners, voters and consumers. Companies that get a reputation as bad employers for women risk jeopardising their name, which can be disastrous in an increasingly tough global economy. Companies that retain outdated structures risk going out of business. Lack of equality can therefore be seen as part of a company’s risk profile.

Aiming to be the employer of choice
Becoming known as an equal opportunity employer can boost the prime source of competitive advantage: people. To be competitive, it is crucial to recruit the right people from the start and to be able to keep them. Studies of young managers show that both women and men are critical of the image and conditions of modern management. They want flexible work options and family-friendly policies. Companies that do not listen to young managers will be ignored by women and men who demand greater balance in their lives.

High staff turnover and its associated expense is a common adverse effect of the failure to promote gender equality. Expenses are incurred when people leave and need to be replaced, in transition and induction, and there are also indirect costs such as loss of customer satisfaction.

A retention study of an international firm of consultants shows what can happen. The company recruited equal numbers of women and men. The normal career path was to work 10 to 15 years as a consultant, and those who were talented were then invited to become a partner. However, the firm only had a handful of female partners and many women left after 10 to 15 years. At this point, many of their male colleagues were partners but the women were often still at a lower level. Women decided to leave because they felt that they had reached a glass ceiling. They saw men with the same or lower qualifications passing them on the career ladder.

Another consultant firm in the same situation took initiatives to retain and develop its female employees and reduced staff turnover from 25 to 18 per cent, saving USD 250 million in hiring and training costs. Managers were also able to concentrate on developing the firm’s services and products instead of wasting time worrying about keeping staff.