Companies report that they are highly committed to gender diversity. But that commitment has not translated into meaningful progress. In contrast to what companies say about their commitment, only around half of all employees think that their organization sees gender diversity as a priority and is doing what it takes to make progress. Around 20 percent of employees say that their company’s commitment to gender diversity feels like lip service.
A closer look at the corporate pipeline
The proportion of women at every level even in corporate America has hardly changed. Women are dramatically outnumbered in senior leadership. Only about 1 in 5 C-suite leaders is a woman, and only 1 in 25 leaders is a woman of color – they are the most underrepresented group of all, lagging behind white men, men of color, and white women.
Women are doing their part. For more than 30 years, they’ve been earning more bachelor’s degrees than men. They’re asking for promotions and negotiating salaries at the same rates as men. And contrary to conventional wisdom, they are staying in the workforce at the same rate as men. For the fourth year in a row, the underrepresentation of women cannot be explained by attrition, because women and men are leaving their companies at similar rates.
The two biggest drivers of representation are hiring and promotions, and companies are disadvantaging women in these areas from the beginning. Women are less likely to be hired into entry-level jobs. At the first critical step up to manager, the disparity widens further. Women are less likely to be hired into manager-level jobs, and they are far less likely to be promoted into them – for every one hundred men promoted to manager, seventy-nine women are. Largely because of these gender gaps, men end up holding 62 percent of manager positions, while women hold only 38 percent.
This early inequality has a profound impact on the talent pipeline. Even though hiring and promotion rates improve at more senior levels, women can never catch up—we’re suffering from a “hollow middle.” Until companies close the early gaps in hiring and promotion, women will remain underrepresented. If companies continue to hire and promote women to manager at current rates, the number of women in management will increase by just one percentage point over the next ten years.
The uneven playing field
It is clear that women still experience an uneven playing field at work. They get less day-to-day support and less access to senior leaders. They are more likely to deal with harassment and everyday discrimination. They often feel the added scrutiny that comes from being the only woman in the room. And understandably, they think it’s harder for them to advance.
The situation in Germany and Switzerland
As Germany and Switzerland are wealthy Western nations with mature financial sectors, well-educated women, and a relatively high labor force participation of women, one might expect a large portion of senior roles in their financial services firms to be occupied by women. But that is not the case, both countries are near the bottom of the list when it comes to women’s representation on the ExCos of financial services firms: Germany is 24th with 10 percent women and Switzerland 30th with 5 percent.
Public policy is the obvious place to look for the explanation, but what Germany and Switzerland share is not public policies, it’s culture. And it seems that, for women in financial services, culture trumps policy.
Traditional expectations about the roles played by men and women seem to have proved more tenacious in Germany and Switzerland than in most other Western countries. Not only is it difficult for women to pursue careers, it is culturally accepted to opt out of the career. Taking care of the family, potentially combined with part-time occupation, is a common model in Germany and Switzerland – for women, but not for men. Given this culturally approved alternative, many women decide to forgo careers, especially when times get tougher at work or when family demand increases.
So perhaps not surprisingly, among senior-level employees who don’t want to be top executives, 42 percent of women say it’s because it would require too much of their families, compared to 35 percent of men.
Gender pay gap
Shouldering more responsibilities at home is a big reason women are paid less than men and fall behind men in their careers, researchers say. While, in public debate, gender pay tends to be treated as a single topic, there are in reality two separate issues at play here. One is equal pay for equal work: that is, the extent to which women are paid less than men for doing the same job. The other is the gender pay gap: that is, the difference between the aggregate average pay for women and men across an organization. The first issue is the most obvious and, arguably, the easier one to fix. The second presents organizations with a more systemic challenge because, while differences in average pay may be due in part to equal pay for equal work issues, they are more typically a product of female underrepresentation in the higher paid industries and functions, and in leadership roles. Viewed in this way, the gender pay gap is a symptom of deeper talent acquisition and talent management problems and not just a reward issue that needs addressing in and of itself.
While women, on average, earn 16% less than men, the gap between a man and woman working at the same job level, for the same company, in the same function is typically only 0.5%. The conclusion here is that the real reason women are paid less than men is not necessarily because she is being paid unfairly although this indeed may be the case in some organizations (averages mask variance) but rather because she is less likely to be working in one of the higher paid industries or functions, and significantly less likely to be working in a leadership role.
Diverse leadership teams boost innovation
BCG and the Technical University of Munich conducted an empirical analysis to understand the relationship between diversity in management (defined as all levels of management, not just executive management) and innovation. A study of 171 German, Swiss, and Austrian companies shows a clear relationship between the diversity of companies’ management teams and the revenues they get from innovative products and services.
To reach its potential, gender diversity needs to go beyond tokenism. In their study, innovation performance only increased significantly when the workforce included a nontrivial percentage of women (more than 20%) in management positions. Having a high percentage of female employees don’t do anything for innovation, the study shows, if only a small number of women are managers. Companies with the greatest gender diversity (8 out of every 20 managers were female) generated about 34% of their revenues from innovative products and services in the most recent three-year period. That compares with innovation revenues of 25% for companies that have the least gender diversity (only 1 in 20 managers were female).
Looking ahead
Closing the corporate gender gap isn’t a side issue. It’s an economic necessity. Companies need a systematic approach that will address all stages of the full employee lifecycle, and it’s critical that companies focus on closing gender disparities early in the pipeline since this will improve the representation of women all the way to the top.
Companies need to treat diversity as the business priority it is. Until they do, meaningful progress remains out of reach.