Why business performance needs women in the boardrooms and how can they get there?
(i) Why does business performance need women in the boardroom?
Women’s participation in the workforce in general is vitally important to any society and any economy. Women make up half of any society. And any country that does not take advantage of their presence will only be half as strong as it can be.
The success of any business depends on how well it understands its customers. And women are responsible for 70 percent of purchasing decisions. So having their input and say is a vital ingredient for business success of any company. The evidence is clear, companies with female board members have 40% higher growth income and almost 50 percent higher average return on equity. And yet so many companies continue to be run by men. Men continue to run most of the world’s major corporations. Less than 5 percent of Fortune 500 companies are run by women and less than 10 percent of top management positions are filled by women.
Why is that?
We have strong cultural biases that lead us to select and follow men. Men and women are different. They have different skills and attributes. Men and women communicate in different ways. This is perhaps best documented and explained in Deborah Tannen’s book “You Just Don’t Understand: Women and men in conversation.” Men are brought up to be leaders. To communicate with confidence and authority.
Women are brought up to take up support roles, to be careful not to challenge authority. We think of female traits as being quiet, respectful and seeking compromise and women are penalized when they break out of this mold.
Sheryl Sandberg documents this in her book, “Lean In” where she describes her time as COO of facebook and other technology companies. She talks about meetings where men take up the seats at the table while women tend to sit at the back or take a position in the second row.
I’ve seen this at many meetings at the World Bank – where many women tend to step back rather than lean in. And it is upto those in management, mostly men to rectify this situation and encourage women to be more vocal and to let their voices be heard.
Without women’s participation in management, boards tend towards group think. We all have an inherent biases whether we know it or not. We tend to like people that remind us of ourselves. So when we are recruiting or promoting staff we unconsciously look for people like us.
If a group of men run a company they are much more likely to recruit and promote other men and this leads to a situation of “groupthink.” We do not have enough perspectives on the table and this limits our choices and our potential. It also limits the choices and potential of those in the work place especially women and minorities of all kinds. Women’s empowerment and participation at the highest levels in the workplace is vitally important for a society’s growth and development.
(ii) How can women get to the boardroom?
At the World Bank we have been struggling with this issue for at least the past 30 years. At first we worked towards ensuring equality in education. The first step was to get everyone in school and ensure that women were literate. This is still an ongoing challenge in many developing countries. The next step was to ensure that as many women made it to college as men.
Although still a challenge in most African and South Asian countries, there are many countries especially those in Europe where women outnumber men in tertiary education. In Central Europe, female enrolment at universities has been higher than men’s for the past 40 years and yet this has not translated into better political or management representation in the workforce. And women who do graduate and enter the labor market are still not paid as much as their male counterparts. So more efforts are needed.
For all of these reasons at the World Bank we started tracking diversity many decades ago. In the 1980s the World Bank was still very much an institution run by “old white guys” – probably not the politically correct term but that was the situation. We strived to increase the share of women and part II nationals (those representing our borrowing countries) especially sub-saharan African staff. We made slow and glacial progress for many years trying to overcome many of the inherent biases that I talked about earlier.
However, a watershed moment came in 2010 when then President Robert Zoellick announced that the World Bank would set itself a target of achieving gender equity in management. That was the first time we had a real target. 50 percent of management positions at the World Bank should be filled by women.
Of course most of the men in the organization, myself included, thought that this was crazy. At the time we had just about 25 percent representation. We thought it would take a generation to make such a shift. But when the leader commits and becomes a champion for change interesting things started to happen.
We moved to seeking women in our recruitment drives and in seeking first that more women were shortlisted for key jobs and then in ensuring greater and greater gender parity in outcomes. We are now at 40 percent, no small feat for an organization as large and complex as the World Bank. We have a female managing director and a significant number of female vice-presidents. Of course in the meantime the IMF now has a female head so we still have goals to reach in this area but women’s power in the organization continues to increase.
Last year I attended the World Bank annual meetings and was impressed to see five women on the World Bank side including: our country manager Elisabetta Capannelli, our director Mamta Murthi, our vice-president Laura Tuck and our managing director Sri Mulyani. They faced an entirely male delegation from the Romanian government. I can see that just like the World Bank, in Romania both in government and the private sector there is much more that can be done.
Managers both male and female need to support and mentor women at all levels of an organization. Seek out the future leaders and empower them by instilling in them the confidence to lead – we can all play a part in this process.
We’ve managed to break the mold at the World Bank and we will make more changes and more gains in the coming years. These changes are down to leaders taking bold decisions. Leadership at the top is important but it is not the only thing. At the World Bank, it was not just Zoellick making the decision to target gender parity but dozens of senior managers both men and women committing to the change.
This is a change that women alone cannot make but one that can only be made with the support of men. Equality in the workplace is a goal that everyone can and should commit to. But we cannot wait for CEOs to take these decisions. Everyone in this room is a leader in this area, a champion of change in your own company or your own environment. Female leaders, like male leaders, are nurtured, supported and mentored – a process that should happen at all the levels in the workplace.
And I hope that you will all take up this challenge, not just because it makes business sense but because it is the right thing to do.