Empowering Female Leadership = Outperforming the Competition

Thriving at work is something many of us aim for. We develop expertise. We create the optimal environment for efficient progress. We find the right team. 

But what if success began with working alongside peers different from you? Rather than testing out the latest productivity app or enrolling in that continuing education course, perhaps simply increasing diversity in your work environment could help make you smarter and more innovative.

The benefits of a diverse workforce

Research shows that working in diverse environments fosters unique perspectives. And multiple perspectives make for improved decisions, leading to enhanced performance. Countless studies show that diversity enhances group decision-making, bolsters creative thinking, and sharpens performance in the workplace. For example, a team at the University of Castilla-La Mancha studied the performance of 4,277 Spanish companies and found that the ones with more women in research and development were significantly more likely to introduce radical new innovations into the market over a two-year period.

As such, ensuring a diverse workforce and leadership team is a growing concern for employees and organizations alike. In fact, a 2018 report from Lean In and McKinsey compiled data from 279 American companies employing more than 13 million people and found that more than 90% of companies say that commitment to gender diversity is a top priority. Several companies have even begun translating this priority into visible action. Over 2,500 organizations worldwide have signed onto the United Nations Women’s Empowerment Principles, a voluntary program that offers strategies for empowering women in the workforce. And even Google, after acknowledging in 2015 that their workforce was comprised predominantly of white men, invested $150 million in diversity initiatives — although, it’s worth noting that this has yet to pay off: Google has witnessed a meager return of just 1% growth in global female representation in the past four years. 

While women are just one of the many underrepresented groups in corporate America, improving their status is critical to sustainable economic development. Women are nearly 40% of the global labor force and more than half the world’s university students. Failing to tap into their talents and productive potential comes with serious costs. The U.S. Council of Economic Advisors estimated in 2014 that the U.S. economy was 13.5% larger, equivalent to an additional $2 trillion in GDP, due to women’s increased participation in the workforce since 1970. Further, more recent projections by the International Labour Organization indicate that reducing the gender gap by just 25% (a target G20 leaders committed to in 2014 — “25 by 25”) would increase global GDP by $5.8 trillion by 2025. 

Women at the top

Mounting evidence shows that increasing the number of women at the top of an organization leads to better performance, which can have lucrative results. Researchers at Pipeline conducted a study among 6,250 companies in 32 countries and found that when organizations move from having zero female leaders to even a mere 30% representation, they experience a 15% increase in profitability. Likewise, a report from Morgan Stanley found that companies with higher gender diversity meaningfully outperformed those with lower gender diversity on a risk-adjusted basis over a five-year period. And in the technology industry, researchers at Intel and Dalberg Global Development Advisors found that compared to firms with all-male leadership, companies with even one female leader holding the title of SVP or higher experienced up to 16% higher enterprise value — that is, the entire economic value of the company, even after taking into consideration the company’s age, size, profitability and revenue. 

Yet women continue to be excluded from the upper echelons of business. Women comprise less than 22% of board members and a mere 5% of CEOs of S&P 500 corporations. Perhaps most shocking, a New York Times report found there are fewer S&P 1500 CEOs who are women (4.1%) than those who are named David (4.5%) or John (5.3%). In other words, two single male names outnumber an entire gender at the top.

Even more, women’s financial worth in companies is undervalued. The average difference in men’s and women’s median earnings continues to stand at stark levels. According to the American Association of University Women, which culls data from the Bureau of Labor Statistics and the Census Bureau, full-time working women in the U.S. made just 82% of what their male counterparts were paid in 2018. Just last year, the World Economic Forum astonishingly projected that it will take 208 years for the U.S. to fully close this gap and reach gender parity, 100 years more than the world average (108 years) and a huge leap backwards from the 2016 prediction that calculated 170 years. 

Despite our ideals, everyday decisions can be unfair

If diversity continues to be a top priority for many organizations, why is the diversity dream still so rarely achieved? One explanation could be the discrepancy that exists between overall organizational intentions and daily employee actions. For instance, a 2016 report by Lean In and McKinsey found that fewer than a third of employees said senior leaders regularly communicate the importance of gender diversity or are held accountable for making progress. And, perhaps not surprisingly, only about half of manager-level employees rank gender diversity as a top personal priority. As managers are tasked with making many decisions that affect women’s early work experiences and career progression, what they identify as personal priorities matter. 

If workforce diversification requires alignment of personal and corporate ideals, it is critical to identify factors that predict when employees embrace the espoused organizational beliefs in hiring and promotion decisions.

To read more about this research, check out my Master’s thesis, entitled “Hopes for a High-Heeled C-Suite: The Effect of Psychological Distance on Adherence to Group Opinions.”

Research I conducted along with colleagues Emily Balcetis and David Kalkstein offers insight into this issue. Our findings suggest that when considering near-term hiring decisions, like those we’re making now for next week, people flexibly incorporate information from their current context. They use information they read on the news, overhear in the breakroom or witness from their peers. But when considering hiring decisions further in the future, people transcend these immediate details and endorse the values espoused by the company at large. 

The problem with taking the current context into account in hiring is the fact that we’re bombarded with information that is so often negative towards women. For instance, a Fast Company article titled “Don’t be surprised that Yahoo’s new male CEO is making double Marissa Mayer’s salary” describes the all-too-common inequitable pay gap that persists for even senior-level women. Likewise, The Washington Post published an article entitled “Utah Republican argues against equal pay for women: It’s ‘bad for families’ and society,” describing a letter James Green, vice chair of the Wasatch County Republican Party, wrote to argue against equal pay. Even when articles like these are ill-received by the public (in this case, Green ultimately apologized for his letter), simply reporting this news makes it clear how frequently women are undervalued. And these views impact evaluations, sometimes despite intentions for fairness.

Strategies for improving diversity

Our findings suggest that for organizations to improve diversity efforts, they need to change the narrative to which employees are regularly exposed. We suggest several ways organizations might do this. 

First, organizations can invest time and resources into proactive activities, such as equipping front-line hiring managers with the company’s diversity agenda and emphasizing the importance of meeting such goals. This stands in contrast to devoting resources to reactive activities, such as training programs to change attitudes or address bias after it has proven problematic in the company. Indeed, such training initiatives though frequently used to address diversity issues are largely ineffective. In fact, a longitudinal study by Alexandra Kalev and colleagues surveying over 700 U.S. companies found that annual diversity training for managers had no positive effects in the workplace. 

Second, organizations can better engrain diversity values in the daily ethos of the company, so employees can more readily access them when making hiring or promotion decisions. This might entail weekly diversity check-ins with employees. Organizations can also implement gender-blind hiring systems. A Lean In and McKinsey survey found that only 56% of companies review job descriptions for biased language, that is, language that can make certain roles seem masculine or feminine, and fewer than 10% of employees say that personnel decisions are regularly evaluated for gender bias. Addressing this kind of discrimination early in the hiring process is key to attracting a diversified candidate pool. 

Finally, organizations might also consider removing hiring decisions from the proximate context altogether, planning hiring decisions for future (rather than immediate) positions. For example, hiring managers could anticipate upcoming promotion and retirement decisions and begin recruiting for these positions earlier. Considering an applicant’s value from this distant perspective might help managers transcend the fleeting negative attitudes about diverse leadership and align more with their company’s ideals. On the flip side, female job candidates might benefit from reiterating their long-term impact for the company, to foster a broader, perhaps less biased consideration among hiring managers. 

If the case for equality is not clear enough, addressing these inequities today will be crucial for attracting the talent of tomorrow. In fact, a 2018 Deloitte survey found that millennials are 83% more likely to feel engaged and empowered when they are working in an organization that they believe encourages inclusivity. Additionally, this survey found 74% of millennials believe their workplace is more innovative when they adopt a culture of inclusion. As individual employees begin to see the value a diverse workforce creates and the fight for talent surges, organizations will have no choice but to accomplish their diversity initiatives to remain competitive. 

The truth of the matter is simple: when women are empowered, we all benefit. 

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Abby Bisi is an Innovation Strategist at Maddock Douglas and earned her M.A. in Industrial and Organizational Psychology at New York University.

Emily Balcetis edited this article. She is an Associate Professor of Psychology at New York University.