At the heart of former civil servant Helen MacNamara’s evidence to the Covid Inquiry, was whether better decisions would have been made if the Cabinet and the top of the civil service had not been dominated by men. The lack of diversity also indicated an educational, ethnic and class-based monoculture in the UK’s governing institutions, as women make up around 50% of the population, their relative absence from decision-making is perhaps most striking.
This lack of gender diversity, highlighted in MacNamara’s evidence, is not recent, nor an issue particular to the public sector or even the UK, and while it is sometimes difficult to measure the impact of gender diversity in the public sector, MacNamara’s evidence indicates there is an organisational cost to a male monoculture. In the private sector, however, there are ways to measure the costs of the problems highlighted by MacNamara as shown in a recent report from Black Rock – the world’s largest manager of assets (for clients) – that provides a way to assess the problems stemming from a lack of diversity in businesses.
The Black Rock report
Black Rock’s report Lifting Financial Performance by Investing in Women, starts by noting they are not suggesting there is a “sweet spot” or optimal balance between men and women in an organisation rather it is diversity per se that is the point, at all levels. To assess this, the report uses “returns on assets” as a metric, rather than focusing on the more volatile share price to assess the impact of increased gender diversity on companies.
One key distinction drawn in the report, is between those firms that have managed to enhance gender diversity all the way to the top of the organisation, and those that have only managed to reduce male dominance at the lower level of the corporate structure. Between 2013-2022 they estimated that those firms that have gone furthest in reaching gender parity across all levels have outperformed those which have achieved least in diversifying gender across their organisation by 29%.
The report posits that those firms with lower gender diversity have a ‘glass ceiling’ beyond which women are seldom if ever promoted. However, when firms do have a female Chief Executive Officer, they outperform their peers. Likewise, in the realm of start-ups, female-led new firms make a better return to their investors than male-led start-ups.
Black Rock’s report explores a range of issues from the association of lower turnover of staff with higher representation of women in top managerial roles, to the positive role that maternity leave plays in both staff satisfaction and overall financial performance. And, although this report focuses on American firms, it seems likely that we would see similar effects if an assessment was made of UK firms’ gender diversity and its economic impact.
The most important insight that the Black Rock report sets out is that gender equity in the workplace is not a cost but rather is a key to improving a business’ financial performance. But here, the report merely confirms what previous reports have already established.
Earlier evidence of the impact of a lack of gender equity
An International Monetary Fund (IMF) report from 2016 found that there was a positive association in European firms between a higher number of women in top posts and greater returns on assets. The research also emphasised that this association was most pronounced when the general workforce was female-dominated and where critical thinking and creativity were particularly in demand. Where there was a prevalence of part-time work for women, there was less likelihood of good representation of women in higher managerial positions.
The IMF report concludes that if more women in senior positions increases productivity, then enhancing support for female career development would be beneficial to economic development. Moreover, given the enhanced career trajectory full-time female workers seem to enjoy, any barriers to women taking on full time work should be removed. Although not explicitly mentioned in the IMF report, measures like improving access to affordable (or free) childcare would therefore feed through to enhanced gender diversity and therefore profitability.
A Credit Suisse (CS) report from 2012 that focused more directly on the gender composition of corporate boards also reached similar conclusions. Interestingly, the CS report identified the most significant positive effect of better board representation of women was in times of crisis. The report spanned the period of the 2008 global financial crisis, finding that corporations with more women on their boards outperformed those with fewer women board members in the years after 2008.
The report suggests several reasons why the share price of those corporations with more female board members outperformed other firms after 2008. Referred to as the ‘Lehman Sisters Hypothesis’, it suggests the global financial crisis would have been less serious (or may not even have happened) if the financial services firms involved had been run predominantly by women. There is also evidence from Iceland that an all female cabinet in government formulated a more balanced response, reinforcing the value of a female perspective at times of crisis.
Another key finding was that greater gender diversity of board members raised all board members’ performance in difficult periods, partly due to a greater mix of leadership skills, experience and talent, but also because there was a better understanding of the wider social context in gender diverse boards.
Even when focused on share price (an externalised marker of successful performance) that was rejected by the Black Rock study, Morgan Stanley arrived at relatively similar results regarding the influence of increased gender diversity on economic performance. While the studies cited here focus on financial performance, they underline the point that MacNamara made about male monoculture in decision-making processes negatively affecting performance of the organisation. However, recognising the problem is only the first step.
What is to be done?
Many responses to the data briefly explored above suggest that either women need to be more forceful in the workplace (e.g. the ‘leaning in’ of Sheryl Sandberg) or that firms must be more inclusive in their hiring and promotion strategies. Modified hiring and promotion practices are often referred to by liberal feminists as ‘add women and stir’ and to address this response, internal rules and national regulations would need to be toughened to halt sexist patterns in recruitment and promotion. One well-known example of this approach was the shift by some orchestras to audition instrumentalists behind a curtain to reduce gender bias in recruitment. This had the progressive effect of shifting the gender balance of orchestras, over a number of audition rounds, towards gender equity.
As MacNamara’s evidence to the Covid Inquiry also indicated, where there is a ‘macho-culture’ women’s contribution(s) may be under-valued or side-lined, with women characterised as being too emotional to act in a crisis. These behaviours may be more difficult to change than simply by reforming an organisation’s rules, as this approach renders the problem as one of misbehaving individuals; men blocking women’s appointments or promotion, and women failing to play the organisational game strongly enough. While these behaviours may play a role, there are also structural impediments to increased gender diversity.
One of the crucial issues constraining gender diversity is how organisations respond to the (unpaid) caring responsibilities that fall most frequently to female family members. Where organisations depend on long ‘voluntary’ workdays or expect workers to be able to swiftly travel for work (with little notice), it is often those with care responsibilities who are unable to fulfil those work requirements.
The answer to the problem of gender diversity in the workplace is multi-faceted. Liberal strategies of ‘add women and stir’ will complement more structural responses regarding how the world of work is organised. Some of the problems can be resolved by changes in practice (like the behind the curtain auditions), while others require organisations to reshape the demands on employees so that those with non-work commitments are not discriminated against.
If this was easy it would already have been done and feminists have been arguing for a range of changes for decades.
While there is a clear business case for gender equity, this should not blind us to the human case for fairness and equality. The business case for gender diversity in the workplace is strong, but what it cannot replace is the drive to gender equity that is based on the ethical case that women are equal and should be treated as such!
Given the economic and performance results of increased gender diversity and the strong ethical case for fairness in the workplace, it can be hard to understand why this problem is not being addressed more thoroughly. How many more times will women like Helen MacNamara have to set out the problem before we really make a change?