Why companies need to pay the ‘Gender Dividend’
As the news headlines boldly announce that the UK and US economies are officially out of recession, and with the UK showing signs of recovery that’s the strongest of any economy in Europe, what will the next phase of sustainable economic growth look like?
Governments of global economies around the world are scratching their heads and searching high and low for the answer, as well as they should be. Some are looking through the lens of geography – will it be the emerging markets such as the BRIC economies? Other politicians are looking through the lens of industry – technology, manufacturing, financial services and consumer durables?
Whilst all of these are relevant market considerations, there’s growing evidence that leaders around the world should be searching for answers from an unexpected source of information – gender – and by that I mean women.
All the current research is strongly pointing in this direction.
Women are the dominant source of economic growth for all global economies over the next decade – and companies that are able to capitalise on the roles women play as economic actors will most likely have a competitive advantage as national economies start to rebuild in the wake of the global recession.
Fully integrating women into both the workplace and marketplace can yield a significant return that’s now dubbed the ‘Gender Dividend’.
Much like the dividends that public companies pay to their shareholders, the Gender Dividend is a steady benefit that’s earned by making wise, balanced investments in developing women as workers and potential leaders as well as understanding women as consumers and their impact on the economy and the bottom line.
If switched on marketers do their job right, the Gender Dividend should be reflected in increased sales, expanded markets and improved recruitment and retention of key talent segments, irrespective of whether you happen to live in the North, East, West or South Hemisphere.
But these benefits won’t happen overnight.
As we head towards a General Election here in the UK two years from now, all the main political parties need to review the discrimination and equality legislation and policies that have failed to rectify the imbalance in the rights of women compared with men that continues to exist today.
It requires a concerted, strategic focus on how to fully integrate women’s experiences, perspectives and voices into the fabric of a company or organisation at a time when women are still under represented in the boardrooms of major companies and also continue to be excluded from high office within Government, judiciary and just about any other area you can think of.
The leaders of all the main political parties need to take this issue seriously rather than paying lip service to it and elevate women‘s advancement to a strategic objective tied to their overall plan for economic recovery.
Not to do so would be bonkers.
To understand why it’s so critical that women play a key role in building—and rebuilding—economies around the world it’s important to consider the rise of talent as a dominant business issue.
In the digital economy, human capital replaces natural resources as the basis for growth. The businesses and countries that will lead in this century will be the ones that are best able to harness the innovation and creativity of their people. Countries like India, China and Brazil stand to potentially make some of the biggest advances here.
Women are undoubtedly a growing force in the global talent pool. But the real power comes from women and men working together and using their collective experience to solve complex problems and issues and to accelerate genuine innovation – whether that’s in research and development, logistics, products and services, technology or sales and marketing.
The importance of gender diversity is also inextricably linked to the growing role of women as consumers – something that I’ve already talked about in a previous blog.
As the spending power of women increases, they represent a massive sales opportunity for brand owners but because women tend to spend differently from men, brand owners need to understand women’s preferences in order to capitalize on this growth.
Having both women and men in decision-making roles provides the answer of how business can unlock the potential for growth in sales in the future.
For example, there are now more women in the world than men and more women are in employment than at any other time in history. And as women continue to enter the workforce in ever larger numbers, they’ll have more disposal income to spend.
Already, women control roughly USD20 trillion of total consumer spending globally and that number is predicted to rise to USD28 trillion by next year.
Or put another way, whether they work outside the home or not, women either make or influence up to 80% of buying decisions, on everything from household appliances to cars and medical services.
In the US alone, the number of women with six-figure incomes is increasing at twice the rate of men, and in almost all urban areas, unmarried professional women have either caught up with or are out-earning men.
In fact, women of the Baby Boomer generation are about to become the richest US demographic ever, controlling more wealth than any other group, according to the complex systems theory at the University of Michigan.
This is true because of two different dynamics at play at the same time: the dynamics of prediction and the dynamics of selection. The more diverse the team, the more likely its prediction in the face of uncertainty and ambiguity will be correct because each person puts things into categories based on his or her background and experience.
How someone categorizes affects how they predict a certain outcome. Someone’s talent and their background have equal weight in terms of their ability to predict.
The dynamics of selection also favour diversity, a strategic issue that many organisations – irrespective of whether they’re private, public or voluntary – have to come to grips with right now.
For example, in biology the more variation in the current population the more robust the population in the face of change. It’s better at adapting; it’s more innovative.
The link between gender diversity and business outcomes is evidenced in the performance of companies with a more robust mix of women and men in senior management.
Today, Fortune 500 companies in the top quartile when it comes to women’s representation on their boards outperform those in the lowest quartile by at least 53% on return on equity.
And a recent study by researchers at Columbia Business School and the University of Maryland comparing the S&P 1500 companies’ performance with themselves over 15 years shows a Gender Dividend of over 1.6% representing USD35 million on average.
In Europe, of 89 publicly traded companies with a market capitalization of over GBP150m, those with more women in senior management and on the board had, on average, more than 10% higher return on equity than those companies with the least percentage of women in leadership.
This research is why Joe Keefe, the CEO of PAX World Mutual Funds, insists on a balanced team up and down his organisation and why women compromise 50% of his senior management team, portfolio managers, and sales force. He’s not had trouble finding qualified women, even in financial services, because he insists that his search firms send him a balanced slate. He also takes a gender lens to investing—including examining the representation of women in senior management and on the boards of companies.
“We’ve had a policy for some time that if a board slate doesn’t contain any women, we withhold support and don’t vote for it. We then write a letter to the nominating committee explaining our policy and why we think this issue is important. And the evidence is mounting that investing in women makes good business sense. I think the burden should shift—and the question should be why not invest in women,” observes Keefe.
He’s got a point, hasn’t he?
According to recent research by consultants Deloitte, American women already control over 50% of personal wealth, or roughly USD5 trillion in purchasing power—larger than the entire economy of Japan in 2008.
Women’s earning power is growing even faster in developing countries, where their earned income grew at a rate of 8.1% compared to the 5.8% rate for men.
In Saudi Arabia, women own an estimated 40% of the private wealth, prompting the Al Rajhi Bank, the largest bank in the country, to start a wealth management division targeted at women.
In summary, women constitute the largest emerging market segment the world has ever witnessed. It’s time for marketers to accept women are no longer a niche market. They are the market. And by paying the Gender Dividend companies will continue to prosper well into the future.