The business case for closing the gender diversity divide

The business case for closing the gender diversity divide is strong, as companies with more female leaders are also more successful financially

Organisations which are among the most successful financially have almost double the number of female leaders of commercially underperforming businesses, according to a research report.

It found that businesses which are among the top 20 per cent of financial performers indicated that 37 per cent of their leaders were women, compared to 19 per cent of female leaders in the bottom 20 per cent.

The DDI report, Ready Now Leaders: Cultivating Women in Leadership to Meet Tomorrow’s Business Challenges, was based on responses from 1528 global HR executives and 3452 women leaders around the world, and found there were no significant differences between men and women related to skill and ability – yet women are still represented in leadership much lower than men.

Diversity: how Australia fares
Australian organisations indicate that one third of their leaders are women, which puts the country behind the World Bank Group average for women in the global workforce (41 per cent).

“If women in leadership are good for business and with so much focus in the country on female leadership, introducing quotas, extensive media coverage, etcetera, how much do Australian organisations really embrace the concept of diversity?” asked Mark Busine, managing director for DDI Australia.

“Most people and organisations will generally agree that diversity is a good thing. But until actually confronted by the reality of it, why don’t we see as many women in leadership roles?

“In a hiring situation for example, people tend to hire for likeness or qualities they find in themselves.

“When building teams or working with others do we openly and willingly address our own potential biases and tendencies to work with similar people or involve others and support new ways of doing things?”

What works for one employee may not work for another, and likewise Busine said not all “women” can be motivated and inspired by one particular approach.

“Robust systems that reduce the chance for bias and open access to opportunities are how organisations can truly begin to embrace diversity,” he said.

How industries stack up in gender diversity
Industries with female-dominated workforces, such as healthcare, education and retail had the highest representations of women leadership.

Only eight industries (business services, financial services, pharmaceuticals, insurance, consumer products, healthcare, education and retail) currently reach or surpass the critical percentage of women in leadership linked to top performing organisational financial performance.

“These are predominantly the main industries in the Australian market – which explains in some cases why we fair slightly better than other markets for higher percentages of women in leadership,” Busine said.

Confidence key to narrowing the gap in self-perception
Men were also more likely than women to rate their leadership effectiveness compared to their peers as high at all levels (first-level, higher-level, senior) – except at the middle level, according to the research, which was conducted in conjunction with The Conference Board.

“What we found across the sample was that there was no significant difference in their leadership abilities, men and women are equally as competent but women are found to be less confident in their own abilities,” said Busine, who observed that the confidence gap between men and women begins early in their careers before almost tripling at the senior leader level.

“Many of the predictors of confidence that emerged from the research are just basic, good development practices, or results of effective development planning – regularly seeking development opportunities, feeling strong engagement and satisfaction with one’s role, having tenure and leadership experience and spending hours on leadership development,” said Busine.

“Better development matters.”

Women in organisations with high-quality development programs are 21 per cent more likely to be highly confident in their leadership ability – more than 5 times the increase for male confidence levels with access to high-quality development programs.

Organisations can reap the rewards of more confident women too. Women are more likely to be engaged in their roles (11 per cent more) and less likely to indicate an intention to leave (67 per cent) with good quality development programs.

Talent practices that lead to more women in leadership
The research found seven talent practices that were strong influencers on the percentage of women in leadership.

“When reviewing the practices, it is evident that they are a combination of widely known best talent management practices across selection, development and succession management practices,” said Busine.

“Irrespective if you put a focus on women, the data shows that good HR practices will lead to better selection and development and open up access and opportunity for gender diversity, and diversity in general.

“By having robust and objective practices in place you eliminate the natural bias or subjective approaches that can occur in identifying, developing and growing talent.”

While men also benefit, women at organisations with high-quality development programs report being 36 per cent more satisfied with their roles and 70 per cent less likely to leave their organisations (compared to 30 per cent and 65 per cent respectively for men).

Initiatives focused on female leaders are 7 per cent more likely to have women in leadership than those that don’t.

However, organisations that strongly support mentoring will have almost double that in women in leadership (12 per cent) whilst organisations that strongly support programs such as high potentials are three times (21 per cent) as likely to have women in leadership. Organisations that do have initiatives focused on women should continue but supported by a foundation of strong talent programs.

Organisations should focus on driving leadership systems that promote and sustain universal, high quality development and growth opportunities for all leaders, Busine said.

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