By: Michael DeVenney
Where would we be if Lehman Brothers had been Lehman Sisters? Would the same financial mess have resulted in the crisis and uncertainty now faced in the business world if women were making the leadership decisions rather than men?
In a word – no!
The investment markets are the seat of testosterone. Wall Street, Bay Street, and the other money roads are some of the most male-dominated organizations of the business world – the result being second-rate decision-making.
Studies show that a balanced team of men and women will make better decisions. Men take more risk impulsively and are particularly likely to make big bets when under financial pressures and surrounded by other males. For women, their risk-taking is unaffected by peer pressure and stress. Men are almost twice as over-confident in their abilities than women and can take risk too far.
Why Women Matter
Women matter to the bottom line – better financial performance and a greater degree of return on capital are seen in businesses with a balanced mix of men and women in senior leadership roles. Organizations with more women in senior roles perform better financially.
Don’t we have equality in the workforce? Despite talking about it for years, the trend for senior women leaders has peaked over the last decade. In North America, less than 30% of leadership roles are held by women despite the right education and abilities. Few women become executives and it hurts the bottom line. With a shortfall of talent fast approaching, organizations need to smarten up and support women better.
More women in senior leadership roles relates to organizations seeing improvements in all nine performance dimensions for competitive success – from leadership impact, to accountability and motivation, to profitability and return on assets.
What Needs To Happen?
Put in place a formal and fair succession planning and high-potential leader development program.
Succession planning needs to move from a replacement transaction to be a development investment.
Organizations need to have formal succession plans to ensure women are selected fairly for investment in high-potential programs to develop future leaders. The approach now is ad-hoc with less than 20% of organizations having any type of formal and fair evaluation process for selecting and developing talented people. Gut feelings don’t produce the best results and talented women are overlooked. With a formal succession plan, organizations select more than triple the number of women for development investment than for firms without structured evaluation programs.
A Woman’s Lot
“Gender discrimination continues to thrive below the surface to the detriment of not just female leaders, but the organizations that employ them.” Ann Howard and Richard Wellins, Holding Women Back, 2009
The percentage of women in leadership roles declines from about 42% for first-level managers and supervisors to only 21% of executive-level leaders. On average, in North America, less than 30% of senior leadership positions are held by women despite the same (if not higher) levels of education. More women in the workforce are not translating into proportionately more women in leadership roles.
Why? The deck seems to be stacked against women in terms of development opportunities. Women have not had the same access to developmental job assignments and training that would prepare them for higher positions.
Many organizations invest in the “high potential” approach to developing future leaders. By identifying those talented individuals who have the potential to progress to leadership roles, organizations have a short cut to invest in the “right people” to prepare people for future leadership roles. As it takes generally about 10 years to prepare for a senior position and most high-potential programs are geared to the 25-35 age group, most women are blocked inadvertently from being selected for such programs as this age bracket tends to coincide with starting families and women are removed from consideration due to concerns over maternity and family leaves.
Regardless of the number of women in leadership roles, men are still significantly more likely to be chosen for high-potential programs.
“Achieving gender parity is not just slow but impossible if organizations continue to place disproportionately more men in high-potential programs as the feeder pool for future leaders.” Ann Howard and Richard Wellins, Holding Women Back, 2009
As well, organizations provide increasingly less support for women as they move up the management ladder. Women reported much greater difficulty in making the transitions to higher leadership roles due to a significant lack of female mentors and role models.
What Needs To Happen?
In businesses where formal succession plans are in place, women comprise a much greater percentage of high-potential programs. Organizations without a formal plan rely more on individual leader recommendations and gut feelings. These types of decisions are prone to biases and stereotypes. Organizations need to have a formal process to evaluate capabilities objectively.
Succession planning and filling the leadership pipeline is a top priority for senior leaders although little is done about it. Succession planning is important but not seen as urgent and falls off the agenda. With people being the single most defining factor in execution, selecting and developing the best new leaders is critical to business success. Succession planning is not about filling management positions after retirement. It is a process of ongoing investment to develop future leaders who will be in the right place at the right time to translate strategy to results.
Succession planning should be formal and completed objectively and transparently to identify the best high-potential candidates based on key competencies and support the proper development investment. A series of objective evaluations of characteristics and competencies minimizes potential biases.
Research continues to show that women need to perform significantly better than men to be seen as equally competent which makes moving up the ladder even more difficult. Again, objectivity is critical. Organizations need to use objective methods of performance evaluation and management to support the best recognition, development, and advancement decisions.
Formal mentoring programs would also be a great benefit for women to advance their careers successfully. Women need to be encouraged to be more proactive about seeking opportunities and advancement. Women tend to apply for promotion opportunities only when they are 100% sure that they have the required capabilities where men will put themselves forward for consideration if they are at least 60% sure they have what it takes. Even though women are 8% more likely to meet or exceed performance expectations, they tend not to apply for promotions. Senior managers need to be aware of this internal bias in women, and actively encourage talented women to get the necessary training to move forward.
Much more support is needed for leaders, both male and female, to make the transitions to higher leadership roles and responsibilities.
Women need to be more assertive in making their intentions known for career advancement. Family roles have been a traditional explanation as to why women are not considered equally for promotion – the consideration being that their time, energy, and motivation will not be there at the same level as their male colleagues to take on the next level of responsibility. Women have proven that careers and families can co-exist.
Many high-powered women have wonderful personal and family lives. Studies show that decisions for promotion are biased against women due to the “family” issue and women need to be more direct and open about their desire for promotion and that they can provide the energy, time, and motivation to take on the more senior role successfully. Men are fundamentally more competitive and women can take lessons from the male approach to promoting interest in advancement and do the same – confidently sell their abilities more assertively.
What’s Next?
Organizations that do not promote women to senior leadership roles will find themselves at a significant disadvantage. Decision-making will suffer from lack of diverse perspectives and organizations will fail to realize the maximum possible return on equity and workforce.
Particularly now in a time of financial strains and uncertainty, women are critical in leadership roles (on a balanced basis and not just token or minority status) as studies have repeatedly shown that women leaders are much less likely derail under stress and show less impulsive and volatile behaviors.
Companies with more women in leadership roles score higher on all factors directly linked to financial performance than firms with no women at the top. Organizations with more women at the senior table outperformed all others on profitability and return on shareholder equity. Organizations with a balanced proportion of men and women senior leaders showed greater decision-making power from discussions with more diverse perspectives and reduced the potential for group think.
Senior leaders should be aiming at a goal of 40% to 50% of women in development programs and senior leadership roles.
We would be significantly better off if it had been Lehman Brothers & Sisters. If organizations want more money, support the promotion of more women to leadership roles.
The ability to attract, develop, and retain talented women to leadership roles will become a competitive advantage for organizations.
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