The Business Case for Gender Diversity

Companies have enormous potential to increase share value, employee retention, and brand equity if they can effectively implement gender diversity initiatives. Kellie McElhaney, UC Berkeley-Haas professor of corporate sustainability shares how.

The data are clear: escalating the number of women in leadership is just good for business. Study after study shows that companies with more gender equity -- that is, a more equal balance of women and men in leadership roles at the board level and C-suite—perform better. A 2009 McKinsey report found correlations between a company’s performance and the proportion of women serving on the executive board; more women translates to less debt and faster rebounds in a crisis. It also found that leadership behaviors “more frequently adopted by women are critical” to navigating “a post-crisis world” (McKinsey, 2009). 

More recently, Credit Suisse delivered a report with similar correlations, finding that even the presence of 1 or more women on a corporate board translated to higher share prices after the economic crisis (Credit Suisse, 2015). Furthermore, women are a dominant consumer base, representing 70-80 percent of consumer spending through buying or influence (Forbes, 2015)—that’s $20 trillion globally. Despite this overwhelming evidence of the benefits of gender equity in leadership, Kellie McElhaney, UC Berkeley Haas professor at the institute for business and social innovation, says that women are still only fractionally represented in leadership positions—comprising 16 percent of board or c-level roles in Fortune 500 companies.

Steps Toward Action

The good news, says McElhaney, is that more than ever, the discourse of gender equity in business leadership has overwhelmingly shifted from reflection to action. McElhaney points to research institutions, corporate strategy firms, and high-profile CEOs like Sheryl Sandberg who have been vocal about the problem at hand and the solutions for bringing -- and keeping -- more women at the leadership table. She says, among those solutions, two things are essential for a successful gender equity strategy: full commitment from top leadership, and more men joining the conversation. 

“Salesforce is a great example of a company taking a positive stand on the issue.” McElhaney teaches coaches women’s leadership sessions at the UC Berkeley Women’s Executive Leadership Program. She says Salesforce employed data-driven strategies to assess the company’s gender equity and salary gaps; and then, they started talking about them. “Mark Benioff, the CEO, is stepping up in a leadership role and talking publicly about the data, why this matters to him, why it matters to Salesforce and what kind of company he wants to be running.”

McElhaney says that  leaders like Benioff can provide a blueprint for other Silicon Valley executives to follow. “I admire that Benioff is calling on other CEOs to take a stand on the issue, asking ‘does this matter to you?" Collective action on the part of leaders will improve the gender representation problems and the reputational issues the tech sector has yet to crack. 

Gender Diversity as Brand Strategy

Another example? “Walmart has done a fantastic job,” she says, pointing to the incremental and innovative ways the company has built out its gender equity strategy. “The previous CEO, Mike Duke recognized there was a problem and he put together a CEO council of women leaders. They then looked across the company, developed training programs for women to ensure they were developing the right support leadership training for female employees.” They also looked externally: turning their attention to the supply chain, they doubled the sourcing of female-owned suppliers, calling attention to these products with “women-owned business” labelling. 

Through these actions, McElhaney believes Walmart has done an impressive job turning around a previously poor track record of diversity management by addressing the issue comprehensively and head on. She says, whether motivated by external pressures or not, leaders need to address the business case for women and champion it as part of a brand strategy. “If you’re not communicating this to consumers, to your employees who care deeply about this, to new markets you’re trying to enter, you won’t get the reputational enhancement or the brand differentiation.”

Learn more about Kellie McElhaney’s research on the ROI of investing in women, diversity in the workplace, and her deep expertise on corporate social responsibility, at the Women’s Executive Leadership Program at Berkeley Executive Education. And, hear the rest of her InFocus interview.