Companies must embrace inclusivity, both for their own—and the wider—good 

Frank-Jürgen Richter

By Frank-Jürgen Richter

July 29, 2019

Inclusivity in the workplace is a much-discussed topic in recent times. Companies worldwide are reporting their commitment towards inclusivity, and although strides have been made, there is still huge room for improvement. In case of the world’s largest economy, the US, progress has been stunted. McKinsey, in its 2018 Women in the Workplace Report, found that “women are still underrepresented” and “companies need to change the way they hire and promote entry and manager-level employees to make real progress”.

This is rather surprising considering the fact that over the past three decades, more women are more highly educated – for example, more women have been securing undergraduate degrees than men. In addition, there has been widespread global acknowledgement of the fact that more needs to be done to enable gender equality in the workplace. Yet, the ground reality stands in stark contrast.

In the case of Asia, investors are increasingly demanding higher women participation in managerial ranks, driven by shareholder’s preference for investments in companies with diverse boards.

Women Representation Poor in Asia

A 2018 report from Corporate Women Directors International on the world’s 200 largest companies revealed that female participation in the higher rungs of the corporate ladder remained low. Japan registered a dismal 7 percent representation, and China’s was even lower at 4.8 percent. Overall, among the 200 companies surveyed globally, only 21.4 percent of director level positions were held by women. The report also highlighted that the highest incidence of companies (35 organizations) with no women directors was in Asia.

And the problems run beyond just the representation of women in senior leadership roles. In many countries, the total labour force participation rates for women are very low, with serious implications on socio-economic development and prosperity. India, for example, has among the lowest female labor force participation rates (LFPRs) in the world. This has a direct impact on economic growth as what it effectively means is that businesses are selecting employees from a much smaller potential talent pool than is actually available to them. In this regard, China has done reasonably well, with more than 60 percent of its women engaged in the labor force – one of the highest globally. In case of the US, it is over 56 percent.

Why Is the Female LFPR Low?

Women are often not participating in the labor force not because they choose not to; rather it is because of decades of baggage that comes in the form of social norms; in certain economies, it is also due to employment policies in place, and the lack of frameworks that encourage more women to join—and indeed stay—in the workplace.

Two issues stand out in particular. The first relates to how the role of women has traditionally been perceived. Age-old societal mores and norms have put the onus on raising children and managing households on women, while men have been perceived as “breadwinners”. Despite the best efforts of governments and regulators, these attitudes persist, with adverse impact on the labor market. Study after study has revealed that women are faced with a different set of expectations in the workforce, and as a result, are discriminated in the workplace. A very common assumption is that women do not want or will not be able to assume senior leadership roles and the responsibilities that come with them because they already have too much on their plates at home. Another assumption is that younger women will leave the workforce when they have children, so there’s no real need to promote them and entrust them with greater responsibilities. A third viewpoint is tied to persistent stereotyping of women – assuming that there only certain kinds of roles women are capable of undertaking. There is a plethora of other misplaced assumptions and views that has contributed to the challenge we face today.

The second major issue in the corporate workplace is that of sexual harassment. In fact, even in the US, 35 percent of women have reported workplace sexual harassment at some point in their working lives. Similar is the case for women in senior leadership too, where 55 percent reported having faced some form of sexual harassment. The corresponding figure was 48 percent for gay women and 45 percent for women employed in technical domains. Typically, women were more vulnerable in work areas that are male dominated. And the numbers are not significantly different in most countries around the world, and not least in Asia.

Steps Companies Must Take

Priority must be accorded to outlining initiatives, tracking progress on these initiatives, reporting the findings and rewarding successful outcomes. For companies to embrace diversity and reap its many advantages, they must drive policies that encourage positive workplace experiences for women. Till that happens, women, and their job market prospects, will remain vulnerable.

While steps are being taken, clearly enough is not being done. The same McKinsey research points out that just 38 percent of companies have set targets for gender representation, which in itself is among the first steps in achieving gender parity in the workplace. Additionally, only a dismal 12 percent share gender diversity metrics with their workforce. In the absence of a concerted effort from senior leaders where they are held accountable, it will be an uphill task towards realizing change for the better. The leadership for this has to come from the top.

Airbnb is but one example of a company trying to do things right. The company is now recognized as the global leader in hotel aggregation, and has incorporated changes in making sure women inclusivity is given top priority. It monitors and analyzes employee ratings and promotion rates to ascertain that there are no gender differences in higher representation that have not been credited to meritocracy. In addition, the organization also tracks employees’ feedback on the fairness of appraisal processes.

Going Forward

Organizational hiring and promotion policies are two key areas that need addressing in order to improve the female participation rate in the workforce. However, companies are not doing so at equal rates for men and women and this is all the more evident in entry level and managerial positions. This can also be attributed to the fact that the majority of companies do not have guidelines that govern this aspect. Very few companies diversity targets for hiring and promotion; and even fewer have tools to eliminate bias when applicants are reviewed. This leads to not only an underrepresentation of women but also less participation from people of some ethnic backgrounds or sexual orientation.

In fact, companies that do adapt their hiring processes and do not encourage and foster diversity at their organizations will find it increasingly difficult to hire the brightest. Millennials today are thoughtful, aware and eager for change – their viewpoints have become increasingly important for any company that aspires to grow.

But perhaps most importantly, and even if we set all of these benefits aside, what corporations cannot ignore any longer is the number of studies that show that companies that have strong female leadership on their boards tend to be more profitable. The MSCI Women on Boards study is one among many such – and it shows that companies that are part of the MSCI World Index and have strong representation of women in leadership roles generated a return on equity of 10.1 percent per year, compared with 7.4 percent at companies without.

Now more than ever, with the global economy plagued with uncertainty, it is time for companies to start making the most of one half of the global talent pool, which has pretty much been ignored until now. This will result in broader perspectives, greater creativity, more innovation, unique ideas, and most importantly—for companies—increased profitability.