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Monday, February 8, 2010

Women corporates: the key to better balance between growth and risk ?


So, the gender issue is back. We are again debating the existing divide between the male and the female workforce. But thankfully the issue doesn’t pose itself as a problem this time.Rather, it tries to find a solution. It aims to strike the right kind of balance between growth and risk in the business world. The recent financial turmoil has ensured that we debate it now else it will be too late. So, the million or should we say the billion dollar question is: Is increased women participation the key to better balance business growth and risk?

Let’s do some number crunching first. Studies have shown that the presence of women on corporate boards was connected to improved corporate performance. This claim has found support in another extensive 19-year study of 215 Fortune 500 firms which shows a strong correlation between a record of promoting women into the executive suite and high profitability. The only major French company to record a share price gain in 2008 was Herm├Ęs - whose management is 55% women, the 2nd  largest share among French blue chips. It seems we might just have the solution in front of us.

Some more data: According to the results of a recent study conducted by Prime Database,6,560 individuals occupy a total of 11,391 directorship positions in 1,069 listed companies in India. Only 311 of these individuals are women. Gender representation at the top of U.S. companies, by contrast, is far more equitable. Nearly 42% of management positions are occupied by women. Furthermore, 88 percent of Standard & Poor's 500 companies have at least one female board member, while 49 per cent have two or more women directors.Women account for only 10 percent of senior managers in Fortune 500 companies. Within this group, less than four percent hold top executive positions such as CEO, President, Executive Vice-President and COO. In India, however, the picture is even bleaker. In 2006,women accounted for just over 3% of all executive positions in India, versus 17% globally. So, by that count the epicenter of financial downturn should be India rather than United States.

Let’s not jump the gun and try to come up with a conclusion every next sentence. Rather let’s try to get at the root cause of the issue of finding the right balance between risk and growth. One common thread that joins all the sinners of the debacle is “greed”. The greed to maximize one’s wealth at any cost, the greed to outdo one another by hook or by crook and the greed to retain power by safeguarding one’s bastion. So, the inherent nature of those in power is behind this gloomy scenario. The board of directors of most firms is a healthy composition of kith and kin of the promoters. Forget about gender diversity, diversity per-se is absent. This makes mockery of equity, meritocracy and equal opportunity for one and all. When the interests of the power brokers are so aligned, it’s not a surprise that the decisions are outcomes of vested interests rather than fairness. “Diversity” after all strikes where it hurts the most and that is the alignment of interest. It is hard to come up with such risky decisions in a diversified set up. Presently, it seems the benefits are shared by the minority but the losses are for every one to bear.

How does an organisation benefit with more women as decision makers? 
  • First of all women bring new ideas to the table as they offer different skill sets 
  • Ideas are characterized by a wider perspective that ensures a democratic solution that benefits a greater audience
  • Their presence brings an alternate way of thinking and so they often raise questions that their male colleagues fail to ask
  • The female way fosters stronger relationships with customers and shareholders, resulting in a more diverse business 
  • They can positively influence recruitment,creativity and production. They help project a positive business image. 
When flexibility and creativity are needed to get an edge over others in the market, a diverse workforce will be conducive to such development. It would provide greater capacity for problem solving as well as enhanced equality of opportunity. This will provide the organisation with an increased ability to attract and retain valued employees as well as provide a wider talent pool.

As far as the working environment is concerned, there is every chance that it will take the turn for the better with policies like flexible work hours, child-care provisions etc finding a place. These policies benefit everybody as they bring into focus the entire family of the employees rather than the individual. Respect for the fairer sex goes up with stricter adherence to rules related to sexual harassments and abuses at the workplace. This ensures greater discipline and a healthier working environment with steps like ‘equal pay for equal work’ likely to see the light of day. Successful stint of the female business owners will provide a major boost to female education in the society as the family will now definitely see a return on their investment rather than perceive the girl child as a burden.

Following data on Women owned businesses (WOB) in US, too have a positive story to tell.

Industry Growth for WOB (1997-2006)
Industry / Million Firms / Growth

Services / 5.3 / 69.0 %
Retail Trade / 1.1 / 130.0 %
Real Estate, Rental & Leasing / 0.6 / 116.8 %

The following table breaks down the growth rate among women business owners, showing the industry sector, and the percentage of increase in growth for the period 1997-2006

Industry Growth for WOB by Sector(1997-2006)
Sector (Growth)
Wholesale trade (283.4 %)

Health Care & Social Assistance Services (130.0 %)
Arts, Entertainment & Recreation Services (116.8 %)
Professional, Scientific, & Technical Services (82.7 %)

But while discussing the exploits of the fairer sex, why should we limit ourselves to the workplace? Women contribute significantly to the running of households mostly in the form of unpaid effort and skills. According to a study by Global Forum on Gender Statistics in Mexico, in the year 2002, women contribute as high as 77% of the unpaid work which is valued at 1,358 billion pesos. “Do women make better managers?”, this question has been raised time and again and women by virtue of their contributions as housewives have proven that they are more than capable of giving the men a run for their money.

The past studies have shown that organisations like IBM that have given priority to gender equality have also taken measures to ensure that region, religion, race etc based minorities also get their due which adds to the sustainability of the organisation.

So, without being judgmental, we can say that women participation at the top will help address the greater as well as wider concerns in the decision making by ensuring greater attention to details. This will promote sustainable decisions. In other words women might just play, ‘The devil’s advocate’ which is the need of the hour.

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