Culture 15 March 2017
According to the “Women in The Workplace Study 2016", by LeanIn.Org and McKinsey & Company, women are less likely to receive the first critical promotion to manager, so far fewer end up on the path to leadership-and are less likely to be hired into senior leadership roles.
Consequently the higher you look in companies, the fewer women you'll see. The study was comprised of 132 companies employing more than 4.6 million people who shared their pipeline data and completed a survey of HR practices. Additionally, 34,000 employees completed a survey intended to reveal their attitudes on gender, ambition, work-life issues, and job satisfaction.
Getting more women into leadership roles.
McKinsey & Company's Joanna Barsh reports that women are moving forward, albeit slowly; women won approximately 30 percent of new U.S. board seats in 2015, compared to 19 percent in 2010 and almost six percent of Fortune 500 CEO's are women. Barsh said: “Give employees more control over their schedules and create flexible work environments and make programs that demonstrate to women in mid-level positions that they can get to the next level so their aspirations stay high."
Despite modest progress since 2015, women remain underrepresented in the corporate pipeline. At every step, the representation of women declines. Promotion rates of women lag behind those of men, and the disparity is largest at the first step up to manager-for every 100 women promoted, 130 men are promoted. In addition, external hiring is not improving the representation of women. Furthermore, the study found that companies hire fewer women from the outside than men, particularly in senior management, at a rate of nearly two to one.
The distribution of women and men in line roles is abysmal.
At senior levels women shift from line to staff roles, while the percentage of men in line roles remains approximately the same. By the time women reach the senior vice president level, they comprise only a 20 percent share of the roles. It gets worse, in 2015, 90 percent of new CEOs were promoted or hired from line roles, and 100 percent of them were men. Women of color face a steeper climb to the top. Though they make up 20 percent of the U.S. population, women of color hold a mere three percent of C-suite roles, despite having higher aspirations for becoming a top executive than white women.
Compared to white women, women of color also report that they get less access to opportunities and see a workplace that is less fair and inclusive. They are nine percent less likely to say they've received a challenging new assignment, 21 percent less likely to think the best opportunities go to the most deserving employees, and 10 percent less likely to feel comfortable being themselves at work. And while 78 percent of companies report gender diversity is a top priority, only 55 percent report that racial diversity is. A greater awareness of the problem and a serious commitment to addressing it is long overdue.
When perception mirrors reality.
Women get less access to the people and opportunities that advance careers and are disadvantaged in many of their daily interactions. They are also less than half as likely as men to say they see a lot of people, like them, in senior management, and they're right-only 20 percent of senior executives are women.
Not surprisingly, these inequities have taken a toll on women. Compared to men, they are less likely to think that they have equal opportunities for growth and development and more likely to think that their gender will play a role in missing out on a promotion, raise, or some other opportunity for professional advancement.
Women are more likely to face pushback when seeking promotion.
It's not all bad news: women are negotiating for promotions and pay increases as often as men. And women who lobby for a promotion are 54 percent more likely to report getting one than those who don't.
But the bad news is that women who negotiate are disproportionately penalized for it. They are 30 percent more likely than men who negotiate to receive feedback that they are intimidating or too aggressive or bossy and 67 percent more likely than women who don't negotiate to receive the same negative feedback. Ultimately, despite lobbying for promotions at similar rates, women are on average less likely to be promoted than men.
When commitment to gender diversity rings hollow.
Companies are struggling to put their commitment to gender diversity into practice, and many employees do not see it as a serious priority. Seventy-eight percent of companies report that commitment to gender diversity is a top priority for their CEO, up from 56 percent in 2012. But this commitment does not always translate into visible action. Fewer than half of employees think their companies are doing what it takes to improve gender diversity.
Evidently the case for gender diversity is not reaching employees, or they worry they will be disadvantaged by diversity programs that are not fair. However, it's duly worth noting that if the workplace was inclusive and fair now, the corporate pipeline would more closely mirror the general population.
Steps for companies to take to advance gender diversity.
1-Make a compelling case for gender diversity.
Senior leaders have a crucial role to play, from talking more often and openly about gender diversity to modeling their commitment in their everyday actions. Although 62 percent of senior leaders say that gender diversity is an important personal priority, only 28 percent of employees say senior leaders regularly encourage an open dialogue on the topic.
2- Make hirings, promotions and performance reviews fair.
While 93 percent of companies report that they use clear and consistently applied criteria to evaluate performance, only 57 percent of employees believe that managers do this in practice. As an example, blind resume reviews are a relatively simple way to minimize bias, yet only four percent of companies say they do this.
3-Invest in more employee training.
Employees need to understand what steps they can take to get to equality, yet they clearly need more guidance: only 28 percent of entry-level employees and 51 percent of middle managers say they know what to do to improve gender diversity in the workplace.
4-Accountability and results.
Only 40 percent of companies report that they hold their senior level leaders accountable for performance against gender diversity metrics, and employees are even less likely to see this in practice: only 32 percent of employees report that senior leaders are regularly held accountable, and nine percent report that managers are recognized for progress on gender diversity. Only 44 percent of companies set pipeline targets, and even fewer set targets for external hiring and promotions. Targets matter because it is easier to track and make progress when a company has clear goals in place.
In summation, companies have a crucial role to play in reaching gender equality, and we will all benefit when they succeed. Ultimately, a more inclusive work environment will lead to more engaged employees, which will lead to stronger, more productive organizations. And that's the bottom line.
7 Min Read
Amid the mainstream conversation about inclusion and justice in the workplace, otherwise known as #MeToo, a Silicon Valley venture capital fund considered how they can be more inclusive of the women, minority, and LGBTQ entrepreneurial communities.
Their solution? Ask the CEOs they currently fund to promise to hire senior-level employees from diverse backgrounds.
Lightspeed Venture Partners, a venture capital fund that has investments with blockbuster startups such as The Honest Company, Affirm, and HQ Trivia, has asked its portfolio company CEOs to sign a “side letter" affirming their commitment to consider women and other underrepresented groups for senior jobs and new spots on their board of directors.
Can making pledges— or even hiring a C-Suite level employee to manage diversity efforts— really make an impact on the funding gap for multicultural women-led companies?
Many experts say it's going to take systemic change, not letters of intent.
It is well reported that the amount of investment going to multicultural women-led companies is incongruous to the entrepreneurial landscape and the performance of their businesses. Between 2007 and 2016, there was an increase of 2.8 million companies owned by women of color. Nearly eight out of every 10 new women-owned firms launched since 2007 has been started by a woman of color yet, these businesses receive an abysmal 0.2 percent of all funding. Amanda Johnson and KJ Miller, founders of Mented cosmetics, were just the 15th and 16th Black women in history to raise $1M in the fall of 2017.
The multicultural women who do defeat the odds to get funded receive significantly less than male founders. The average startup founded by a Black woman raises only $36,000 in venture funding, while the average failed startup founded by a White man raises $1.3M before going out of business.
The implicit and explicit bias not only impacts individual multicultural female founders, it could be stifling innovation. For example, companies with above-average diversity on their management teams reported innovation revenue as 45 percent of total revenue compared to just 26 percent of total revenue at companies with below-average management diversity. That means nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years.
In our economy today, venture capital is responsible for funding the work of our most innovative companies. Venture capital-backed U.S. companies include some of the most innovative companies in the world. In 2013, VC-backed companies account for a 42 percent of the R&D spending by U.S. public companies.
With a wealth of multicultural women entrepreneurs and evidence to support the performance of diverse companies, why does this funding gap persist?
According to Kristin Hull, founder of Oakland-based Nia Impact Capital and Nia Community, many traditional investors consider women or minority-led businesses as a category in their portfolio, like gaming tech or consumer packaged good. Hull, who focuses on building portfolios where financial returns and social impact work hand-in-hand, argues gender and ethnicity are not a business category and investors who dedicate a specific percent of their portfolio to diverse companies are the ones missing out.
“We are doing this backwards," says Hull. “Adding diverse, women-run companies actually de-risks an investment portfolio."
Hull points to research that has found women are more likely to seek outside help when a company is headed for trouble and operate businesses with less debt on average. What's more, a study conducted by First Round Capital concluded that founding teams including a woman outperform their all-male peers by 63 percent.
Ximena Hardstock, a 43-year-old immigrant from Chile experienced this bias first hand before she raised $5.1M for her tech startup. “How do you get an investor to notice you and take you seriously?" says Hardstock. “White men from Harvard have a track record and investors are all looking for entrepreneurs that fit the Zuckerberg mold. But a woman from Chile with an accent who started a technology company? There is no track record for that and this is a problem so many women of color face."
Hardstock came to the U.S. from the suburbs of Santiago when she was just 20-years-old. Alone with no family or connections in the U.S., Hardstock worked as a cleaning lady, a bartender, and a nanny before she began teaching and working in education. “I had a lot of ideas and Chile is still a very conservative country," she says. “Most women become housewives but I wanted to do something different. So, I moved to the U.S."
Hardstock went on to earn a Ph.D. in policy studies, served as vice president of Advocacy for National StudentsFirst and worked as a member of Washington DC mayor Adrian Fenty's cabinet. Her experience working in both education and government exposed her to a need to simplify the process of connecting lawmakers with their constituents. As a result, Hardstock founded Phone2Action, a digital advocacy company that enables organizations and individual citizens to connect with policymakers via email, Twitter, Alexa and Facebook using their mobile phones.
Because venture capital and private equity are not necessarily meritocracies, Hardstock initially struggled to get in an audience with the right investors despite her company's growth potential, her experience, and her education. In fact, it wasn't until she won a competition at SXSW in 2015 that she could get an audience with a serious venture capitalist.
While it may seem like symptoms of a bygone era, both Hardstock and Hull say the path to investor relationships is forged in places where many women of diverse backgrounds are not – ivy league organizations, golf courses and late night post-board meeting cocktails attended mostly by White men of means.
The history of venture capital has never been very balanced, according to Aubrey Blanche, global head of diversity at Atlassian software development company and co-founder of Sycamore, an organization aiming to fix the VC funding gap for underrepresented founders. “White and Asian men have built the venture system and for generations have been seeking out people like themselves to invest in."
Personal and professional networks are critical for founders to connect with investors, but many multicultural women don't have access to the networks their White peers have. According to a study conducted by PRRI, the average White person has one friend who is Black, Latino, Asian, mixed race, and other races. This common situation makes getting that all important warm introduction to established VCs very challenging for multicultural women founders.
“Is the ecosystem of your network equivalent to your net worth? Absolutely," says Hardstock. “For us, we have to build our own ecosystem and recreate what happens on the golf courses and at the Harvard reunions."
To Hardstock's point, most multicultural women with entrepreneurial aspirations lack that Ivy League network. According to reporting published in The New York Times, Black students make up just nine percent of the freshmen at Ivy League schools but 15 percent of college-age Americans. This gap has been largely unchanged since 1980.
While notable female investors such as Arlan Hamilton, Joanne Wilson, and Kathryn Finney are actively working to close the funding gap for women of color, only seven percent of current senior investing partners at the top 100 venture firms are women. Less than three percent of VC funds have Black and Latinx investment partners. Without an influential network, Hardstock and entrepreneurs like her are left screaming for a seat at the table.
When Black, Latina, and Asian women founders do get in the room with the right investors, they have to work harder to get the investors to relate to their products and services. “Entrepreneurs solve problems they understand," says Blanche. “When multicultural women entrepreneurs present their businesses to a homogenous group of male investors who may not be equipped to understand the idea, they may pass on an amazing business."
Take, for example, the founders of Haute Hijab or LOLA. Founders of both successful startups would have to explain the market for their services to a table occupied mostly by men who may never have considered that Muslim women want more convenient access to fashion and have never considered women might prefer to purchase organic tampons.
This lack of familiarity typically means reduced funding for women and a host of other consequences.
As one recent study pointed out, even the way investors frame questions to women can impact funding. According to the Harvard Business Review, female founders are often asked “prevention-oriented" questions focused on safety, responsibility, security, and vigilance. Male founders, on the other hand, are often asked questions focused on hopes, achievement, advancement, and ideals.
When all of these factors are considered, a side letter may not be enough to begin to close the funding gap.
Both Blanche and Hull say real change can be made by democratizing information and education on impact investing. Both women say educating investors and MBA candidates about impact investing is the best way to overcome current bias.
Blanche's organization, Sycamore, produces a newsletter for new angel investors who want to help close the funding gap while making money in the process. Hull's firm has an internship program for multicultural girls from Oakland to expose them to the worlds of investing, entrepreneurship, business leadership, and financial literacy.
“I'm excited about the changes I see," says Blanche. “I see more firm employing the Rooney Law on an institutional level, an increase in smaller firms looking at underserved communities, and the democratization of institutional funding."
Hull adds that as long as multi-cultural women-led firms continue to show returns and outperform or perform on par with companies founded by White men, the investor community will rethink their portfolio strategies.
This piece was originally published in 2018.