Blog & News 

Businesses that invest in women do better financially.

It Makes Good (Business) Sense to Invest in Women

// July 25, 2019

Companies that Invest in Women Do Better Than Their Peers That Don’t

WFCO interviewed Julie Gorte, co-chair of our programmatic investment committee and senior vice president at Impax, about the business benefits of investing in women. Her team was instrumental in the development and 2014 launch of the Pax Global Women’s Leadership Index, a custom index calculated by MSCI. The Pax Ellevate Fund makes up a portion of WFCO’s 100 percent gender lens portfolio.

What are the most compelling business reasons to invest in women?

Companies that invest in women tend to do better than peers who don’t, for some very logical and powerful reasons. First, any company that can get the best work out of its entire workforce is more likely to prosper than a company that gets the best efforts of only its male workforce.

The same logic applies throughout the value chain. Making products for and marketing to women makes sense when you consider that women are expected to control $72 trillion in assets by 2020. Women are accumulating those assets 1.5 times faster than men.

Another very strong theme in the academic literature is that diverse groups do a better, more robust job of decision-making compared with homogeneous groups. Groups that include people of different genders, ethnicities, experiences, and skills are less prone to the shortcuts and perils of “groupthink,” and more likely to evaluate their options more thoroughly.

Of course, if that were only an academic perception it might not have much power in the investment world. But study after study from the academic and financial worlds show that companies that invest more in women, and that have higher proportions of women in decision-making groups, tend to perform better financially, have lower risk, and be more resilient.

What does (or should) investing in women look like for businesses?

There are many ways that businesses can invest in women. The journey often starts with an employee survey with questions specifically designed to elicit views on whether there really is equal opportunity. What one typically finds is that the men tend to think that diversity programs are working fine and the women are less enthusiastic.

Another good starting move is to conduct a pay audit. There are many consultants who know how to do them without making obvious mistakes such as not factoring in skills, qualifications, and experience. Those pieces of information, together with a demographic picture of a company’s workforce, should give some clues as to whether the company’s equal opportunity programs are really working, or if there are glass ceilings in place and where those are.

We have seen companies that have established goals for diversity recruitment and retention, and goals for elimination of pay gaps. We’ve also seen companies that, once they discovered that they had a pay gap, simply eliminated them. That sends a powerful signal.

It’s also useful for companies to know their culture. Often, companies with all the right infrastructure still have cultures of discrimination and harassment. It’s very important, especially for managers, to know that a lot of discrimination and bias is unconscious. Assessing culture is far more difficult to do, and sadly, the HR department may not be well equipped or willing to assess it. Again, a good outside consultant can be a real aid to companies that really do wish to understand whether their culture empowers or diminishes women, no matter how many EEO declarations, diversity and harassment training programs, and nondiscrimination policies they have.

Have you seen consequences for companies that don’t invest in women?

What we know from some very good research conducted by academic researchers as well as financial analysts is that companies that do have more women in decision-making positions tend to do better on several financial metrics, including return on assets and return on invested capital. The same rich literature tells us that companies with more women in decision-making positions tend to be more innovative, and those with a critical mass of women on their boards tend to manage talent better than those with fewer than three women on their boards. It is logical to infer from all this that companies that don’t invest in women, or don’t see the need for gender balance, are more likely to do a little worse on those financial measures, as well as against yardsticks such as innovative capacity and talent management.

 

 

Find Us on Social Media (#WFCO)

Join our social media network by engaging with us on Facebook, Instagram, LinkedIn and Twitter, and by watching our videos on Vimeo.

         

Sign up for our eNewsletter

Sign up for our email newsletter to receive updates on our work, statewide events, research, and much more.

Sign Up Now

We have advised you to seek your own legal and tax advice in connection with gift and planning matters. The Women’s Foundation of Colorado does not provide legal or tax advice.

© 2019 All rights reserved. View our privacy policy or unsubscribe.