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Because it's 2017: Gender Equality as an Innovation Challenge

by Sarah Kaplan

Instead of focusing on building a ‘business case’ for gender equality, we need to re-frame it as an innovation challenge.

Because it's 2017

MOST READERS PROBABLY REMEMBER that moment when newly-elected Prime Minister Justin Trudeau was asked by a reporter, why he had appointed women to 50 per cent of his cabinet positions — and his now-famous response: “Because it’s 2015.”

What is remarkable to me about that moment is not the Prime Minister’s appropriately-feminist response — although that was a welcome surprise; but the fact that the question had to be asked at all. How did we get all the way to the 21st century, and this is still a question? How are people still wondering whether women should have equal positions of leadership in politics, business — or anywhere else in the world?

If I think back to my own career, it has been 30 years since I had my first job out of university; and frankly, I thought we would be further along than we are. Lately I’ve begun to wonder, why haven’t we seen more progress?

Indeed, in many ways, we appear to have plateaued. Some have concluded that this is because the case for ‘equality of opportunity’ has largely been made on an anti-discrimination basis. For a long time, the messaging around this issue was, ‘It’s just not right to discriminate against women’. In response to the lack of impact of this argument, the messaging has shifted in recent years to ‘making a business case for equality’. Somehow, the thinking goes, if we can make an economic argument for why diversity matters, we should be able to make more progress.

Publications from the Financial Times to The New York Times have been touting the ‘growing evidence’ for a business case. This evidence has come, in large part, from reports from organizations like Catalyst, which are focused on establishing relationships between the presence of women and company performance. For instance, their research shows that returns for firms with no women on their board of directors are much lower than for firms with three or more women on their board.

For those who prefer to look beyond the elite setting of boards, there is also data from McKinsey showing that gender-diverse companies are more likely to outperform their peers. These findings are being quoted not just in the business world, but also in the world of non-profits and NGOs, with organizations like the World Bank and Oxfam justifying their policies on the idea that gender equality is based in a ‘strong business case’.


Why have we become so obsessed with making a business case for gender equality, and what is the actual evidence for it?Tweet this


This kind of rhetoric about the business case for gender equality has led to comments like the one that appeared in The New York Times recently, in which the writer said — almost with relief — that ‘The business case now transcends public policy and moral imperatives’ — as if moral imperatives somehow don’t matter anymore.

All of this got me thinking: Why have we become so obsessed with making a business case, and what is the actual evidence for it?

I turned to the academic literature to see what scientific studies had to say about the relationship between gender diversity and performance. Based on my analysis of the findings to date, it appears that this relationship holds true — in some circumstances, in some industries and at some points in time. More importantly, the research shows that the relationship between gender diversity and performance is not necessarily causal: It could be that the best companies happen to hire a more diverse workforce and have more diverse boards, so it is not the diversity that causes their strong performance, but that diversity and performance are two outcomes of ‘being a great company’.

And yet, the headlines continue to trumpet: ‘Just add one more woman to your board, and your company will perform better.’ The truth is, we don’t actually know if this supposed business case actually holds. Researchers have definitely found correlations between gender diversity and performance — but because we have not yet achieved full equality and there are few truly-inclusive environments to study (yet), we actually have no idea what the true potential could be.

When I get to this point in the conversation, many of the people who thought I was ‘on their side’ suddenly think I’m the enemy. By calling the business case into question, people are concerned that I am ‘undermining’ their ability to make change. What I’m suggesting, however, is that doubling down on the business case may actually be impeding change. I would like, instead, to re-frame this conversation.

Critically, the existing research does not show that adding women in leadership positions leads to worse performance for an organization. This leads me to question why we even need to ‘prove’ that including women is somehow a ‘win-win proposition’ in order to have them included in business or politics — or any other kind of setting. Why is the bar set higher in the first place?

Figure One shows the difference between having women on a board and having no women on a board. If you turn the comparison on its head and look at how firms compare relative to the average performance for their whole industry, the companies with no women on their board have, on average, much worse performance than the average for their industry (Figure Two). No one is asking those companies, ‘What is your business case for having only men on your board?’ Yet, we still seem to be obsessed with the ‘business case for action’ when it involves increasing the representation of women.

 

Why is this? I don’t have a perfect answer, but I believe it has to do with the notion of meritocracy.

We all want to believe that we live in a meritocracy, where the best and the brightest people get the big jobs and the best and brightest entrepreneurs get opportunities for funding. To explore how meritocracies actually work, I decided to examine a domain where everyone thinks meritocracy truly rules: Silicon Valley and
its venture capital investing community. Silicon Valley is known for having some mysterious, magical way of finding greatness and supporting it. By implication, it must value meritocracy more than any other place in the world, right?

Not so fast: If you look at the data, only two per cent of venture capital funding currently goes to female-led startups (and that is down from six per cent in recent years). How is that a meritocracy? When I asked venture capitalists what was going on, they said, ‘Women just aren’t bringing us enough good ideas’ or ‘We can’t find enough good female entrepreneurs’.

This seemed problematic to me and, in fact, to several other researchers. These colleagues decided to create a situation where the ideas presented to investors were objectively equivalent and asked, ‘Would we still see this gendered difference in investing?’ They developed a pitch for a new startup, along with a script to
narrate that pitch. Then, they asked potential investors to view the PowerPoint presentation. The only difference was that, in some cases, the narration was read by a recorded female voice, and in others, it was read by a male voice. At the end, they asked, ‘Would you invest in this startup?’

The results were startling: When the exact same pitch with the exact same script was narrated by a male voice, it was more than twice as likely to get recommended for an investment.

Maybe venture capital and Silicon Valley are a special case, you might say. So, I looked at the world of hiring in organizations. In one experiment, researchers used two versions of the exact same resumé to apply for a lab technician job. The only difference was that one applicant was named John and the other, Jennifer. When hiring officers evaluated the resumés to decide, ‘Is this person hirable for this job?’, it turned out that ‘John’ was much more hirable than ‘Jennifer.’

You might still be thinking that people are inferring some underlying difference in quality that is represented by gender but not by the résumé or the business pitch. How could we hold this constant and see if a bias still exists?

So, here’s another experiment: A group of people were asked to perform some specific tasks on a computer. Everyone in the experiment used the same exact type of computer, and everyone was asked to do the same tasks. The only difference was that some participants were told that their computer’s name was James, and others were told that their computer’s name was Julie.

After they completed the tasks, they were asked, ‘How did the computer perform?’ Everyone said that the computers worked well—there was no discernable difference between them. But when they were asked, ‘Given that performance, how much do you think this computer is worth?’ — it turned out that ‘James’ was worth 35 per cent more than ‘Julie.’

The examples of bias in the face of equal levels of quality and ability are endless, making it harder to cling to the notion of a meritocracy. In my own research, I’ve spent a lot of time talking with and observing people who are trying to achieve gender equality in terms of access to capital and in the world of finance. So, let’s go back to Silicon Valley for a moment. One of the people I talked to there told me, “Meritocracies are noble and worthy goals, but they are absolute myths. The only thing that meritocracy serves in Silicon Valley is as great validation if you’ve made it; it justifies your success. You are just that much smarter than everyone else.” And, by the way, it is the same on Wall Street. As one banker who did a survey of members of her Wall Street firm said: “The feeling that the firm was a meritocracy was much more likely to be held by those in the majority [white, male, heterosexual] group. Non-majority members were more likely to say that there were ‘hidden rules’ for success, and that it was harder to get the right opportunities.”


We are all jointly producing and perpetuating a system that is biased. Tweet this


The takeaway: When you look closely, you realize that the current ‘meritocracy’ is actually reinforcing the privilege of the people at the top. Those in positions of privilege want to believe in meritocracy because it justifies that they have ‘made it’ based on their own skills — not that they’ve somehow benefited from privilege. And this, I believe, is why we are being forced to make a ‘business case’ at the moment: Because we have to prove to these people in positions of privilege that there is ‘something in it for them’.

So, what to do? This is not a story about criticizing white, heterosexual men. The fact is, we are all in this together: We are all jointly producing and perpetuating a system that is biased and so, we are going to have to collaborate in order to solve the problem. This is also not a ‘fix the women’ story. We can’t simply say ‘The system is broken; women need to fix it themselves.’ And we can’t say to women, ‘You just need to be more self-confident,’ ‘You need to be less risk averse’, or, ‘You need to learn to negotiate better’. These are suggestions that are easy to make, as they come without costs to those with privilege and without a requirements that the system itself change.

If ‘fixing the women’ is not the solution, then what is?

My answer is this: Innovation. It will be hard to make further progress if we continue to do the same old things within the same old system. In my mind, the demand for a business case perpetuates the existing ways of doing business, because we are being asked to make a case within the existing system — instead of thinking about how to change that system.

I’ve been doing research on innovation for my entire career, and one thing that is unquestionably true is that innovation is difficult. The fact that it is so difficult means that organizations put their best people on it and invest substantial resources in it; and the fact that it’s so difficult is what makes it so exciting for these smart people. In contrast, when people start talking about diversity and equality, and how hard those things are to achieve, most people get depressed or frustrated, rather than excited. What if, instead, we thought of diversity as an innovation problem—making this challenge as exciting as other innovation challenges?

Following are a few examples of what innovation looks like in this arena.

INNOVATIVE PROCESSES.

‘Social innovation accelerator’ Village Capital brings together cohorts of entrepreneurs with new ventures to develop their business potential. The goal — as with all innovation accelerators — is to help new ventures make their business more viable through training, mentoring and networking. In this program, two of the ventures from each cohort are selected to receive funding at the end of the program.

Without even having gender in mind, Village Capital’s leaders had a discussion about the mechanism they were using to make these investment decisions. In most entrepreneurial settings — Silicon Valley being the prime model—you pitch your venture to a panel of investors. But research shows that pitching is actually a highly-gendered, ‘masculinized’ process. At Village Capital, they wanted a new model for their due-diligence process — so they decided to focus instead on peer mentoring and peer evaluation. They thought, ‘Wouldn’t it make more sense to have the actual participants — the entrepreneurs themselves — vote on which of their peers should receive funding?’

They decided to experiment with this approach, and something amazing happened: While only about 15 per cent of the entrepreneurs in the program were women, these entrepreneurs made up 30 to 40 per cent of those who were voted by their peers to receive funding. Basically, Village Capital took proactive steps to innovate and change its system, and as an unintended outcome, female entrepreneurs are benefitting.

INNOVATIVE EVALUATIONS.

In 1970, women made up only five per cent of symphony musicians. Today, that number is closer to 30 per cent—and that is because in the 1980s, orchestras began doing ‘blind auditions’. Candidates are now situated on a stage behind a screen to play for a jury that can’t see them. In some orchestras, blind auditions are used just for the preliminary selection, while others use it throughout the process, until a hiring decision is made. Even when the screen is only used in the preliminary round, it has a powerful impact: Researchers have determined that this step alone makes it 50 per cent more likely that a woman will advance to the finals.

INNOVATIVE CRITERIA.

France is in the process of moving to a 40 per cent quota for women on corporate boards; and everyone is up in arms: They don’t know how they are going to find these women, because they claim that there is no pipeline in place. One executive at a search firm even said, ‘We might have to look outside of France.’ Well, why not? This is a global economy; maybe French companies should want to have some board members from outside of France. Maybe lots of companies’ criteria for ‘what makes for a good board member’ are outdated, and if they changed the criteria, they might see all sorts of benefits. Indeed, research suggests that boards that proactively seek gender diversity become more effective because the gender diversity brings functional and intellectual diversity along with it.

In closing

Many of us believe that we can make evaluations based on quality alone. But as indicated herein, the research suggests otherwise. The next time you are making a decision about hiring someone, giving an employee a raise or investing in a new business, perhaps you can take some proactive steps to keep your implicit
biases at bay and carry out your evaluation using only the criteria that actually matter.

This is not just about checking our own individual biases. Once we recognize that these biases are built into our systems for hiring, evaluating and investing, we need to think about ways to change the systems themselves. If we can collectively recognize that our supposedly-neutral systems are actually gendered in many ways, together, we can make progress on gender equality.

And we won’t even need a business case to do it. We’ll just be able to say: Because it’s 2017.


Sarah Kaplan is Director of the Institute for Gender + the Economy, University of Toronto Distinguished Professor of Gender and the Economy, and Professor of Strategic Management at the Rotman School of Management. This article was adapted from her TED talk, which can be viewed online.

Rotman faculty research is ranked #3 globally by the Financial Times.


This article originally appeared in The Inequality Issue (Fall 2017) of Rotman Management. The magazine offers the latest thinking on leadership and innovation and is published three times a year. 

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