Five Ways Gender Equity Improves Company Financials

What is the tangible value of improving gender equity in the workplace? I genuinely believe that the majority of us want to contribute positively, and improving the experiences in the workplace for underrepresented individuals is inherently good. Most of us want to believe we are actively contributing to fostering a welcoming and inclusive environment to those around us. But beyond being the right thing to do, there are many other benefits to improving gender equity in the workplace.

In this article, we’ll share five financial benefits to better understand how gender equity is an investment with indisputable returns. Thoughtful and intentional programs to increase equity, diversity, and inclusion have a proven ability to improve companies’ financial performance, making them more profitable and resilient.

1. Fortune 500 companies in the top quartile of gender diversity had a 16% higher return on sales and a 26% increase in return on capital than the bottom 75% (WWEST, 2015). Diverse perspectives enable us to make more effective and pragmatic decisions because our biases contradict each other, rather than compliment each other. In 2015, Westcoast Women in Engineering Science and Technology (WWEST) released a book titled Gender Diversity in STEM, and outlined that Fortune 500 companies with the highest levels of gender diversity outperformed those in the bottom tiers. Setting ambitious and realistic gender equity targets paired with carefully selected policies and programs to achieve them can be a comparatively low upfront cost relative to the long-term potential gains attributed to diverse and equitable workforces.

2. Company profits and share price performance can be almost 50% higher when women are well represented at the top (McKinsey, 2020). McKinsey’s 2020 report titled “Diversity wins: How inclusion matters” showed that companies with the highest gender diversity in leadership were statistically proven to financially outperform companies with limited gender diversity. Many companies are making meaningful strides in improving gender equity at junior levels, but the gap continues to be much larger at senior levels. To achieve the full financial benefits of diversity, women need to also be well represented in leadership positions. For this reason, we advise our clients to map out gender representation at all levels to ensure they can focus their efforts on the high priority areas. Often looking at global gender representation alone can be misleading and create the risk of companies not achieving the full financial gains of diversity in leadership.

3. Companies with just 3 female board members have an 84% higher return on sales and a 60% higher return on capital investment than companies with less (Catalyst). According to the 2019 Canadian Census, women’s representation on boards of directors has increased an average of 2.5% every year since 2016. This is important progress but is still far from achieving equitable gender representation. The same census reported that women only hold 19.2% of all director positions in Canadian companies. Looking for opportunities to disrupt bias in the selection of board members can help increase access to diverse and underrepresented groups. Tip: Is there gender equity within private company shareholders? If not, look for opportunities to increase representation within this group by introducing standardization in internal promotion structures.

4. Only 30% of organizations that don’t include men in their gender equity initiatives show progress in improving gender equity (Harvard Business Review, 2020). I often hear meritocracy cited as a reason for not investing in equitable practices. We all want to hire the best people, shouldn’t it be simple? Unfortunately, we are all products of our own biases and being unaware of those biases can actually inhibit our ability to hire the best people. As reported in the book Invisible Women by Caroline Criado-Perez, studies show that men who believe they are objective and unbiased are more likely to hire a male applicant than an identically described female applicant. The studies suggest that the belief in meritocracy alone prevents hiring managers from hiring the best candidate, and therefore meritocratic hiring. If all employees aren’t engaged in achieving gender equity, it can be very difficult to make meaningful change.

5. 96% of organizations that incorporate men in their gender equity initiatives see progress in their policy implementation (Harvard Business Review, 2020). As reported in The Harvard Business Review’s The Missing Link in Gender Equality Efforts, representation matters in gender equity initiatives themselves. Inclusive policies and practices need to be engrained into global company culture and governance. If only individuals who identify with the underrepresented group are participating in progress, there is an increased risk of burnout within this group. Additionally, it can be difficult to appreciate the challenges faced by an oppressed or underrepresented group if you don’t have that lived experience, and it is impossible if you don’t hear these stories. I continue to learn everyday as I hear new perspectives from individuals with different identities and lived experiences that help me fill in my own gaps and biases. Engagement of all genders in improving gender equity is critical to success and the only way companies can achieve the true financial value of gender diversity and inclusion.

If you would like to learn how we offer strategic advice on retention, policy, and governance based on industry research and data., please email us at [email protected]. A strong EDI strategy isn't a one-size-fits-all approach. That's why we develop customized strategies to address your organization’s specific challenges and propel you forward in your EDI journey.