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Why we need more WOMEN leaders in business

  Nowadays, simply earning an MBA degree is not enough to get your dream job. Since the corporate world is very competitive, demanding and dynamic, there are other skills that you should cultivate.  

In 2017, MSCI Incorporation, a USA based provider of financial markets analysis tools, analyzed American companies over 2011-2016 period and found that the companiesthat began this period with at least three (3) women on the Board, experienced over 10% gains in Return on Equity (RoE) and Earnings Per Share (EPS) of 37%. On the other hand, companies that began the period with no women Board members suffered 1% loss in RoE and 8% in EPS!

A straight-forward causal link to such economic performance is hard to establish. However, such superior performance may derive from better decision-making by a more diverse group of Board members. At the same time, the outperformance may also be tied to greater gender-diversity among senior leadership and also, the rest of the workforce, which has been correlated with reduced turnover and higher employee engagement.

If there is an economic merit to encourage healthy participation of women in workforce – across the entire spectrum of roles, why then, such an extreme reluctance to do what is obvious?

In a study it was found that in seven years to 2012, over 19.6 million women either quit or lost their jobs1. This decline is across all the possibly imagined scenarios – be it rural or urban area, formal or informal sector, across any level of literacy level, women are losing out of the workforce. 

A senior World Bank economist, Frederico Gil Sander, commented, “India’s female labour force participation rate is uniquely low for all levels of education. 65% of Indian women with college degrees are not working. This number stands at 41% for Bangladesh and Indonesia, and 25% for Brazil.”

Interestingly, women participation in education has gained traction over the past couple of decades and presently, women make up 42% of new graduates. However, they are not able to break into the employment scene. Women, new graduates make only about 24% of entry-level professionals; of these, about 19% reach senior-level management roles. Understandably, they hold only 7.7% of board seats and just 2.7% of board chairs.

The Securities and Exchange Board of India (SEBI), India’s securities market regulator, identified this issue and mandated that all listed companies in India must have at least one woman director on the board – a mandate that has not yet been fulfilled despite five years of the said directive.

As per the Ministry of Corporate Affairs (MCA 21) Registry, in FY 2016-17 25% of the directors on the board of companies were women directors. As on January 26, 2018, out of 1,723 NSE listed companies, 1,667 companies had just one woman Director on Board. Out of this, 425 companies had women from the promoter group or family. 285 companies had more than one woman on board, while 56 companies did not even have a single woman director!

It is evident that the entire exercise was merely a formality by most of the companies, and therefore, the intended benefits of the SEBI’s primary objective (to increase gender diversity at the top decision making level in publically traded companies in India), will be impossible to meet, at least any time in the near future.

Obviously, the benefits of having women in decision making roles in companies go much beyond simply increased diversity as explained by the MSCI Inc. study. It has also been estimated that if women are allowed to have active participation at work in India, the GDP could grow leaps and bounds.

According to International Monetary Fund (IMF) Chief Christine Lagarde, “If the number of female workers were to increase to the same level as the number of men, GDP in India will grow by 27%.”

So, we have two very important facts:

There is extreme scarcity of women in decision making business roles, and

Having women leaders in decision making roles may have economic value

Why, then, if there is economic benefit of having women leaders, is there a scarcity of women leaders in the corporate world? While the scarcity of women leaders plagues companies all over the world, the focus of this article is going to be India and in this process I will examine – through data and analysis – various aspects that could lead to severe scarcity of women leaders at leadership levels.

More women are pursuing higher education, but not the more ‘competitive’ education

Let us start our discussion from the very beginning – the education of girls, especially higher education.

In 2016-17, women comprised 48% of all the graduate level students in India. However, a significant portion of the female students (40%) enrol in Faculty of Arts, a relatively less competitive education stream, when compared to the likes of Faculty of Engineering & Technology (10%), Faculty of Science (17%) or even Faculty of Commerce (16%). While male representation in the Faculty of Science (17%) or even Faculty of Commerce (17%) is the same as that of women, they clearly beat women in the Faculty of Engineering & Technology enrolment (22%). As a result, a typical Engineering class has only 29% women students.

However, the situation is more alarming at the ‘elite’ engineering colleges in India. In recent years, the number of girls admitted to IITs has been around 9%2 (a steady share since 2014) and at NITs only about 14%3! To have more women leaders, India needs more women students in elite institutions. For 2017, only 20.8% of students who qualified were women, indicate results for the Joint Entrance Examination (JEE) – Advanced, the test designed specifically for the IITs and recognised internationally as one of the toughest undergraduate admission tests. Moreover, 93.2% of the top 1,000 positions were taken by men.

Popular entrance tests (such as CAT, XAT, etc) that are accepted for admissions in various MBA institutions in India are extremely competitive, and test the candidates on analytical, quantitative and time management skills. It has been found that aspirants with an Engineering & Technology background fare far better than those from any other educational background. For this reason, the Common Admission Test (CAT) is particularly popular among students with Engineering & Technology background.

The Common AdmissionTest (CAT)

Earlier, I talked about the CAT, one of the most popular entrance tests to be accepted in various MBA Institutions in India. A significant number of MBA aspirants (currently studying in the final year of their undergraduate courses or recent graduates) write the CAT. So, my next step is to have a look into the CAT.

The last 3 editions of the test has seen an increased representation of women candidates at the overall registration level (33.7% in CAT 2017, up from 32.7% in CAT 2016 and 31.5% in CAT 2015).

However, as always, the topper list is dominated by Engineering students, clearly not a favourable undergraduate stream of women. 

So, what is the state of women representation in a top MBA class?
Obviously, the two previous arguments indicate that since CAT favours those with an Engineering & Technology background, and since more men pursue Engineering, their presence in an MBA class should also remain strong. A typical MBA class in India has more than 70% male students and about 80% engineering undergraduates! Data from Table 1 verifies this argument.


Table 1: Diversity at the top 30 MBA programs in India4

Diversity

Share of the Class

Non Engineers

20%

Women

28%

One can expect only the women graduates from the top-30 B-schools to finally assume leadership roles in companies. But, if the entry-level representation of women is so low, we can easily expect what happens next.

Career of a woman candidate

Despite the growing share of graduating women (42%), over 50% of them drop out between entry-level and mid-levels. This number (21%) is very low as compared to 29% for across Asia. Women hold only 7.7%Board seats and just 2.7% of Board Chairs in India. They lose representation rapidly as they move up the ladder5.

Table 2: Representation by Gender across levels6

Level

Entry to Manager

Manager
to Director

Senior Management

CXOs

Women Employees

24%

21%

19%

14%

Male Employees

76%

79%

81%

86%

Obviously, hiring, growth and retention of the women employees are a big challenge that companies are facing today. The case in point is hiring: When 42% of all the new graduates are women, why are only 24% of entry-level jobs held by them? Are women being pressurised to opt out of the workforce or are they simply not being hired? These are some of the necessary questions that companies need to ask, and try to find solutions around them.

India’s IT/ITeS/BPO industry is one of most woman friendly industries in India, where they make over 34% of the workforce. An analysis indicated that over 51% of entry level recruits were women; over 25% of women were in managerial positions, but <1% are in the C-Suite7!

So, despite starting at a very healthy rate, women representation at the top level simply vanishes into thin air as women start progressing through their careers and life. It has been found that 48% of Indian women drop out of white-collar jobs before reaching mid-career (compared to the Asia average of 21%)8.  Several factors contribute to this behaviour:

Social Traditions and Norms

There is no denying that career opportunities for women in India are rapidly expanding, but family expectations and social mores remain rooted in tradition. So many parents still consider the marriage of their girl children as the single most important to-do thing in their life, and the sooner that happens, the better it is. Statistics don’t disappoint either.

At an all-India (urban) level, in the 20-25 years age group, more than 62% women are currently married. In the same age group, the urban women would have had at least one child9. It is important to note that in India, most students pursue MBA in the 20-25 years age group. Once married, it is difficult for women to find balance between the demands of marriage, a rigorous curriculum of MBA, and other social & traditional expectations. 

Career and work-life balance

By the time women graduate from their postgraduate programs, and start working in companies, they start to fall in the 26-29 years age group, in which more than 86% urban women are currently married – the data also underscores the social importance for women to get married before they turn 30! Also, the woman would definitely have had at least one child by this time.

As mentioned earlier too, it requires a Herculean effort to balance so many conflicting demands – a growing career, marriage, child-care, elderly-care, etc, in the absence of a proper support system – both at home and the workplace.

A research found that more than 80% Indians agree with the statement, “Changing diapers, giving kids a bath and feeding kids are the mother’s responsibility10.”  So, it is clear that despite a fast changing social landscape, there still are deep rooted notions and beliefs that refuse to die.

Slower career progression, and Salary Gap

That there exists a salary gap between the two genders is not news, but the extent of that gap might shock many people. The salary gap at the workplace varies from 20% - 40% (depending on the survey source that you choose) in favour of men.

According to Shashi Irde, Executive Director of Catalyst, India, a non-profit organisation, even if women start out as equals, a gender gap emerges over time and they lag financially behind their male counterparts to a tune of `3.8 lakh, by the time they are 12 years into their careers. So, despite all the claims by companies, there is gender discrimination at work places, at least on the salary front.

Also, their male counterparts seem to have faster promotions (something that could explain the salary difference). Women, on the other hand, face the usual gender biases: They are perceived as unambitious, incompetent, or even as misplaced homemakers. Married women with children are perceived as less flexible, less available, less committed and, hence, not leadership material. Married women with no children are perceived as abnormal. And if they exert themselves at the workplace, they are perceived as bossy, prude and arrogant.

Unfavourable workplace – policy and support

Combine all the above with the fact that women executives at work don’t always receive adequate support or understanding from their employers. Many organizations do have flexible work arrangements, and yet men and women don’t utilise that facility, for the fear of being penalised, as the leaders place more value on face-to-face interaction.
While the trend of providing on-site child-care is gathering pace in a few sectors, the concept is still alien to several others. Child-care (75%) and elder-care (80%) are the two most reported reasons why women leave their jobs11 in India. Once women leave the organisation, it is very hard for them to get back into the workforce. Returnees to work feel stigmatised for having taken a long leave; they are often put on a slow-track career path that does not do justice to their education and career.

Why should we care?

If women participated in the economy at par with men, India could increase her GDP by up to 60%, by 202512. That is a huge opportunity to be ignored by anyone concerned with the economic well-being of India. Presently, women are estimated to contribute a mere17% to the country’s GDP, which is well below the global average of 37%. That, combined with the fact that women participation levels have been dropping in the last few years, should alarm us all. The National Sample Survey found that while in 1999-2000, over 26% of all women worked, by 2011-12 this proportion dropped to 22%.

Another issue is that of women’s well-being, which is closely linked to their earnings. Men have long enjoyed a bigger say in family and even in social matters, simply because they have traditionally been the sole breadwinners. Ergo, a woman who brings money into her household is likely to have greater status in that family. An improvement in employment prospects for women could lead to greater investment in their education and health.

The last and often ignored (mostly because of social norms and traditional expectations) issue is that women really want “paid jobs”. The 2011 National Sample Survey found that over a third of women in urban Indiaand half in rural areas who engage mainly in housework want a paying job.

What is holding them back?

You may ask – if women are getting educated, they want paid jobs, then why are they holding themselves back? Why are they quitting? The answers are not straightforward; they are complex and definitely, uncomfortable.

One way to explain this disparity is “women’s agency” or their ability to make effective choices and to transform those choices into desired outcomes.

In our society, both men and women have different levels of endowments and freedoms. An Indian man is expected to have a paid job and he needs no one’s permission when he seeks it. Women, on the other hand, almost without exception, must have the permission and blessings of their fathers, brothers, husbands and in extreme cases, the local societal order to be able to get educated, learn skills needed to make them employable and work.

While, patriarchy, cultural and social attitudes exist all over India, there is an added burden of ‘shame’ should a man’s wife work. This shame changes its shape when a woman has a child and still continues to work. She is often made aware of the fact that she is ‘neglecting her child rearing duties’. That and the responsibility of other household work are serious constraints. Women usually don’t accept jobs, quit or move to more ‘amenable or safe’ (and therefore, lower paying) jobs because of ‘family reasons’.

Even when women are ‘allowed’ to work, there are several safety related conditions that must be met. The workplace should be closer to home, the work must have fixed working hours that will allow her to be back in time to take care of household work, the commute to work must be safe and inexpensive, etc.

So, what can be done?

It is important to commit to the cause and walk the talk. The good news is that there are certain steps in the right direction.

Finally taking note of the atrocious gender diversity in their classrooms, the Indian Institutes of Technology have decided to admit more women from the 2018 academic session. The Joint Admission Board (JAB) of the IITs approved a quota of supernumerary (over and above the actual intake) seats for women in a phased manner, reaching up to 20% by 2026. Following suit, NITs have also decided to introduce similar quota to gradually increase women representation to 20% by 2020. The Indian Institutes of Management (IIMs) already are doing a few right things by tweaking the CAT (making it less maths oriented) pattern, and awarding extra marks for gender and academic diversity, which have already started showing a slight improvement in gender and academic diversity in their MBA classrooms.

One more important piece of the puzzle that organisations need to put in place is the absence of strong role models for women professionals to excel in the workplace. Young women executives rarely hear about the contributions of women leaders, and receive any mentoring from those who succeeded. It affects and limits their career aspirations. Hearing senior leaders such as PepsiCo Chairman and CEO Indra Nooyi say that women “can’t have it all” only serves to remind women executives that no matter how high into the career echelons a woman climbs, her identity as a wife, mother and homemaker will always trump her individual and professional identity.

While there is less overt discrimination and biases against women at the workplace, it is increasingly becoming hard to deal with because it is not voiced. The Human Resource (HR) function must take the blame for this too – they still associate certain key roles with men; leadership competencies are often thought to be ‘masculine traits’; job descriptions and growth paths are usually designed for men. These factors combine to drain the motivation of women to aspire to leadership roles. So the leadership commitment has to go beyond setting visible targets and policy changes to having a clear purpose to build a culture that is inclusive, irrespective of gender.

A research conducted by Genpact reveals that there may be close to 1.5 million qualified Indian women who have dropped out of corporate jobs, because they could not find suitable employment after starting a family. However, there are global companies such as SAP and Target that have launched initiatives to provide women professionals opportunities to re-enter the workforce after a career break.

At a policy level, the SEBI mandate has shown (albeit on paper) the result of increased gender diversity at the top. As more and more women leaders emerge, they are more likely to get Board level positions in top organisations. The next logical step should be to stipulate a minimum required representation of women leaders at Board level.

Tying it all together

The need of hour is to start investing in women. The kind of growth that India aspires to achieve is not possible unless we reduce the gender inequality at work. While achieving substantial changes in the societal attitudes take time, it is rather easily achieved at workplaces.

Companies that wish to remain competitive need to utilise India’s highly educated women. As long as they remain underrepresented in leadership positions, gender inequality will continue. When leadership ranks become more diverse, more pathways will open for India’s women, and this in turn will promote India’s economic growth.

That is an opportunity for companies to start initiatives to attract mid-career level women who have taken a sabbatical and are looking to get back into the mainstream. This way, they not only get qualified talent, but also are able to achieve the gender diversity needed for success. 


The author is an alumnus of IIT Roorkee and Kelley School of Business, and has had extensive industry experience with organisations such as Wells Fargo, Cummins India Ltd and BHEL.