The bottom line: Why Gender Inclusion is Good for Business Making the business case for a Gender Inclusive Organization Written by: Rena Zuabi, Gender and Social Inclusion Expert at Value for Women This brief explores the business case for supporting inclusive business models and gender- balanced staffing, and examines how to operationalize gender diversity into an organization s culture
Background Over 30% of small and growing businesses (SGBs) are owned by women, playing a key role in driving economic growth and social development. 1 However, women s potential is limited by systemic challenges such as: Limited access to finance or capacity building opportunities. In Mexico for example, only 11% of commercial banks have specific SGBfocused strategies, and within this missing middle women are even less visible. 2 In Latin America, financial institutions are more likely to serve businesses without women shareholders than they are to serve companies with one or more women owners. 3 Lack of access to credit entrenches a culture of informality, particularly for women-owned SGBs (WSGB). 4 Cultural restraints compound these challenges by enforcing social norms and traditions that marginalize women and limit them to non-public spheres of life. Childcare is the biggest restrictor of growth for WSGBs in Mexico and is key to freeing women s time to invest in their businesses. 5 Making the business case for gender inclusion across organizations and firms in diverse ecosystems is challenging, often due to a lack of gender disaggregated data that can show how gender affects performance and profits. 6 Given these challenges, it is important to understand why gender inclusion is good for business ecosystems, and how businesses can begin operationalizing gender inclusion in a practical way. Bringing gender inclusion into existing businesses is one method for cultivating a broader ecosystem that supports women s economic empowerment, and includes women entrepreneurs, employees, and producers. Although there are diverse ways to instill gender inclusivity in organizations, this brief specifically examines how inclusive gender staffing can be achieved, and why it is an effective method through which to achieve a stronger organizational culture of inclusion. What is an organizational culture of inclusion? An organizational culture of inclusion encompasses practices, processes, policies and governance that promote diversity and equality and impact the organization both internally and externally. 7 For example, it includes Human Resources policies and practices that promote gender equality at different levels of the organization, including managerial positions. Management should encourage staff to better understand inequality and its manifestations and to challenge norms, attitudes, beliefs, and behaviors that perpetuate it. 1 Jackie Vanderbrug (September 2013), The Global Rise of Female Entrepreneurs Harvard Business Review. 2 Fries, et al (September 2014), Creating Opportunities: Strengthening the Ecosystem for Women Entrepreneurs in Mexico, Value for Women, http://www.v4w.org/images/generales//resources/creatingopportunitiesreport-vfw-dec2014.pdf. 3 Ibid. 4 Aimee Hampel-Milagrosa (2011), The Role of Regulation, Tradition and Gender in Doing Business, http://www.diegdi.de/uploads/media/studies_60.pdf. 5 Fries, et al, 2014. 6 World Bank (26 February 2014), Expanding Women s Access to Financial Services. http://www.worldbank.org/en/results/2013/04/01/banking-on-women-extending-womens-access-to-financial-services 7 Developed from: http://www.unesco.org/new/en/indigenous-peoples/social-inclusion-and-social-change/ The bottom line: Why Gender Inclusion is Good for Business 2
Many banks, accelerators, and other organizations in the SGB sector are experimenting with new, more inclusive approaches, while others are also struggling to find solutions. A major challenge is that many organizations lack the tools, resources and know-how to include gendered approaches into their everyday work and overall strategy. Furthermore, issues of gender often feel abstract or intangible, particularly in understanding the position of women in the workplace, how to access women clients, and how gender dynamics can impact effectiveness and performance. Finally, organizations do not see or understand the business case for gender inclusivity. Gender inclusion: Good for Business Research shows that gender inclusion in organizations is good for business. Operationalizing gender inclusion makes a difference because internal policies and practices have positive impact on sales, and allow the business to tap into new markets. Bringing a gender inclusion focus into the culture of an organization will facilitate the break down of unconscious bias. Recent studies show the importance of internal gender inclusion strategies to business performance. 8 Female employees, managers, and executives can ultimately serve untapped female consumer markets and can build a company s brand. For example, businesses that understand how to target women consumers can lead to an increase in sales. This is key, due to the fact that women control over US$20 trillion of total consumer spending globally, and make or influence 80% of buying decisions globally. 9 By including women in staffing, businesses can also reach the 80% of women that believe investment marketers do not understand their needs and requirements to build greater brand loyalty. 10 For example, research led by Johns Hopkins University together with the Global Alliance for Clean Cookstoves revealed that women are better candidates for clean cookstove enterprises because they better understand the needs of women and can more easily approach their clients, and further, consumers who bought cookstoves from women more likely reported benefits and adoption. 11 This research found that investing in women led to greater overall sales and continued desire to pursue sales despite limited success. 12 Industry highlights To support the ability of businesses to capitalize on gender inclusion, the Criterion Institute connects its gender analytics to businesses systems of finance by exploring the purpose of investment, product design, incentives and regulatory environment, and the process of analyses and decision-making that goes into making investments. It looks at its work as enabling a cultural shift by providing a gender lens to finance. 13 In the finance industry, the Criterion Institute cites how women make up less than 1% of employees in big data firms: Inarguably, those firms are going to miss key factors that would affect design of these structures. How should that affect private or public equity valuations of those firms? Criterion Institute http://criterioninstitute.org/revaluegender/ 8 Credit Suisse (September 2014), Research Institute 9 Dalberg (October 2014), The Business Case for Women s Economic Empowerment: An Integrated Approach. http://dalberg.com/documents/business_case_for_womens_economic_empowerment.pdf 10 Dalberg, October 2014 11 Johns Hopkins University, Bloomberg School of Public Health, USA ESVAK Community Development Initiatives, Kenya and Envirofit, Ltd Kenya (2015), Understanding Impacts of Women s Engagement in the Improved Cookstove Value Chain in Kenya. 12 Ibid. 13 Criterion Institute, http://criterioninstitute.org/revaluegender/methodology/ The bottom line: Why Gender Inclusion is Good for Business 3
Beyond finance, a cultural shift towards diversity and gender inclusion is relevant across industries and sectors. Fortune 500 companies with women s representation outperform those without women representation. 14 Dalberg highlights the following: 15 Companies with more board gender diversity have higher stock market returns adjusted for sector bias. Companies with more than one woman on the board have returned a compound 3.7% a year over those that have none. Companies with higher female representation on the board level or in top management show higher return on equity, higher valuations, and higher payout ratios. In a 2013 study of 837 ventures by Emory University, the following findings were made: Equity investment for firms with women team members report a slightly lower likelihood of attracting equity investment (23.8% compared to 28.2% of the ventures with all-male founding teams). However, they are considerably more likely to have reported positive revenues in 2012 (58.4% compared to 48.5%). Ventures with women on their founding teams are also slightly more likely to have reported non-negative profits in 2012 (61.7% versus 57.5%). 16 On the financing side, venture capital firms with women partners are more than twice as likely to invest in companies with a woman on the executive team (34% of firms with a women partners compared to 13% of firms without a woman partner), and are more than three times as likely to invest in companies with women CEOs (58% of firms with women partners versus 15% of firms without women partners). 17 There is a need for greater data and analyses around the business case for gender inclusion, specifically diverse staffing and management. However, emerging research underscores the need for businesses to translate gender inclusive concepts into action by designing and piloting strategies and operations in order to build tailored approaches to gender inclusivity for businesses across industries and sectors. Ultimately, when women earn an income they reinvest 90% of this income into their families as compared to men who invest only 30-40 percent. 1 This multiplier effect has social and economic impacts for entire communities. Agora Partnerships specifically sought to encourage women entrepreneurs to hire other women and support new employees with training and stronger wages. One of their women entrepreneurs succeeded in creating 1,174 jobs in just one year. Dalberg 14 Dalberg, October 2014 15 Ibid. 16 Social Enterprise Goizueta (January 2014), The Impact of Entrepreneurship Database Program, http://goizueta.emory.edu/faculty/socialenterprise/documents/2013_end_summary_final_final.pdf. 17 Dr. Candida Brush (2014), Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capital, The Diana Project. http://www.babson.edu/academics/centers/blank-center/global-research/diana/documents/diana-project-executive-summary- 2014.pdf. The bottom line: Why Gender Inclusion is Good for Business 4
Practical steps to achieve gender inclusivity Various ecosystem actors, from corporations and financial institutions to capacity developers, are already integrating a gender dimension into their growth strategies. The following are steps that organizations can follow to develop existing gender inclusion strategies, or to begin the process of bringing gender inclusion to their work. Value for Women and the Global Alliance for Clean Cookstoves have partnered to create a toolkit to bring gender diversity into Small and Growing Businesses (SGB). VfW walks small business owners through a step- by- step process of examining how to develop and implement Gendered Human Resources and Operational policies. 1) Implement gender sensitivity training for a target area of the organization in order to address unconscious bias, and to promote buy-in for adoption of gender inclusive strategies and focus within the organization. Gender sensitivity training can be held for a team, department, or an entire organization. This training raises participants awareness of gendered issues in the work place and facilitate the ability of the organization to understand gaps in gender inclusion within the targeted area. Example Value for Women developed a training package in collaboration with the Aspen Network of Development Entrepreneurs and the Mexico Women s Working Group. The Gender Sensitivity Training promotes a gender inclusive organizational culture, focused on raising the awareness of staff, towards developing product and service offerings that cater to needs of men as well as those of women. The Gender Sensitivity training has been tailored for and delivered to commercial banks, and has included practical hands-on solution development for inclusion. This has created the space for innovation that improves business performance through gendered approaches. 2) Conduct a gender impact assessment of the organization, in order to understand existing gaps and opportunities. Every organization has different gender inclusion gaps and opportunities. A gender impact assessment of the organization provides a deeper understanding of the specific needs of the organization in order to build tailored strategies and tools to address them. Examples A gender impact assessment allows organizations, private, public or voluntary; to design efficient and relevant gender inclusive strategies that respond to their own interests as well as to those of their primary stakeholders. A gender impact assessment for financial institutions focuses on tapping into new markets, and understanding how to benefit both women clients and the financial institution 3) Develop gender inclusion targets and incentives to achieve them A more aware organization with clarity on challenges and opportunities can then develop gender inclusion targets and incentives. Targets should include an overall objective and key indicators to measure them. Incentives should take the business case for the gender inclusion objective into consideration. The bottom line: Why Gender Inclusion is Good for Business 5
Example Internal procurement quota policy can be developed for purchasing from WSGBs in the case of government or private sector, in order to capitalize on key markets where WSGBs are highly productive, and support investment for the growth and scale of these businesses. 4) Develop internal gender inclusive policies, particularly those that enhance staff performance, or open new markets Gender inclusive organizational policies should build off of the specific needs and objectives of the organization. For example, a child-care service among a significant number of employees that are mothers would facilitate the ability of women to work more hours, or work more productively. Or for example, the recruitment of women staff could facilitate a business product development capacity, or ability to reach a female customer base. Examples Impact investors: explore new models for impact investing, including specific tracks for WSGBs Banks: innovative finance models that serve women WSGBs Accelerators and incubators: segment program to understand women applicants Government: disseminate good internal practices to the SGB community, formal application process to make registration easier and more accessible, develop WSGB focused funds Global SGB Networks: build regional internal working groups on women Final Thoughts The wide range of research available regarding the business case for gender inclusion is indicative of the growing acceptance of diversity as a core ingredient to building sustainable, global, and profitable organizations. However, the steps, tools, and expertise required to achieve gender inclusion are not always well defined. It is therefore critical that different actors of the ecosystem such as value chain actors, finance service providers, business development experts, and gender experts work together to find common language and practical methods through which to bring gender inclusive policy and practice into businesses. This policy brief hones in on the specific business case for gender staffing; however, ecosystem actors can take the steps outlined above and continually experiment with how these steps can be applied across a range of industries and contexts. The bottom line: Why Gender Inclusion is Good for Business 6