Gender Gap: Breaking the Top Management Boundary

This is the first of a series of posts on why we need more women in top management positions and how women engineers are ideally positioned to make it happen.
Gender Gap: Breaking the Top Management Boundary

By Dana Goldblatt, DBA

The lack of gender parity in the U.S. and the negative impact it has on women’s lives and society as a whole are highlighted by the Women’s March and both the Me Too and Time’s Up movements. Gaining political power to make and enforce laws and public policies that support women is the solution suggested by the record number of women running for public office this year.1 While it is critical to achieving gender parity, I would argue that equally important is for women to acquire business power. To effect transformative, sustainable and rapid change in the U.S., more women must lead organizations at all levels (executive, CEO and board positions) and in all sectors (private, public and social).

The Gender Gap in Top Management Positions Is Bad For Women and Families

The U.S. has a mixed market economy that leans towards a free market economy.2 In effect, the private sector makes critical public policy decisions that the government minimally regulates including pay, healthcare access and quality, retirement funding, maternity and family leave benefits and work flexibility. The lack of women and family friendly organizational cultures, policies and practices is cited in the literature as a main factor in women opting out of the workforce and not aspiring to top positions which hurts them financially, especially in retirement, among other negative effects.3 This is in contrast to more socialistic countries like Sweden that provide universal healthcare, paid paternity and family leave and free daycare and schooling (preschool through college) and that impose financial penalties on companies with gender pay gaps.4 But even when family-friendly policies are mandated by the U.S. government, they have been found to hurt women’s careers because companies are hesitant to invest in employees they believe are more likely to leave.5 The power that business leaders wield in the U.S. is why women must also focus on closing the gender gap in management that begins at the first level and gets progressively worse the higher the position (see Graph 1).6 Women compose almost half (45%) of the workforce, yet they are less than one-third (27%) of executives and one-fourth (21%) of board directors at S&P 500 companies. The greatest disparity is at the very top. Only 5% of companies are led by women. Studies suggest the problem is pervasive but greatest at organizations headquartered in the South and Northeast and in the technology industry as well as traditional industries like manufacturing, transportation, construction and real estate, and mining.7

Graph 1: Gender Gap in U.S. Business Power (S&P 500 Companies)6

Gender Gap: Breaking the Top Management Boundary Breaking the Top Management boundary

Achieving Gender Parity in Top Management Is a Business and Economic Imperative

Unlike elected office, women cannot run for top management positions. Executives, CEOs and board directors are identified, developed and selected by executive search consultants, senior-level executives, CEOs and boards of directors. Moreover, those influencers and decision makers are predominately male.8 Aside from moral and ethical reasons, why should they and society care about the gender gap in top management and more importantly, take action to rectify it? Organizations with more women in top management perform better than those with fewer women. They are more profitable and have higher sales growth, market value and returns on both equity and assets.9 That is consistent with studies that have found diverse groups to be better at problem solving than homogeneous ones.10 There are also compelling non-financial benefits that have broader implications for the U.S. economy.

Women perceive risk differently than men and organizations led by women are less risky.11 Those findings have prompted many in the business world to ask, could Lehman Brothers have been saved if it had been Lehman Sisters or at least Lehman Brothers and Sisters?12 And more consequentially, could the Great Recession have been prevented and could future downturns in the economy be avoided if there was gender parity at the top of financial institutions? I am going to take an educated guess and say, “yes!”

Organizations with more women at the top are also better at attracting, developing and retaining women and including them in senior leadership.13 Expanding their talent pool to include more women, who as a group have become better educated than men,14 provides organizations with a competitive advantage.15 Additionally, it benefits them in the war for talent that is predicted to intensify as the U.S. workforce shrinks due to changing demographics. Increasing the average participation rate of women in the workforce would also greatly help the U.S. economy. According to a study by McKinsey & Company, GDP in the U.S. would grow by 3-4% if the average rate of women aged 24-54 in the workforce (76%) reached the level of the top 10 states (84%) which is still below that of Sweden (87%).16 The average participation rate for all women in the U.S. peaked at 60% in 1999 and is projected to fall to 56% (compared to 66% for men) by 2024.14  More ominously, the study concluded that in order for the U.S. to maintain its global economic leadership and GDP growth, women are needed to both expand the workforce and increase productivity. Imagine if incentivizing organizations to be more inclusive of women was the strategy utilized by the U.S. Congress to boost GDP instead of the Tax Cuts and Jobs Act which is projected to raise the national debt to more than $1.5 trillion by 2028!17

Women Can and Must Drive the Changes Needed to Achieve Gender Parity in Top Management

Asserting that diversity is a business imperative is not new. Many of you work at large organizations with a Chief Diversity and Inclusion Officer that regularly communicates that message. But, it is typically accompanied by the caveat that it will take time and it is rarely, if ever, said by the CEO, the rest of the c-suite and the board of directors or supported by metrics with goals and timeframes linked to their compensation. That suggests it is being done primarily for public relations purposes, not as a strategic priority that they intend to achieve. In my experience as a strategic management consultant, it is rare for organizations to seek and be successful at transformational change unless they have a visionary leader that makes a compelling case for change or a ‘burning platform’ that requires it. Uber is a prime example. It was only after public and regulatory backlash for gender-biased and discriminatory practices that Uber agreed to change its leadership and culture.18 While women alone cannot increase the number of women in top management, we can and must be a part of the Time’s Up movement and drive the organizational, individual and societal changes that are needed. This blog series will present findings from the literature and my own doctoral research on best and promising practices that you as an engineer, employee, leader, shareholder, customer and elected official can implement. My post next month will focus on actions to increase the number of women attaining and retaining executive-level positons.

About Dana Goldblatt

Dr. Goldblatt is a speaker at WE18, the Annual Conference of the Society of Women Engineers, October 18-20, 2018 in Minneapolis, MN. She helps organizations achieve sustainable transformational change by setting and communicating strategic objectives, aligning organization structure, culture and talent with strategy and actively measuring and managing strategic performance. Prior to leading the Strategy Execution Group, she was V.P. of Research and Advisory Services at Palladium and a Principal in its Strategy Consulting practice. Dr. Goldblatt has assisted more than 75 private, public and social sector U.S. and international organizations in a wide variety of industries and has conducted research and published articles on best and leading practices in strategy, CEO successions and women in top management. She believes that gender parity is a strategic imperative and is committed to achieving it through education, advocacy and action.

1Janet Hook, ‘Women Running for Office in 2018 Wear Gender as Badge of Honor’, Wall Street Journal, 3 April, 2018.

2Sean Ross, ‘Is the United States a Market Economy or a Mixed Economy?’, Investopedia, 2018 [accessed 4 February 2018].

3Sylvia Ann Hewlett and Carolyn Buck Luce, ‘Off-Ramps and on-Ramps: Keeping Talented Women on the Road to Success’, Harvard Business Review, 83.3 (2005), 43–6.;

Kara Stiles, ‘Here’s How The Gender Gap Applies To Retirement’, Forbes, November 2017.

4Judi Lembke, ‘Why Sweden Is the Best Country for Parents’, The Culture Trip, 2018.;

Chris Weller, ‘Sweden Is the Best Country in the World for Women — Here’s Why’, Business Insider, 2017.

5Shana Lebowitz, ‘How Family-Friendly Policies Can Hurt Women’s Careers’, Buisness Insider, 2015.

6‘Pyramid: Women in S&P 500 Companies’, Catalyst, 2018 [accessed 26 February 2018].

72013 Catalyst Census: Fortune 500 Appendix 7 – Women’s Represntation by Region, Catalyst, 2014.;

Women in Business: The Path to Leadership, Grant Thornton, 2015.

8G. F. Dreher, J.-Y. Lee, and T. A. Clerkin, ‘Mobility and Cash Compensation: The Moderating Effects of Gender, Race, and Executive Search Firms’, Journal of Management, 37.3 (2011), 651–81.

9Janet Burnes, ‘The Results Are In: Women Are Great For Business, But Still Getting Pushed Out’, Forbes, September 2017.;

Georges Desvaux and Sandrine Devillard, Women Matter 2: Female Leadership, a Competative Edge for the Future, McKinsey&Company, 2008.;

Terrance Jalbert, Mercedes Jalbert, and Kimberly Furumo, ‘The Relationship between CEO Gender, Financial Performance, and   Financial Management’, Journal of Business & Economic Research, 11.1 (2013), 25–34.;

Yap et al., The Bottom Line: Connecting Corporate Performance and Gender Diversity, Catalyst, 2004.

10Lu Hong and Scott E. Page, ‘Problem Solving by Heterogenous Agents’, Journal of Economic Theory, 97.1 (2001), 123–63.

11Walayet A. Khan and João Paulo Vieito, ‘CEO Gender and Firm Performance’, Journal of Economics and Business, 67 (2013), 55–66.

Women in Business 2017: New Perspectves on Risk and Reward, Grant Thornton, 2017.

12N.D Kristof, ‘Mistresses of the Universe’, New York Times Week in Review(New York, 7 February 2009), p. 12.

13Linda A. Bell, Women-Led Firms and the Gender Gap in Top Executive Jobs, 2005.;

2016 Spencer Stuart Board Index, Spencer Stuart, 2017.

14‘Women In The Workforce: United States’, Catalyst, 2018 [accessed 26 February 2018].

15Georges Desvaux, Sandrine Devillard-Hoellinger, and Pascal Baumgarten, Women Matter: Gender Diversity, a Corporate Performance Driver, McKinsey&Company, 2007.;

Ann Howard and Richard S. Wellins, Holding Women Back: Troubling Discoveries — and Best Practices for Helping Female Leaders Succeed, DDI, 2009.

16Joanna Barsh and Lareina Yee, Unlocking the Full Potential of Women in the U . S . Economy, McKinsey&Company, 2011.;

James Manyika et al., Can Long-Term Global Growth Be Saved?, McKinsey&Company, 2015.

17Paul Krawzak, ‘CBO Sees $804 Billion 2018 Deficit, $1 Trillion Gap By 2020’, Roll Call, 16 April 2018.

18Justin Bariso, ‘Uber’s CEO Just Posted New Cultural Values–and Taught a Valuable Lesson in Leadership’, Inc., April 2018.

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