Over the past years, much of the research and discussions about gender diversity have revolved around board diversity. There are indeed a lot of studies on how businesses perform better with gender-diverse boards. When analyzing gender composition within the lower ranks of a company, RobecoSAM came across interesting data points indicating a decline of the female talent pool when moving from junior positions to senior ones. RobecoSAM recognizes the ability of a company to retain female talent as an important driver to promoting gender diversity and an overall contributor to the sustainability performance of a company.
Transitioning Up the Ranks
RobecoSAM annually assesses around 2,900 companies worldwide, and in 2014, 830 of these companies actively participated in the RobecoSAM Corporate Sustainability Assessment (CSA). The CSA covers more than 120 questions — material sustainability metrics which include gender diversity.
While we recognize that gender diversity and availability of female talent within the workforce can vary significantly depending on region and industry, what we wanted to focus on is a company’s ability to retain female talent by looking at the transition of junior managers into senior management positions.
Figure 1 illustrates how industries fare when comparing companies’ overall of share of women in their workforce with their share of female managers at all managerial levels. The more one goes to the left in the table, the smaller the difference in the comparison. Two interesting observations can be made: 1) all industry groups have a lower share of female managers than total female workforce, and 2) industries with a smaller share of women in their workforce seem to be more inclined to advance women in management positions.
Total share of women in the workforce versus total share of female managers. Figures are based on the annual RobecoSAM Corporate Sustainability Assessment and represents averages for all assessed companies 2012-2014. The gender equality section was developed in collaboration with the EDGE Certified Foundation, a Swiss foundation focusing on fostering gender equal workplaces through a global certification system in gender equality.
The second point especially raises some interesting questions: What measures can be taken by companies that are good at attracting women to also make sure that these women are represented at the management level? Is there a natural selection bias that comes into play for the companies on the left side, in other words, are the women that go into traditionally “male” industries like materials or automobiles more likely to also aim for management positions independent of companies’ policies and efforts in the area?
This led us to take a step further, by comparing the retention in junior management positions with that in senior management positions. The results were indeed interesting: across all industry groups we are seeing a negative trend, i.e. companies across all industries are consistently losing female talent between junior and senior management levels. The average retention rates are shown in Figure 2 below.
Average retention share of female managers per industry group between junior and senior management positions. Figures are based on the annual RobecoSAM Corporate Sustainability Assessment and represents averages for all assessed companies 2012-2014. The gender equality section was developed in collaboration with the EDGE Certified Foundation, a Swiss foundation focusing on fostering gender equal workplaces through a global certification system in gender equality.
One can generally deduce from these figures that industries that have higher shares of women both in junior management positions and in the overall workforce seem to be lagging in terms of retaining their female talent. Industries that rankin the lower end, by retaining only around half of their female managers to senior management positions, include Banks, Household & Personal Products and Retailers, whereas the industries that fare better include some unexpected ones such as Utilities, Automobiles & Components, and Energy.
So why does this matter to investors? A large share of companies assessed by RobecoSAM indicate that human capital development & attraction and retention of talented employees are at the top of the list of issues they deem material for the long-term success of their businesses — a view also shared by many investment analysts around the world. The loss of junior management talent is an important investment loss, not only from a resource perspective but also from a cost perspective. Companies that are able to develop and implement successful retention programs for women will be in a better position in the long run — and will have a much more important impact on gender diversity than board composition alone. Moving beyond board composition will get companies around the world to start thinking about diversity in their everyday business operations.
Ida Ljungkvist is Head of Sustainability Application and Operations at RobecoSAM in Zurich, where she develops metrics to assess the current corporate sustainability reporting landscape, and examines the recent progress companies have made in providing sustainability information in a language that resonates with investors. Christine Gugolz Kiefer is Head of Client Strategy Management within the Asset Management arm at RobecoSAM.