Gender Equality as Smart EconomicsThe World Bank GroupInternational Finance Corporation

Case Studies

Heidrick & Struggles - Kevin L. Kelly

Promoting Women’s Economic Empowerment:
The Learning Journey of Heidrick & Struggles

Company: Heidrick & Struggles
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The Business Case: Widening the Pipeline to Meet Client Needs

For nearly 60 years, Chicago-headquartered Heidrick & Struggles has been searching, recruiting, and helping place new board members and corporate officers in multinational corporations. The job requires deep understanding of business needs and trends. It also requires best practice expertise in strategic management and leadership issues faced by all companies in the international marketplace. In the last decade, this has meant increasing attention to cultural and gender diversity when building high-performance leadership teams.

Working directly with company chairpersons, CEOs, and board nominating committees, Heidrick & Struggles has witnessed – and helped shape – this gradual evolution. As witnesses, the firm's partners have seen increasing demand for female board candidates, particularly in the last few years, as companies awake to the idea that boards should better reflect the markets and customers they serve. As an influencer, the firm has helped women by educating corporate clients on the value of bringing diverse perspectives to a board and by making an extra effort to identify qualified female candidates.

The task is not as easy. While demand for a diversity of candidates is getting stronger in many countries, the pipeline of "board-ready" women is not as well developed as it could be relative to the proportion of educated women in the workforce. About half of the workforce in OECD countries is now female, including a large percentage of middle managers. In developing countries, the number of educated and professional women is also increasing. Yet, women's presence in boardrooms everywhere has been increasing only very slowly, or even stagnating.

The Business Case: Diversity and Performance

Companies with more women in senior ranks and as directors show stronger financial results compared to those with fewer women, according to findings in the U.S. and Europe. While the studies do not point to causal relations, the results are significant:

  • 53% higher return on equity, 42% higher return on sales, and 66% higher return on invested capital (Joy, et al, 2007)
  • Outperforming their sector in terms of return on equity, operating result and stock price growth (McKinsey & Co., 2007)
  • 40% higher average return on equity (Singh and Vitticombe, 2005)
  • More than one-third higher return on equity and total return to shareholders (Catalyst, Inc. 2004)
  • Firms with the best record of promoting women found to be 18% to 69% more profitable than the median (Adler, 2001)
  • 18% higher stock price and more than double the earnings per share three years after an IPO (Welbourne, 1999)

 

In North America, women represent just over 15 percent of directors at Fortune 500 companies, although nearly 85 percent of these boards now have at least one woman. In Europe's top 300 companies, less than 10 percent of board seats are held by women. The variation across countries is huge, however, ranging from about 40 percent in Norway because of a government mandate to under two percent in Portugal. In Asia, where some firms are willing to pay Heidrick & Struggles a premium to find good female talent, the percentage of women directors ranges from a high of 16 percent in Singapore and Australia, to five percent in India, to minimal representation in Korea and Japan. In both Europe and Asia, there are still many boards with no women at all.

Heidrick & Struggles has had to delve deep into issues of corporate culture to understand and meet this challenge. Alicia Yi, managing partner at Heidrick & Struggles' Singapore office, says, "A lot of international companies are now taking gender issues quite seriously. They are setting employee targets, tracking, and looking to improve." These companies want to attract and retain the best talent possible from the widest talent pool. They are aware that women represent half of the market and are often responsible for more than half of consumer spending decisions. And when it comes to top management, they are increasingly aware that homogenous leadership teams can be less well equipped to do business in an increasingly complex business environment.

At the same time, Alicia explains, many companies are puzzled that they are not able to retain senior executive women. Women and many minority groups have not been following career paths that easily channel them toward board positions – at least not in great numbers. They are less likely to be operational line managers with profit and loss responsibility. They are also less likely to have experience with their companies' executive committees, even at the functional or regional committee level, whether in full-time roles or strategic projects. This means less visibility for women managers, with a concomitant impact on women's networking, role models, and access to key decision-makers.

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