HR Challenges
The Business Case for Diversity: Why It Pays to Have Women at the Top
March 09, 2020

Women have long faced barriers to their success, and this is commonly reflected in the proportion of women in leadership roles. Although women make up nearly half the Canadian labour force, they’re still underrepresented in management and senior leadership positions.

In 2019, Statistics Canada reported less than one fifth of all leadership roles in Canada were held by women, and out of the 532 C-level executives among Canada’s 100 largest publicly traded corporations, only 10% are women.

Compared to men, women face numerous biases, social penalties, and stereotypes that prevent them from getting promoted.

Women also face difficulty breaking through the glass ceiling, but even more are held back by a “broken rung” at the bottom of the corporate ladder, and are never really able to get a foot on the very first step, remaining stuck in entry- or low-level positions. Because of this, fewer women are promoted to early management jobs, decreasing their representation at subsequent leadership levels.

Women often get promoted based on past accomplishments, but men are typically promoted for their future potential.

This makes it even tougher to narrow the gender gap in leadership. For some organizations, gender diversity just isn’t that high on their list of priorities; however, it’s expected by 2025 that Millennials will make up 75% of the workforce, and as demographics shift, so do the values of younger generations. Current trends show that Millennials and Gen Z expect the organizations they support and work for to be progressive, forward-thinking, and socially responsible. While organizations may choose to reflect the values of their employees as a reason take action on gender equality, this is far from the only reason.

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There are plentiful business benefits to improving diversity at the leadership level. Companies with strong female leadership representation perform better. A study by McKinsey and Company with the Women’s Forum for the Economy and Society found that companies in the top 25% for gender diversity were 21% more likely to outperform on profitability, and more likely to have superior value creation. Additional research found that Fortune 500 companies with at least three female directors had higher profit margins, ROI, and ROE.

There is a significant correlation between women in leadership and profitability, and because women generally have a major influence on purchasing decisions, they can also improve growth by helping organizations stay ahead of social and consumer trends. In addition, diversity is an asset for companies’ public corporate image and can improve the appeal to a broader range of shareholders, investors, consumer markets, and untapped talent pools.

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What can organizations do to
support diversity?

Organizations must commit to make diversity a priority, hold leaders accountable, address biases, and set concrete diversity targets in order to achieve long-term success. Women can contribute to that success if given the opportunity, but the key to reaching parity is removing the barriers that women face early in their careers. McKinsey and Company’s Women in the Workplace report, a comprehensive study, provides data-driven recommendations for closing gender disparities in employment and fixing the “broken rung” to help companies achieve their workplace diversity goals.

 

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