Business Benefits from Authentic Women

Thirty years ago, Iceland's Vigdis Finnbogadottir became one of the world's first elected female heads of state. She was a popular leader, evidenced by the fact that she was reelected three times before retiring in 1996. Indeed, her victory could have signified a turning point for women in all professions—a confirmation that their leadership abilities were as well regarded and effective as those of male counterparts.

Alas, three decades later things haven't quite turned out that way. While there has been a slight upward trend in the number of female political leaders, the overall figures are still quite low. In 2010, women held only 90 of the 535 seats in the U.S. Congress, or 17 percent of the total—73 of them in the House of Representatives and 17 in the Senate. Currently, among the 192 member countries in the U.N., eight have female presidents, eight have female prime ministers, and three have reigning queens—less than 10 percent overall.

Progress in business has been more positive. As of 2009, women held 49 percent of all jobs in the U.S. and half of managerial positions. As far back as 2006, a U.S. Labor Dept. report noted that women outnumbered men in occupations such as financial management, accounting and auditing, budget analysis, human resources management, educational administration, medical and health services management, real estate and property management, and social/community services management.

But while women have advanced considerably in middle management, the statistics are still quite depressing at the top management level. In 2010, only 2.8 percent of Fortune 500 chief executives are female. In the FTSE 500 the statistics are even worse: Only 1.8 percent of such companies are led by women.

Explicit Quotas That Help

There are some bright spots. In Norway, for example, about 44.2 percent of board members are women. This has not come about by chance; in 2008 the country passed a law requiring publicly listed companies to have boards composed at least 40 percent of women. Naturally enough, the world is watching closely to see how this works out, and at the moment, the results look positive. Both Spain and France are now considering similar such legislation or formal quotas, while Sweden hopes to reach its 40 percent target by 2015.

Not just countries are introducing targets: Many businesses are also setting themselves challenging goals for the number of women in senior management. For example, Deutsche Telecom (DT) earlier this year announced that it aims to fill 30 percent of its mid-to-top-level management positions with women within the next four years.

Companies aren't setting such targets out of a generalized notion of equality or fairness but because the business case for doing so is strong. A significant body of academic research suggests the economic value of having gender-diverse management teams. For instance, companies with more than three women in senior management positions tend to have better returns on equity and assets. Those companies also typically score higher on measures of organizational effectiveness. Equally, female board members tend to be particularly well-prepared for meetings, which raises the benchmark for others. This leads to better discussions—and better decisions.

When Tokens Cease to Be Tokens

Notwithstanding the clear business case for hiring and promoting more women, what is life like for women already in these roles? When we have less than 15 percent of a minority group in a social category, we tend to speak of them as tokens. People in that position are typically under huge pressure due to their visibility and because they feel the need to represent their entire category.

At 25 percent participation—currently the target in many companies—women are still in a minority but are no longer tokens. The tipping point is at 35 percent: Once this level is reached, visibility becomes less of an issue, and women's identity as women becomes less salient. Past this point, when a woman speaks she is heard as an individual, with her own separate background, values, and personality—not simply as "the woman." Her opinions and views are not reduced to her gender.

The problem at the moment is that so few women are in senior management positions that they continue to be perceived as outsiders. This creates a kind of legitimacy gap, in that women do not fit the (male) stereotype of what it is to be a leader. That, in turn, links to another problem. Male leaders tend to be more given to "agentic" behavior, meaning that they are proactive, assertive, dominant, and in control of situations. Female leaders, by contrast, show what we call "communal values," such as friendliness, support, warmth, and a caring attitude. When we compare these two sets of values, it's clear that the agentic approach is more associated with leadership.

Acting Like Men Can Seem Fake

Many women come to the conclusion that, as a result of these stereotypes, the only way for them to be perceived as legitimate leaders is to emulate men. The real answer, however, is not so straightforward. If women simply act like men, they violate the gender stereotype, which creates a perception that they are being phony. This can cause them to be penalized for being inauthentic leaders.

Women should instead blend both sets of characteristics. Indra Nooyi, the chairman and chief executive of PepsiCo (PEP), does this very successfully; she can make tough decisions and is very assertive in negotiations, but her direct reports also describe her as extremely warm and caring.

What then of the future? Despite the disappointing statistics quoted at the beginning, I think there are reasons to be positive. I strongly believe that the next 5 to 10 years will see a dramatic change for the better. Women managers can contribute to this by understanding better the expectations related to organizational leadership and developing their skills accordingly. Men can help and benefit by understanding the specific problems that women business leaders face.

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