Cover feature: Recessions lessons

As reports that the global economy may be on the road to recovery gather pace. Lamia Walker analyses what lessons in gender diversity can be learnt from this financial crisis.

In August 2009, the UK’s Office of National Statistics (ONS) reported that gross domestic product (GDP) had been revised to a fall of 0.7 per cent, a marked improvement on the 2.4 per cent contraction in the previous quarter. This, coupled with reports that US consumer spending rose by 0.2 per cent in July 2009 and that the Australian economy grew more than expected in the second quarter of 2009 would seem to indicate that the worst of the global financial crisis may finally be behind us.
But, what, if anything, have we learned from the unsettled economic climate of the past 24 months? Certainly, this has been a financial crisis like no other. We have seen just how intrinsically our financial institutions are interlinked globally, and how vulnerable organisations can be. We also know that the impact is being felt at a micro as well as the macro level. Individuals in their households across the world have been affected, with reducing demands for their labour, shrinking access to credit and diminishing financial resources generally. To ensure survival, many companies have refocused their strategy on core products and services, cutting deep into headcount. Some have been more mindful than others of the gender balance in their teams as they have done so, prompting heated debate over the long-term impact of the global financial crisis on gender diversity in the business context. This article considers the gender diversity lessons that can be drawn from the events of the past 24 months.

Lesson 1: Financially, women are more vulnerable than ever before
The persistent pay gap between men and women has become increasingly visible due in part to increased communication about the results of employment tribunals and heightened research into salary discrepancies between the sexes. For example, in May 2009 UK newspaper The Financial Times reported that “Whitehall gender pay gap outpaces business”, with a difference as high as 25 per cent reported in some institutions1 – up from 12.5 per cent recorded in April 20072. Furthermore, in August 2009 the UK Equality and Human Rights Commission (EHRC) published a report entitled Proposals for Promoting Greater Transparency in the Private Sector: A Consultation on Improving Gender Equality in the Workplace, which revealed a yawning pay gap between male and female employees in some parts of the private sector. The areas where the gap was most pronounced included fund management, stockbroking and futures trading, with women in specific roles being paid a staggering 60 per cent less annual gross salary than men3.
“The truth is that however you look at the numbers, women do not have equal status or equal rewards,” said EHRC chair Trevor Phillips. “Nobody wants this kind of unfairness, including the businesses themselves.”
To address this growing disparity in pay, the UK government announced plans in April 2009 to require companies with 250 or more staff to give details of the average hourly pay of male and female workers4.
Pay gaps appear persistent despite deployment of pay bands and manager training – this may well be due to awards usually being given on a subjective basis from manager to employee.
Regardless of the cause, such inequality can easily manifest itself in stress. As the US-based American Psychological Association, reported in April 2009, US women were bearing the brunt of financial stress5.
In fact, according to data from the American Psychological Association’s 2009 Omnibus Research: Causes of stress in America survey, women are on average more likely than men to report that their stress is down to the factors of ‘the economy’, ‘money’, ‘work’ and ‘job stability’ in this current economic climate (see Table 1).
Although for many of the respondents these four factors were significant for both sexes, women were more likely to report them as causes for stress. The underlying reasons are varied. It is probable they are fostered through increasing fear of financial vulnerability in the recession. With the majority of working women earning less than their male colleagues, and therefore managing with less contingency, times of hardship can add significant stress to their private circumstances. When this is juxtaposed with women also carrying the double burden of career, household management, as well as care for their children and seniors, the results are hardly surprising.

Lesson 2: Women may have achieved ‘equality’… in unemployment
Unemployment is at the highest rate since the 1980s with significant cross-sector job cuts. In fact according to the Financial Times, “unemployment has risen as rapidly as in the downturn of the early 1980s, and faster than in the slowdown of the early 1990s”6. Opinion is, however, divided on the actual proportions of men and women leaving organisations during the past two years and whether more women or men have been made redundant. According to UK broadsheet The Times, women in the UK were losing jobs twice as fast as men at the start of 2009 – a statistic that prompted Harriet Harman, the UK minister for women and equality, to highlight the unlawful nature of employers targeting women during redundancy proceedings in the downturn7. What’s more, the UK government employment statistics for the last quarter of 2008 illustrated that the number of women in full-time work fell by 53,000, compared with a fall of 36,000 for men8.
But is this proof that women are losing jobs at twice the rate of men? The ONS paints a different picture, stating a redundancy rate for women at 6.6 per 1,000 employees in the three months to December 2008, less than half the male redundancy rate of 13.6 per 1,000 employees9. Undoubtedly both men and women are experiencing significant job losses across all sectors, but with such diverging opinions from credible statistics, it is difficult to ascertain if there is ‘equality’ in job loss.
Cuts in staffing levels have certainly become commonplace in many law firms as they fight to manage head count in a tough financial climate. In June 2009, The Times reported: “As many as 10,000 lawyers could be out of work in the UK in the next two years as the legal business faces its worst slump in decades. More than one in ten of the country’s 83,000 privately-employed solicitors could lose their jobs…and will struggle to find new jobs even as the economy emerges from the recession.”10
In response to the recession, firms have not only been cutting back on staff quotas and on the recruitment of graduates globally, but have also been refocusing spending on key priorities. For example, many firms have been putting some of their highly-evolved benefit programmes developed to retain and nurture diverse talent under stress-testing. “The recession has been a testing time for all organisations,” says Sarah Twite, diversity manager at magic-circle firm Clifford Chance. “As with any investment Clifford Chance makes, our diversity programmes and initiatives are undertaken with careful analysis and assessment. It is increasingly important that we ensure that there are direct business benefits to any initiative.”

Lesson 3: Testosterone-fuelled decision making could have exacerbated the crisis
The September 2008 collapse of investment bank Lehman Brothers prompted increasingly public debate as to whether the recession could have been averted had more women been in senior roles in business. The November 2008 publication of a study by John Coates, a former derivatives trader with Goldman Sachs turned Cambridge University academic, found that “endogenous steroids were shifting risk-preferences systematically across the market cycle, exaggerating the peaks and troughs” and further fuelled the argument that testosterone-fuelled decision-making was to blame for the fiscal crisis that followed11.
Yet, other academics rebuked the speculation that the meltdown could have been averted had more women been running the business world. A March 2009 letter to the Financial Times, co-signed by Professors Herminia Ibarra, an organisational behaviour academic at INSEAD global business school, London Business School’s Centre for Women in Business director Lynda Gratton, and Martha Maznevski, programme director of organisational behaviour and international management at Switzerland-based business school IMD, stated how they were “deeply troubled by the claims that women are inherently more risk averse or cautious or prudent than men”. Such claims they said “have little or no empirical support in a business context”12. Certainly propagating unfounded stereotypes in analysis of the causes of this recession is best avoided but the promotion of greater inclusiveness in the workplace has proven a valuable side effect of such debate.
The business case for gender-balanced teams is strong. Professor Gratton’s 2007 research at London Business School’s Centre for Women13 demonstrated the benefits of building professional teams with an equal composition to yield optimal innovative potential. Such gender-balanced teams were found to be more likely to have the most favourable potential in the specific drivers for innovation such as ‘experimentation’, ‘communication’, ‘boundary spanning’, ‘efficiency’ and ‘confidence’.
And many other studies published by academics and corporate researchers further prove the business case for gender balance. Researchers at the University of Helsinki, for example, found that companies with female chief executives or board directors achieve a ten per cent higher return on capital, regardless of the company sector14. And the international management consultancy McKinsey & Company found in its Women Matter 1 study that better-than-average financial performance is experienced by European companies with female chief executives or board directors15. While the research consultancy Catalyst reported that Fortune 500 companies with the highest proportion of female directors are more profitable and efficient on average than those with the lowest16.
So, could the financial crisis have been averted had more women been running the business world? Possibly. However, a more pertinent question to ask would be why? Is this because of biology, or socialisation and experience, or the influence of both?
“There is a constant interaction between biology and environment; and gender differences are changeable, for instance, through training,” says gender theorist Dr Elisabeth Kelan.17
The early socialisation and enculturation of most young professionals will also have an impact on their development as future managers.

Lesson 4: Flexible working is the future
The long-standing perception among those who have ever considered flexible working in the professional-services context, is that it can be a fast route to non-client facing projects; historically, a trap for working mothers and a taboo for the career-minded has been challenged by the difficult economic conditions of recent months.
New formats and technologies for working flexibly and collaboratively have become more popular in the recession. And it is not just women who are requesting flexibility.
Technology companies such as Cisco Systems and IBM have long encouraged employees to use their own working-methods to optimise performance and efficiencies, often claiming that most of their workforce is mobile and working remotely. Recessionary drivers have ensured that more traditional sectors focus attention on technology-driven flexible working schemes.
“The drive to deliver more cost-effective and efficient legal services to clients has enabled our global law firm to develop online solutions which, in turn, provide great opportunities for working flexibly,” says Sasha Hardman, associate director of human resources (HR) at international firm Allen and Overy.
What’s more, from April 2009 all UK parents with children of 16 years and under were granted the legal right to request flexible working, following a May 2008 government commissioned ‘Flexible Working Review’.
In anticipation, professional-services firm KPMG went one step further, creating a new contractual arrangement for employees to change the terms and conditions of staff employment contracts, in case it needs to reduce overhead costs. All employees have been encouraged to adopt the new ‘flexible futures’ contract. This HR-led initiative was designed to enable KPMG to request that employees who agree to the change can be required to work a four-day week, or take between four and 12 weeks’ sabbatical at 30 per cent of their pay. Since launching in January of this year, 85 per cent of all UK personnel have signed up for the scheme.
It follows a growing trend among the newly-redundant and full-time professionals looking for change to replace one full-time job with a variety of experience-enhancing part-time ‘portfolio work’.
Eversheds’ business development partner Denise Jagger, for example, opted to work part-time not to manage the boundaries between her personal and professional commitments but rather to juggle her work as a partner in a law firm with her non-executive directorships in a range of public companies and charitable bodies.
“My various roles are complementary and provide me with a fascinating and challenging portfolio of interests,” she says. “By retaining interests in the corporate world I am better equipped to ensure that Eversheds delivers commercially-focused legal solutions. As a firm we have well-tried and effective IT and support systems to back up our ‘Lifestyles’ flexible working options; such systems are essential if policies are to work in practice.”
In fact, according to the UK’s Equal Opportunities Commission, in 2008 there were 7.4 million part-time workers in the UK, of which four out of five were women. These figures are expected to change as the next generation, Generation Y, begins to make an impact on the workplace. Research conducted by consultancy Freshminds Corporate for its Work 2.0 survey found that men and women from Generation Y are more likely to ask for flexible working, sabbaticals and time out.

Lessons learnt
The gender diversity lessons that can be garnered from this recession can, therefore, be outlined as follows:

The use of internal and independent ‘pay audits’ will go some way to minimising the financial marginalisation of women;
Job losses for men and women must be monitored to ensure transparency;
Teams mixed equally along gender lines offer a broader range of skills and experiences and therefore enrich decision making within your organisation. Women should be encouraged to take on front-line business roles through broader business experience and leadership training;
New working formats, as well as technologies for working flexibly and collaboratively, are gaining tenure and acceptability.

Organisations should continue to evolve their flexible working options where possible to ensure a flexible and adaptable future for their organisation and employees.

Lamia Walker is a director at the London Business School’s Centre for Women in Business. She can be contacted at lamiawalker@london.edu

References

Briscoe, S., ‘Whitehall gender pay gap outpaces business’, Financial Times, May 2009;
‘Annual Survey of Hours and Earnings’, National Statistics Online, 2008;
http://legal-news.ashbycohen.co.uk/employment-law/gender-pay-gap-in-financial-sector-up-to-60;
http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090716/text/90716w0032.htm;
‘Omnibus research: Causes of Stress in America’, American Physcological Association, 2009;
Cohen, N., ‘Jobless rising at fastest rate since 1980s’, Financial Times, May 2009;
Oakeshott, I., ‘Women losing jobs twice as fast as men’, The Times, January 2009;
http://equality-diversity-network.webs.com/recessionfeb09.htm;
http://www.statistics.gov.uk/cci/nugget.asp?id=2145;
Spence, A., ‘UK legal industry faces loss of 10,000 lawyers’, The Times, June 2009;
Coates, J. and Herbert, J., ‘Endogenous steroids and financial risk-taking on a London trading floor’, Academy of Sciences of the USA, 2008;
Ibarra, H., Gratton, L., and Maznevski, M., ‘Claims that women are inherently more cautious are deeply troubling’, Financial Times, March 2009
Gratton, L; Kelan, E; Voigt, A, and Walker L., Innovative Potential: Men and Women in Teams; Centre for Women in Business, London Business School, 2007;
University of Helsinki, ‘Companies Managed by Women are More Profitable Than Those Run by Men’, 2006;
McKinsey, Women Matter 1, Gender Diversity – a Corporate Performance Driver, 2007;
Catalyst The Bottom Line: Connecting Performance and Gender Diversity, 2004;
Kelan, E., ‘Bound by Stereotypes?’ Business Strategy Review, 2008.