Unlocking the full potential of women in the US economy

As I read this it reminded me of my aspirations and my career, and I thought others might find it interesting.  It's long, but it's good.  From McKinsey Quarterly-sorry for the wonky formatting, you have to be a member to read so I cut and pasted into email.

Unlocking the full potential of women in the US economy

April 2011  |  By Joanna Barsh and Lareina Yee
Women have been a growing factor in the success of the US economy
since the 1970s. Indeed, the additional productive power of women
entering the workforce from 1970 until today accounts for about a
quarter of current GDP. Still, the full potential of women in the
workforce has yet to be tapped. As the US struggles to sustain
historic GDP growth rates, it is critically important to bring more
women into the workforce and fully deploy high-skill women to drive
productivity improvement.

McKinsey & Company undertook this research over the past three months
to understand how women contribute to the US economy; how their work
benefits individual corporations; what prevents women from making
greater contributions to their companies; and what approaches can help
companies unlock the full potential of women.

Creating the conditions to unlock the full potential of women and
achieve our economic goals is a complex and difficult challenge. At a
macro level, there is significant potential to raise the labor
participation rates of women across the country. At a corporate level,
where many high-skill women are employed, the opportunity is to
continue to advance women into leadership positions where they can
make the greatest contributions. Despite the sincere efforts of major
corporations, the proportion of women falls quickly as you look higher
in the corporate hierarchy. Overall, this picture has not improved for
years.

We believe, however, that there is an opportunity to make substantial
progress in developing and advancing women on the path to leadership.
Companies have become very good at recruiting women?many major
corporations recruit their ?fair share? or more of women. Moreover,
many companies have introduced structural mechanisms such parental
leaves, part-time policies and travel-reducing technologies to help
women stay the course. While the many barriers that remain are
substantial, interventions at critical career points can have outsized
impact.

For example, with a focus on middle management to increase the number
of women who advance to the vice-presidential level, corporations
could substantially improve the odds of achieving real gender
diversity in top management. We found that more women in middle
management roles are focused on leading than their colleagues at the
entry level. And they have already demonstrated enough to advance and
acquire managerial skills. Moreover, many are younger women with
relatively light work/family concerns. If companies can win their
loyalty at this stage of their careers, they will be more likely to
stay the course. These women are ours to lose.

What compels bright, highly-motivated women at middle management
levels?and higher?to turn down opportunities for advancement, look for
jobs outside the company, or leave Corporate America altogether? We
reviewed over 100 existing research papers, surveyed 2,500 men and
women and interviewed 30 chief diversity officers and experts to
understand the factors that hold women back. The result is a clearer
understanding of what drives career decisions of women and men?what
makes them strive for greater leadership responsibility and what
convinces them to stay put.

One clear take-away: Women don?t opt out of the workforce; most cannot
afford to. They do leave specific jobs for others in pursuit of
personal achievement, more money and recognition?just like men. They
do hold themselves back to pursue greater satisfaction across all
parts of their lives?but not only to fulfill family responsibilities.
Indeed, a sizable percentage of the male college graduates who took
our survey reported the same motivation to gain greater balance.

We looked into the specific barriers that women cite as factors that
convince them that the odds of getting ahead in their current
organizations are too daunting. The reasons why women choose to remain
at their current level or move on to another organization?despite
their unflagging confidence and desire to advance?include: lack of
role models, exclusion from the informal networks, not having a
sponsor in upper management to create opportunities.

In McKinsey?s ongoing Centered Leadership research, which examined the
distinctive strengths women bring to leadership roles, we found
another phenomenon that limits diversity at the top: Women often elect
to remain in jobs if they derive a deep sense of meaning
professionally. More than men, women prize the opportunity to pour
their energies into making a difference and working closely with
colleagues. Women don?t want to trade that joy for what they fear will
be energy-draining meetings and corporate politics at the next
management echelon.

Of all the forces that hold women back, however, none are as powerful
as entrenched beliefs. While companies have worked hard to eliminate
overt discrimination, women still face the pernicious force of
mindsets that limit opportunity. Managers?male and female?continue to
take viable female candidates out of the running, often on the
assumption that the woman can?t handle certain jobs and also discharge
family obligations. In our Centered Leadership research, we found that
many women, too, hold limiting beliefs that stand in their own
way?such as waiting to fill in more skills or just waiting to be
asked.

These imbedded mindsets are often institutional as well as
individual?and difficult to eradicate. A CEO?s personal crusade to
change behavior does not scale. A diversity program by itself, no
matter how comprehensive, is no match for entrenched beliefs.
Targeting behavioral change generally leads only to an early burst of
achievement followed by reversion to old ways.

Our evidence points to the need for systemic, organizational change.
Companies that aspire to achieve sustained diversity balance must
choose to transform their cultures. Management needs a powerful reason
to believe such as the potential competitive and economic advantage
from retaining the best talent.

How women contribute to the economy

Between 1970 and 2009, women went from holding 37% of all jobs to
nearly 48%. That?s almost 38 million more women. Without them, our
economy would be 25% smaller today?an amount equal to the combined GDP
of Illinois, California and New York.

GDP growth is driven by two factors?an expanding workforce and rising
productivity. Back in the 1970s when women and a huge cohort of baby
boomer men were entering the workforce, 65% of GDP growth arose from
workforce expansion. Today, nearly 80% of growth is related to
productivity increases, according to the McKinsey Global Institute
(MGI).

To sustain the historic rate of GDP growth of approximately 3% and
maintain the United States? leadership in the global economy, MGI
reports that the nation will need a combination of some workforce
expansion and a burst of productivity?driven by innovation and
operational improvements. Women are critical to both forms of growth:

Bringing more women into the workforce. About 76% of all American
women aged 25-54 are in the workforce (i.e., currently employed or
seeking work). That compares with about 87% in Sweden. Underneath the
US average, there is considerable variability among the states, and
the top 10 states have participation rates at 84%. This suggests an
opportunity. Getting all states up to an 84% participation rate would
add 5.1 million women to the workforce. This is equivalent to adding
3-4% to the size of the US economy.
Fully tapping the talent of high-skill women; training women for the
most productivity enhancing jobs. In 2010, 58% of all undergraduate
degrees in the US were awarded to women. As a result, women accounted
for 53% of the total college educated population in the US However,
only 50% of the college educated workers were women. Simply said, we
don?t have the full amount of female college educated talent in our
workforce. Changing this could improve corporate performance and help
raise national productivity. But doing so will depend on finding ways
to keep ambitious, well-qualified women moving up the management ranks
(see What Holds Women Back below). Women can also contribute to the
productivity challenge by training in disciplines with impact on
increasing productivity, such as finance, professional services, and
science & technology. How women contribute at the corporate level: The
business case for diversity

How women contribute at the corporate level: The business case for diversity

What do women bring to Corporate America? How do women leaders
contribute to a company?s competitive edge? These questions have been
the subject of much debate and research. The central challenge in
proving a link between gender diversity in top management and improved
corporate performance is sample size: Too few companies have had
enough women in senior roles to provide statistically significant
results. However, there is a growing body of work that compares
financial performance to gender diversity at the top. Catalyst has
just released its most recent comparison of large industrial
companies, pointing out the correlation of financial performance and
more women at the top. The 2009 McKinsey Women Matter global survey on
gender diversity highlighted the link between the characteristics of
women leaders and organizational health. McKinsey?s 2010 Centered
Leadership research found that many women bring an approach to
leadership well suited for the challenges that major organizations
face today:

Catalyst, the U.S. non-profit focused on expanding opportunities for
women in business, continues to deliver research on the relationship
between the representation of women on boards of directors and
corporate performance. In its 2011 research, Catalyst found a 26%
difference in return on invested capital (ROIC) between the
top-quartile companies (with 19-44% women board representation) and
bottom quartile companies (with zero woman directors).
When the McKinsey Women Matter team asked business executives globally what they believe the most important leadership attributes are for
success today, each of the top four?intellectual stimulation,
inspiration, participatory decision-making and setting
expectations/rewards?were more commonly found among women leaders.
In a limited application of The McKinsey Organizational Health Index
(OHI) we found that companies with three or more women in top
positions (executive committee and higher) scored higher than their
peers. OHI measures nine factors, ranging from external orientation to
coordination and control, that are linked to well-functioning
organizations. Companies that score highly on all nine metrics of
organizational health have also shown superior financial performance.
In the 2010 McKinsey Centered Leadership research, we found that more
than 90% of the women and men who mastered each of the five leadership
dimensions felt equipped to lead through today?s challenges compared
to only 21% of those who mastered none.

What holds women back

As has been well documented, Corporate America has a ?leaky? talent
pipeline: At each transition up the management ranks, more women are
left behind. According to Sylvia Hewlett, founder of the Center for
Work-Life Policy, women represent 53% of new hires. Catalyst estimates
that at the very first step in career advancement?when individual
contributors are promoted to managers?the number drops to 37%.
Climbing higher, only 26% of vice presidents and senior executives are
female and only 14% of the executive committee, on average, are women.
At this point women are doubly handicapped because, as our research of
the largest US corporations shows, 62% are in staff jobs that rarely
lead to a CEO role; (in contrast, 65% of men on executive committees
hold line jobs.) This helps explain why the number of women CEOs in
Fortune 500 companies appears stuck at 2-3%.

While our data shows that women?even mothers?retain strong conviction
about their abilities and a desire to advance, when they look at the
odds of making it through the pipeline, many make a well-reasoned
decision: They stay put, look for a job elsewhere that will fulfill
their ambition, or seek careers outside large corporations. We found
four kinds of barriers in their way:

Structural obstacles: In our survey and interviews we found specific
factors that hold women back or that convince women that their odds of
advancement may be better elsewhere. Women in our survey cited
familiar factors that they find discouraging: Lack of access to
informal networks where they can make important connections, a lack of
female role models higher up in the organization, and a lack of
sponsors to provide opportunities, which many male colleagues have.

Lifestyle issues: Some interesting insights from our research relate
to the role that life outside work plays in career choices. These
insights counter much of the conventional wisdom. For example,
diversity officers told us that motherhood, per se, rarely prompts a
woman to stay put, downshift or look for work elsewhere. No surprise,
many women expressed a concern about the always-on 24/7 executive
lifestyle and travel requirements. Notably, we found that attitudes
among fathers and mothers are converging: Half of fathers with one
child say they will not accept a new job that reduces work/life
balance; 55% of women without children say the same thing. This
suggests that companies have even more to lose from the talent
pipeline than highly-qualified mothers.

Imbedded institutional mindsets: The most insidious barriers for women
are imbedded mindsets that halt their progress. Managers (men and
women) still tell diversity officers that ?Everybody ?knows? you can?t
put a woman in that particular slot.? Or ?That job could never be done
part-time.? Even at major corporations, not-so-subtle differences
linger. Several diversity officers and experts told us that despite
their best efforts, women are often evaluated for promotions primarily
on performance, while men are often promoted on potential. Management
may be acting with best intentions?to prevent women from failing?yet
another mindset that forms a barrier to advancing women.

Imbedded individual mindsets: The effect of women?s own mindsets
cannot be discounted. While women remain highly confident of their
qualifications throughout their careers, women are, on average, less
satisfied than men with their chosen professions and jobs. Moreover,
as women get older, their desire to move to the next level dissipates
faster than men?s desire. At all ages, more men want to take on more
responsibility in their organizations and have greater control over
results.

What our survey showed most clearly is that, no matter how they feel
about their current situation, women never lose their belief in their
abilities. Indeed, age, motherhood, and seniority did not materially
change the high response on this question. Women are ambitious and
believe they have the qualifications?they want to make a contribution
to the success of the organization. Over time, however, the barriers
seem to get larger and women?s belief that there is opportunity ahead
diminishes?and along with it their willingness to keep pushing.

A path to solutions

Knowing what we know about the role of women in driving macroeconomic
growth and how women can contribute to corporations, it is clear that
the US must make far better use of women in the workforce. Plugging
the leaks in the talent pipeline is clearly a top priority and there
are opportunities at every transition point in the pipeline. But we
believe companies have a promising opportunity to capture by focusing
on the transition from mid-level manager to senior management
(typically the vice president role).

Having survived the first cut in the talent pipeline?from individual
contributor to manager?women have already demonstrated superior
capability. They retain their ambition and confidence and are quickly
acquiring skills and know-how. They also have a better understanding
of what it takes to succeed than when they entered the workforce?and
have a stronger belief that opportunities for promotion exists. A
greater portion of middle management women aspire to top management
roles versus entry-level women (31% versus 16%).

If companies could raise the number of middle management women who
make it to the next level by 25%, it would significantly alter the
shape of the pipeline. More women who make it to senior management
share an aspiration to lead, and more believe that getting to senior
leadership is worth the cost. Advancing more women into these
positions would in time help companies rebalance their executive
committees, which in turn increases the likelihood of sustaining
gender diversity at every level to the very top.

Addressing the barriers that convince women that they can?t make it is
far more complex. As chief diversity officers told us, there are a
thousand reasons for a thousand little leaks in the talent pipeline.
This means that one-off solutions will never succeed. Comprehensive
change is required.

Our conclusion is that this systemic challenge can be met only through
organizational transformation. This is a tall order. Our research on
organizational change indicates that 70% of transformation efforts
fail. However, the same research tells us that the transformations
that succeed have strong leadership from the top and a comprehensive
plan to shift mindsets and behaviors. Getting people to think and act
differently is one of the most difficult management challenges, but it
can be done:

Start with a compelling story for change?the ?business case??and
communicate it broadly, emphasizing the successes that reinforce the
desired mindset shifts.
Refine the organizational processes and other formal mechanisms that
can reinforce the change?in particular the metrics and reporting used
to track performance and reinforce accountability.
Build the capabilities that enable the desired behaviors. For example,
both men and women can learn how to be more effective sponsors.
Leaders?all the way down to the front line?must model the change.
Changing only the mindsets of the Executive Committee and other senior
leaders misses the most important influencers of sustained
change?employees? direct supervisors.

Our interviews revealed that many companies have made real strides in
removing structural barriers for women, by adopting more flexible work
routines, implementing career off-ramps and on-ramps, and policies
that enable women to survive the dual responsibilities of family and
work. The next leg of this long journey requires something much harder
to achieve?genuine transformation.

***

If the US is to achieve a level of economic growth to sustain or
improve living standards, and if US-based corporations are to remain
globally competitive, we can no longer simply have good intentions
about gender diversity. Now, we need good results.

Joanna Barsh is a director in McKinsey?s New York office and Lareina
Yee is a principal in the San Francisco office.