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Why Equal Pay for Women Is a Smart Business Move

Equal pay for equal work has become a hot button political and social issue. But there are solid financial reasons why this should be part of your business strategy.

Companies are measured by gains versus losses and not on sentiment, particularly for corporations where senior leadership must answer to stockholders. It is critical to understand, however, that paying women equally doesn’t have to come at the expense of profits. In fact, it can help increase revenue.

“Groupthink is the kryptonite of success. When you diversify, you stimulate real debate and receive fresh ideas and different perspectives.”

Here are three recent studies supporting that fact:

1. An MIT professor published in the Journal of Economics and Management Strategy discovered that shifting from an all-male or all-female office to one split evenly along gender lines would increase revenue by 41%.

2. A McKinsey study finds that companies in the top quartile for gender diversity are 15% more likely to generate financial performance above their national industry median.

3. Finally, a Gallup study of the different business units of two companies in the retail and hospitality industries showed significant differences in revenue, up 14%, and net profit, up 19%, based on the level of gender diversity in each business unit.

Beyond numbers, here are three common sense reasons:

1. Elicit varying viewpoints. As everyone knows, when you put people who have similar backgrounds in one room, they are likely to come up with similar solutions based on their shared experiences. Groupthink is the kryptonite of success. When you diversify, you stimulate real debate and receive fresh ideas and different perspectives.

2. Tap into $20 trillion in worldwide spending by women. Women control a whopping $20 trillion in global spending power. Thus, it behooves nearly every business imaginable to court women’s buying habits. What better way to reach potential female consumers or clients than by adding employees who are themselves women and understand what motivates their spending habits.

3. Attract top male and female talent. Employers of choice understand that paying women equally fosters and promotes a healthy business environment. Great people, regardless of gender, are attracted to great working environments. When businesses maintain an inclusive culture and pay structure that recognizes women’s workplace contributions, ‘A players’ are far more likely to want to join the firm. This is especially true if your competitor fails to recognize these benefits. In a robust, rapidly changing global economy, you can’t afford to ignore 50% of the population. Millennials, who are expected to make up 75% of the workforce by 2025, are particularly progressive and are keen to work in an environment that embraces diversity.

Finally, here are the three biggest mistakes to avoid in hiring women:

1. Hiring just to fill quotas. The red herring argument is that a woman will get a job that a man deserves simply to fill a quota, which would hurt business. If a company is trying to simply check a box, we agree that the intended business benefits are unlikely to be recognized. However, there are tens of millions of talented women across the globe who can add value to your business, and not at the expense of talented men.

2. Not encouraging an inclusive environment. There are some industries, namely finance, sales or sports where there is a perception of a boys club. Plus, anyone who watched the hit TV series ‘Mad Men’ knows that just a few short decades ago, women were objectified in the workplace (and the unfortunate reality is that it still continues today). CEOs must hire best-in-class human resource professionals, no matter who they are. HR policies should welcome women, embrace their skill-sets, and give every employee the opportunity to achieve success. While this is not as much of an issue as it has been in the past, it is something that must continue to be guarded against and improved.

3. Failing to remove subconscious bias from interview process. Sometimes an unconscious bias affects interviewers, even when they don’t realize it. It is critical to have a rigorous screening methodology that meets predetermined criteria with decisions based on proof and not gut feelings. This approach should enable you to test all candidates in an ‘apples to apples’ manner.

The United States is making solid progress on the economy and is evolving on social issues. Hiring and paying women equally is not only the right thing to do but the statistics and common sense reasoning illustrate why it will simply be good for business.


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