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Tech Still Lacks Diversity, but Don't Blame the Pipeline

Sarah Thomas

The telecom, media and technology (TMT) sector has seen the most decline in diversity representation since 2015 of any industry studied in McKinsey's report on diversity spanning 1,000 companies across 12 countries.

Companies in this sector, the majority of which are tech companies, McKinsey & Co. says, have not only declined in diversity since 2015, they also continue to lack women at the executive level. And, before you blame the "pipeline problem," as is popular to do, their representation of female executives isn't even half of what the proportions are at the collegiate level. (See What Facebook's Recruiting Woes Tell Us.)

The study found that US-based TMT companies are made up of 30% to 35% women, nearly the same as the proportion of STEM (science, technology, engineering and math) degrees granted to women, which came in at 35% and 33% of Master's degrees in 2017. Yet, women make up only 17% of US TMT executives amongst the companies McKinsey studied. (See Tech's Gender Problem Starts at Entry Level – McKinsey).)

The decline comes at a time when tech companies are simultaneously touting initiatives and progress around promoting and supporting women in the workplace, but also grappling with a lot of negative attention around their treatment of women. (See WiC Panel: The Upside of Sexism Scandals, Light Reading's 2017 Survey of Women in Comms and our weekly WiCipedia entries for much more.)

Join Women in Comms for an afternoon of workshops and networking in Austin at the fifth-annual Big Communications Event on May 14. Learn from and engage with industry thought leaders and women in tech. There's still time to register to attend for free!

McKinsey's study looked at how diversity correlates to companies' profitability and longer-term value creation and found, once again, that the correlation is strong. In 2014, it found that companies in the top quartile for gender diversity on their executive teams were 15% more likely to experience above-average profitability than companies in the fourth quartile. This number rose to 21% in its 2017 report. At the same time, the top quartile companies -- like Salesforce.com Inc. -- are 27% more likely to outperform fourth-quartile companies on longer-term value creation, measured using an economic profit margin, McKinsey said.

"We found that having gender diversity on executive teams, specifically, to be consistently positively correlated with higher profitability across geographies in our data set, underpinning the role that executive teams -- where the bulk of strategic and operational decisions are made -- play in the financial performance of a company," the report said.

It's not just a matter of having women at the top, but having them in line roles directly related to profit and loss, rather than supporting staff roles. Women tend to be underrepresented in line roles, but those companies with above average financial performance had 10% women in line roles versus just the 1% that those in the fourth quartile had in line roles. (See McKinsey: Women Less Likely to Advance at Work.)

McKinsey advocates for companies to use inclusion and diversity as an enabler of business impact. While one may not directly cause another, the correlation has been shown over and over again in studies like this one. McKinsey says that more diverse companies are better able to attract top talent; improve their customer orientation, employee satisfaction and decision making; and to secure their license to operate. It's not easy to implement change, which can take years to do, but it's more important than ever to do so. (See Why Diversity of Geeks in Tech Matters.)

— Sarah Thomas, Director, Women in Comms

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