Companies looking to recruit top financial talent that is most likely to resist unsolicited approaches from recruitment firms should hire more women. Women are also much more likely than men to respond to the recruitment firm with a polite but firm note saying they are happy where they are and are not considering moving. These are just a couple of the findings of our internal review following last month’s International Day for Women.
The annual event led the team at TALTRAN Global to give increased consideration to what we have learnt from our talent searches and whether there are any signs that the 100 Women in Finance Vision 30/40 can be achieved. Aiming for 30% of senior finance positions to be filled by woman by 2040 looks a tall order at a point when Deloitte tell us that the number of women in leadership roles in financial services firms currently stands at only 24%. Recruiters have a part to play in making it happen.
It doesn’t take a genius to realize that there are no easy answers when you are trying to make an impact on problems that have emerged from decades, possibly centuries, of social, cultural and educational bias. Our approach is to be data-led to try and understand the scale and roots of the problem and then to use these facts to influence our discussions with clients and candidates. We weren’t quite expecting the loyalty factor mentioned in the first paragraph but it will become one of our talking points in the future.
A Yawning Gap
Returning to the overall theme there are a few data points that set the scene in several finance related areas. Overall, women outnumber men in the finance and banking industry, but the reverse is true at the most senior positions. At the beginning of 2021, women accounted for about 52% of the industry, according to research by McKinsey, but their representation fell at every step up the corporate ladder. In the C-suite, women accounted for only 27% of executives.
In academia, a study by the University of Masschusetts at Amherst and Yale University found that in the country’s top business schools only 16% of the finance faculty were women. There is also a publication gap with women professors publishing about 17% fewer papers than men. A small bit of good news is that the report was published in the Journal of the American Finance Association – the first article on gender imbalance ever published in this academic journal.
In venture capital and private equity firms women account for less than 10% of senior roles. It’s difficult to resist the notion that gender factors are in play when we see that 97% of venture capital dollars go to men and 86% of all start ups funded by venture capitalists only have men on their teams. In 2021, only 2% of venture capital went to female-founded teams which shows a decline from what might, laughingly, be called a high of 2.8% in 2009.
The finance industry has the second-largest pay gap in the United States economy, according to a study by Automatic Data Processing, Inc. Based on ADP’s research, the average salary for women in the banking and finance sector was $27 per hour in 2019, compared to an hourly average wage of $40 for men. There is also a promotion gap, where men take about 6.6 years to be promoted compared to 7.4 years for women.
From the C-suite to basic pay via venture capital and higher education the sheer scale of the problem is clear and it seems to be everywhere you look. From a professional recruiter’s point of view it is a staggering waste of talent compounded by a troubling sense of bias. Despite this our experience is that women tend to be more loyal to their employers – it’s puzzling.
Working Towards a Better Future
We were bemused by the Yale insights feature on research showing that “a major factor preventing women from being promoted is that they are consistently judged as having lower leadership potential than men.” The majority of hiring managers we work with are men but we find the women leaders who engage us at least their equal in professional insights. They are often able to bring a different dimension to their hiring strategies due to the bias and discrimination they have personally faced. When we thought about that word ‘potential’ we began to recognize how some companies might confuse competence with charisma in their recruitment and promotion criteria.
A good example is seen in the venture capital world where investment behavior is not always driven by experience and evidence of good outcomes. While the overwhelming weight of investment is in male founders and teams, First Round Capital and Boston Consulting Group’s analysis of MassChallenge accelerator program participants showed that founder teams with women outperformed them. Despite being less likely to raise follow-on funding, founder teams with women are more likely to exit and have a higher internal rate of return (IRR) — 112% versus 48%.
Telling phrases in the research are that “men often overpitch and oversell” and that women are more likely to ask for less and accept criticism as “legitimate feedback”. We are cautious about getting into lazy generalizations but anybody who has been in recruitment for any length of time recognizes these extremes of behavior in interview situations. The good news is that they are factors recruiters can consider when short-listing and the increasing amount of publicly available information helps us brief hiring companies about the pitfalls of unintentional bias.
The evidence also tells us that there is genuine strength in gender-based networks and role models. Women venture capitalists, for example, are two times more likely to invest in female founders than a male VC and research published in the Journal of Experimental Social Psychology shows how “Successful female leaders empower women’s behavior in leadership tasks”. Where a recruiter is enlisted to help structure a new finance team we can bring that understanding to bear on our discussions.
An Agenda for Recruitment
At TALTRAN Global we don’t delude ourselves that we are able to solve all of society’s biases and problems but our mission is to make sure that candidates fulfil their potential and that companies find finance professionals who can transform their business. Talking the issues through with colleagues and doing our own internal review was a reminder that this is a responsibility which has to be taken seriously and where understanding the broader social issues can be helpful. International Women’s Day and our subsequent research gave us better insights and suggested practical actions we can take to ensure we do the best for women candidates and help companies build their gender diversity.
The action list includes reminding companies that focusing on performance, competence and capability is a better standard for appointments than idealized, poorly founded notions of potential. It means reflecting pragmatically on the evidence that women will be more likely to resist inducements to leave and so may provide a more stable foundation for growth as long as their career ambitions are realized. It’s also worth engaging with clients on the structure they might consider creating to attract, incorporate and excite women about their potential for advancement and success.