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The Imperative of Investing in Women in the Workforce

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Within the same week that McKinsey Quarterly published an article addressing how private-sector companies can enjoy sizable benefits by empowering women in the workforce, particularly in developing countries, The New York Times reported on the remarkable gender gap in the high-tech world of Silicon Valley. See Irina A. Nikolic & Lynn Taliento, How Helping Women Helps Business 24 (McKinsey Quarterly No. 2, 2010); Claire Cain Miller, Out of the Loop in Silicon Valley, at BU1 (N.Y. Times, April 18, 2010). The McKinsey piece raises salient points that any global enterprise should consider. Meanwhile, in Silicon Valley, it would appear that female entrepreneurs -- and thus the business landscape as a whole -- would benefit from similar prescriptions.

The Macroeconomic Benefits of Investing in Women in the Workforce

According to McKinsey & Company, there are a "startingly wide range" of ways in which companies can offer economic benefits not only to women, but also to the corporations themselves in the form of enlarged markets, improved quality and size of the workforce, and improved corporate reputations both locally and globally. It is important for companies to understand the macroeconomic impact of investments in the female workforce. "Women's unfulfilled potential significantly hinders economic growth," according to Nikolic and Taliento, two McKinsey principals. According to one recent study, lower education and employment rates for women and girls are responsible for as much as a 1.6 percentage point difference in annual GDP growth between South Asia and East Asia. See id. at 26 (citing V. Kasturi Rangan and Rohithari Rajan, Unilever In India: Hindustan Lever's Project Shakti - Marketing FMCG to the Rural Consumer, Harv. Bus. Sch. Case 9-505-056, June 2007). Put differently, a 1.6 percent swing amounts to the difference between long-term economic growth or recession. Yet of the 83 percent of surveyed companies that said that economic growth in the developing world is important to their growth and success over the next ten years, only 19 percent said that their companies had invested in development activities specifically aimed at women in developing markets. Such private-sector investments can give companies longer-term rewards such as developing and maintaining a positive brand image and creating a more educated workforce and wealthier consumers. Yet they occur all too infrequently.

Silicon Valley: A Different Narrative For Women

On the domestic front, no one has ever mistaken Silicon Valley for a developing country. On the contrary, it is home to nearly unparalleled financial, intellectual, and network capital, and through both Boom and Bust, it has remained a catalyst for and breeding ground of some of the world's most innovative technologies. Like other high-tech centers in the United States -- New York's Silicon Alley; Northern Virginia's high-tech corridor; Austin, Texas; and Boston, for example -- the Valley prides itself on being a raw meritocracy. Failure is not a stigma, but rather a badge of honor and a ticket to return to the arena. Only in Silicon Valley can two unknown engineers introduce free email to the masses (Hotmail); the computer industry forever be turned on its head in a garage (Apple); and two graduate students develop an algorithm that launches arguably the most powerful company in the world today (Google). It is not a stretch to say that it is a culture like no other.

According to The New York Times, however, "that narrative often unfolds differently" for women. Cain Miller, at BU1. While women own 40 percent of the private businesses in the United States, they create only eight percent of all venture-backed start-ups. According to the National Center for Women and Information Technology, women account for only six percent of the chief executives of the top 100 tech companies. And women comprise only 14% of all venture capitalists, the source of investment for many of those same companies. It should be noted that Silicon Valley is not a microcosm of the larger economy. The Times reports that women now outnumber men at elite colleges, law schools, medical schools, and in the overall work force.

Just as companies benefit by investing in women in developing countries, so too is investing in women as tech entrepreneurs good for the bottom line. According to Cindy Padnos, a venture capitalist who compiled data from 100 studies on gender and tech entrepreneurship, venture-based start-ups run by women use, on average, 40% less capital than start-ups run by men. Moreover, diversity promotes greater innovation, that magical nectar so prized in the high-tech world.

Silicon Valley may also be the victim of the confluence of a number of important factors that keep women underrepresented in the high-tech ranks. First, only 18 percent of college students graduating with computer science degrees are women, down from 37% in 1985. Second, with such numbers dwindling at such an alarming rate, women are exposed to even fewer role models in the workforce who have risen to the highest levels of the technology sector. Third, according to the National Center for Women and Information Technology, 56 percent of women with technology jobs leave their work midway through their careers, double the turnover rate for men. (Twenty percent of these women leave the workforce entirely, while an additional 31 percent take nontechnical jobs.) Leaving and returning to the workforce raises particular difficulties in the high-tech sector, where paradigm shifts occur at Internet speed and skills become outdated just as quickly as they are acquired.

One cannot object to the premise that investing in women in the workforce leads to numerous positive results. Aside from the much larger discussion of the societal benefits derived thereby, one thing must become clear to all business executives. Whether in the developing world or the billion dollar hills of Sand Hill Road, companies that invest in the success of women in the workforce will enjoy long-term benefits to both their top and bottom lines.

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Ben Kerschberg is a Founder and the Chief Operating Officer of Consero Group LLC. Mr. Kerschberg has a Bachelor of Arts in Foreign Affairs and German, summa cum laude and Phi Beta Kappa, from the University of Virginia and a Juris Doctor from Yale Law School, where he was as a Coker Fellow. He clerked for the Honorable Gilbert S. Merritt, Chief Judge of the U.S. Court of Appeals for the Sixth Circuit.