The Gender Advantage for Multinational Firms

By Elizabeth Harrin (London)

New research shows that companies can benefit by exploiting gender discrepancies in host countries – in other words, hiring highly skilled, local women who are not ‘employees of choice’ in their own countries. Can companies really gain a competitive advantage by hiring women who are overlooked? And should they?

When Qualified Women are Overlooked…

The research was produced by Professor Jordan Siegel from Harvard Business School, Lynn Pyun of MIT, and B.Y. Cheon of Hanshin University and the Korea Labor Institute. The multinational team looked extensively at hiring practices in South Korea. They found that women were frequently discriminated against in the labor market, particularly for management positions. However, the female candidates were as qualified as the male candidates. There is a rich pool of talent there, but local firms are reluctant to tap into it.

So, there are lots of qualified, talented women waiting for jobs, and fierce competition with male candidates. That equals an opportunity for multinational firms, who can exploit “social schisms” in the employment economy through hiring and promoting women. Better candidates mean better – and loyal – employees, and in turn this equals a competitive advantage and better profit margins.

It’s not that South Koreans don’t appreciate the value that women can bring to the workplace. The researchers interviewed former President Kim Dae Jung, who said that it will take time to address the problem of the male culture in workplaces. “More and more women are successfully passing the high government official examinations, and females are very active and visible among government officials these days,” he said. “In fact, a majority of those passing the high government exam and the bar exam are now women. There are now many women as prosecutors and judges.”

Local pressure means that even managers who want to hire women often don’t get to the final stage of offering a woman a job. Existing male employees and local partners could be reluctant to work with women. Local customers may refuse to trust the decisions female employees make, insisting on going over their heads to speak to a man. Society is slow to change.

“You’re basically facing a tradeoff,” Siegel says. “Your customers, business partners, and/or senior male employees may often have biases against women in important management positions. Some executives interviewed for the study worried that this bias would hurt their business.”

Even the female candidates themselves recognise the uphill struggle in taking on management jobs. The cost of childcare in South Korea is high, and many successful women told the researchers that they had only managed to climb the corporate ladder because they had chosen not to have children, or because they had arranged for their mothers to take a full and active part in raising their children.

Is it ethical to hire in this way?

So should multinational companies step in and employ women in markets where they are traditional discriminated against?

“It is not only ethical to hire females who are underutilised – a euphemism for discriminated against – it is just sound business practice,” says Lee E. Miller, Adjunct Professor at Columbia University and author of A Woman’s Guide to Successful Negotiating. “Frankly it occurs a great deal in countries where women are not afforded equal opportunity in the local market. Any time you can recruit talent it offers a company a competitive advantage. If a country is not using its local female talent then it is in
the women’s interest and the multinational’s interest to put that talent to use,” Miller, who works extensively in Asia, adds.

“If it gives the multinational an advantage it will spur local companies to stop discriminating against women. No one would question making an offer to recruit a talented male who is being underutilized at his company. It happens all the time.”

Swinging the Needle

The research shows that a 10 percent nominal increase in the percentage of female managers was associated with a 1 percent nominal increase in return on assets. “We have found that all firms, both foreign-owned and domestically-owned, were able to enjoy a performance benefit through increased hiring of women, especially at the senior management level,” the research authors write. “Our results indicate that multinationals in the representative emerging economy of South Korea enjoy a competitive weapon from their active hiring and promotion of the excluded group in the labor market. The size of the profit benefit is large but realistic.”

Those of us who are naturally optimistic would hope that once local companies start seeing the competitive advantage that having women on the team brings, that they would start to recruit from this pool of talent too. Eventually, the actions of gender-conscious multinational companies will move the needle on gender equality.

Unfortunately, this is not likely to happen. It will take more than a couple of local hires to promote cultural change, especially as it is also the clients of the companies that need to change, not just the employers. The HBS researchers conclude that the South Korean market will be very slow to change, regardless of what multinationals do.

“The market is moving towards a new equilibrium that is free of discrimination, but only at a very slow rate,” the authors say. “The profits are not being quickly competed away.”

This is good news for corporations who want to get ahead in Asia, but less good for the highly skilled women waiting for local managers to offer them reasonable jobs.

In the meantime, employers would do well to seek out the candidates that will best help them get ahead, and candidates should do the same.