Why Women CEOs Are More Likely To Be Forced Out

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Why Women CEOs Are More Likely To Be Forced Out
Less likely to get a promotion, and more likely to be forced out or have a life event interrupt their careers, women represent only 3% of new CEOs in the U.S. Here's how we can change that.By Stephanie Vozza

“Corporate America is a man’s world,” says Carly Fiorina. The former CEO of technology giant Hewlett-Packard was considered to be one of the most powerful women in business in 1999 when she became the first woman to head up a Fortune 20 company. Five and a half years later, after HP survived the collapse of the dotcom bubble but lost 40% of its stock value, Fiorina was forced out.

 

It’s been nearly a decade since her departure, but Fiorina, who currently serves as chairman of the product philanthropy organization Good360, says corporate America is still very much a man’s world: “There are more women CEOs today, which is not an insignificant thing, but progress has been amazingly slow,” she says.

Women make up 46.9% of the labor force, according to the U.S. Bureau of Labor Statistics, but they made up just 3% of new CEOs in 2013, according to a study by the consulting firm Strategy& (formerly Booz & Company). In its 14th year, the annual study examines CEO turnover and incoming and outgoing CEOs at the world’s 2,500 largest public companies.

Women CEOs are less likely to be promoted from within and more likely to be forced out.

While there is a huge disparity in numbers, men and women CEOs have similar profiles; they rarely come from a region outside of where the company headquarters is, they're more likely to come from line (sales and manufacturing) rather than staff roles, they become CEO in their early 50s, and they have a tenure of about five years. But there are two areas where they’re different: Women CEOs are less likely to be promoted from within and more likely to be forced out.

The Inside Track

Companies like to promote familiar faces–an average of 76% of all CEOs come up through the ranks, the study finds–but it’s men who are more likely to be on that track. In fact, 78% of men who became CEOs between 2004 and 2013 were insiders, compared to just 65% of women CEOs. One reason for the difference may be that there aren’t enough female candidates, suggests DeAnne Aguirre, Strategy& senior partner.

“Companies need to rotate more women into line roles,” she says. Line positions, such as sales and manufacturing, are considered to have a direct contribution to the company's profits. Staff positions support the line and include human resources (HR), billing, and public relations.

Aguirre and Fiorina agree that the career path of General Motors CEO Mary Barra is a good example of what it takes to become CEO. “Something happened that was critical for her career; she was taken out of HR and put into product development for the purpose of developing her executive skills,” Fiorina says. “Without that move, she clearly wouldn’t have the experience to be CEO. Many women don’t make that critical move.”

Instead, women often stay where they excel: “They can get in a particular professional area where they’re very good and people come to rely on them,” Fiorina says. “Sometimes it’s difficult for women to say, ‘I’m going to move out.’”

When Fiorina came to HP, she says several women were in entry and middle management levels, but few if any were at the top of the chain. She made sure when the company was looking at executive placements that qualified women and minorities were in the candidate pool.

“Twenty years ago, there was an issue of having qualified candidates,” she says. “This is not an issue anymore. By the time I left HP, half of my direct reports were women, but they were a perishable commodity. Within nine months of my departure, 70% had left. Women are tuned to the environment in which they operate. If the environment is unfriendly to women, they may leave.”

Unplanned Exits

While fewer women are being promoted from within, more women are brought in as CEO from the outside. “Women are frequently hired when a company feels as though it’s in a difficult situation and needs a turnaround,” Fiorina says. This can be part of the reason why a higher number of women than men–38% versus 27%–are forced out of their companies as opposed to leaving in a planned succession or merger.

“Women CEOs who were brought in from the outside would be less familiar to an organization and might be given less of a grace period than a CEO promoted from inside,” says Aguirre. She adds that one of the industries with a higher number of female CEOs is technology, which has a higher level of forced turnovers.

When man is in a job, he is presumed to be competent; a woman isn’t given that presumption.

Fiorina’s exit from HP involved “a fundamental disagreement in the boardroom about the role of board members. The dynamics in the boardroom were vastly different for me because I was a woman,” says Fiorina, whose memoir Tough Choices, chronicles her rise and fall at HP. “The interaction between the members of a boys’ club and a woman is different than the interaction among the members of a boys’ club alone.”

Women are perceived, scrutinized, and criticized differently, says Fiorina. “When man is in a job, he is presumed to be competent; a woman isn’t given that presumption,” she says. “Huge expectations are placed on women. The operating environment is different, especially when things are not going well.”

Had she been a man, Fiorina says she’s not sure she would have been forced out. “A board is more likely to promote someone who is like them, including their gender or race,” she says. “They’re also more likely to be reluctant to force the exit of someone they’ve known and worked with for a long time. It’s easier to make that decision when the person is different.”

The Future

But women are making progress, says Aguirre. “Today 60% of undergraduate students around the world are women and 30% of the top business school students are women,” she says. “Along with changing social norms and the expectations of the millennials generation, we believe more women will take CEO offices.”

"We don’t help women CEOs by focusing on her gender; we should focus on her results."

The Strategy& study predicts that by 2040 as much as a third of incoming class of CEOs will be women, but Fiorina says she’s disappointed that it could take 25 years to get there: “It’s disappointing to think that just a third of women would be CEOs when women make up half of the population and are getting MBAs and higher degrees at the same or higher rate as men,” she says.

She is, however, encouraged by one change that’s happened since she was CEO: “When I was at HP, people were still talking about my gender five or six years in,” she says. “When Mary Barra was named CEO of General Motors, stories about her gender lasted a few days and now no one brings it up. That’s progress. We don’t help women CEOs by focusing on her gender; we should focus on her results.”

 

Why Women CEOs Are More Likely To Be Forced Out
Less likely to get a promotion, and more likely to be forced out or have a life event interrupt their careers, women represent only 3% of new CEOs in the U.S. Here's how we can change that.By Stephanie Vozza

“Corporate America is a man’s world,” says Carly Fiorina. The former CEO of technology giant Hewlett-Packard was considered to be one of the most powerful women in business in 1999 when she became the first woman to head up a Fortune 20 company. Five and a half years later, after HP survived the collapse of the dotcom bubble but lost 40% of its stock value, Fiorina was forced out.

 

It’s been nearly a decade since her departure, but Fiorina, who currently serves as chairman of the product philanthropy organization Good360, says corporate America is still very much a man’s world: “There are more women CEOs today, which is not an insignificant thing, but progress has been amazingly slow,” she says.

Women make up 46.9% of the labor force, according to the U.S. Bureau of Labor Statistics, but they made up just 3% of new CEOs in 2013, according to a study by the consulting firm Strategy& (formerly Booz & Company). In its 14th year, the annual study examines CEO turnover and incoming and outgoing CEOs at the world’s 2,500 largest public companies.

Women CEOs are less likely to be promoted from within and more likely to be forced out.

While there is a huge disparity in numbers, men and women CEOs have similar profiles; they rarely come from a region outside of where the company headquarters is, they're more likely to come from line (sales and manufacturing) rather than staff roles, they become CEO in their early 50s, and they have a tenure of about five years. But there are two areas where they’re different: Women CEOs are less likely to be promoted from within and more likely to be forced out.

The Inside Track

Companies like to promote familiar faces–an average of 76% of all CEOs come up through the ranks, the study finds–but it’s men who are more likely to be on that track. In fact, 78% of men who became CEOs between 2004 and 2013 were insiders, compared to just 65% of women CEOs. One reason for the difference may be that there aren’t enough female candidates, suggests DeAnne Aguirre, Strategy& senior partner.

“Companies need to rotate more women into line roles,” she says. Line positions, such as sales and manufacturing, are considered to have a direct contribution to the company's profits. Staff positions support the line and include human resources (HR), billing, and public relations.

Aguirre and Fiorina agree that the career path of General Motors CEO Mary Barra is a good example of what it takes to become CEO. “Something happened that was critical for her career; she was taken out of HR and put into product development for the purpose of developing her executive skills,” Fiorina says. “Without that move, she clearly wouldn’t have the experience to be CEO. Many women don’t make that critical move.”

Instead, women often stay where they excel: “They can get in a particular professional area where they’re very good and people come to rely on them,” Fiorina says. “Sometimes it’s difficult for women to say, ‘I’m going to move out.’”

When Fiorina came to HP, she says several women were in entry and middle management levels, but few if any were at the top of the chain. She made sure when the company was looking at executive placements that qualified women and minorities were in the candidate pool.

“Twenty years ago, there was an issue of having qualified candidates,” she says. “This is not an issue anymore. By the time I left HP, half of my direct reports were women, but they were a perishable commodity. Within nine months of my departure, 70% had left. Women are tuned to the environment in which they operate. If the environment is unfriendly to women, they may leave.”

Unplanned Exits

While fewer women are being promoted from within, more women are brought in as CEO from the outside. “Women are frequently hired when a company feels as though it’s in a difficult situation and needs a turnaround,” Fiorina says. This can be part of the reason why a higher number of women than men–38% versus 27%–are forced out of their companies as opposed to leaving in a planned succession or merger.

“Women CEOs who were brought in from the outside would be less familiar to an organization and might be given less of a grace period than a CEO promoted from inside,” says Aguirre. She adds that one of the industries with a higher number of female CEOs is technology, which has a higher level of forced turnovers.

When man is in a job, he is presumed to be competent; a woman isn’t given that presumption.

Fiorina’s exit from HP involved “a fundamental disagreement in the boardroom about the role of board members. The dynamics in the boardroom were vastly different for me because I was a woman,” says Fiorina, whose memoir Tough Choices, chronicles her rise and fall at HP. “The interaction between the members of a boys’ club and a woman is different than the interaction among the members of a boys’ club alone.”

Women are perceived, scrutinized, and criticized differently, says Fiorina. “When man is in a job, he is presumed to be competent; a woman isn’t given that presumption,” she says. “Huge expectations are placed on women. The operating environment is different, especially when things are not going well.”

Had she been a man, Fiorina says she’s not sure she would have been forced out. “A board is more likely to promote someone who is like them, including their gender or race,” she says. “They’re also more likely to be reluctant to force the exit of someone they’ve known and worked with for a long time. It’s easier to make that decision when the person is different.”

The Future

But women are making progress, says Aguirre. “Today 60% of undergraduate students around the world are women and 30% of the top business school students are women,” she says. “Along with changing social norms and the expectations of the millennials generation, we believe more women will take CEO offices.”

"We don’t help women CEOs by focusing on her gender; we should focus on her results."

The Strategy& study predicts that by 2040 as much as a third of incoming class of CEOs will be women, but Fiorina says she’s disappointed that it could take 25 years to get there: “It’s disappointing to think that just a third of women would be CEOs when women make up half of the population and are getting MBAs and higher degrees at the same or higher rate as men,” she says.

She is, however, encouraged by one change that’s happened since she was CEO: “When I was at HP, people were still talking about my gender five or six years in,” she says. “When Mary Barra was named CEO of General Motors, stories about her gender lasted a few days and now no one brings it up. That’s progress. We don’t help women CEOs by focusing on her gender; we should focus on her results.”

 

[Author]

May 8, 2014 at 11:20 AM