The Importance of Gender Balance in Founding Teams
By Molly Hayward & Morgen Newman, co-founders of Cora
Morgen Newman ’06 is also the co-founder of IdeaPaint and Bushwick Kitchen
@MorgenNewman | @CoraWomen
Investors and founders agree there’s one indicator of the future success of a business even more important than the idea or business model: the team. However, often overlooked is the value diversity plays in the makeup of that team. Our story as a female / male duo behind the organic tampon startup Cora, is one that demonstrates the value of gender diversity in founding teams, especially at a time when less than 10% of VC-backed startups have a woman on the founding team.
Those debating the value of gender diversity, instead of implementing within their companies, are being left behind; the evidence clearly indicates that teams with more gender diversity regularly and decisively outperform those of more traditionally male-dominated teams. Companies with gender-diverse teams prove to be more productive, more creative and better at problem solving. It’s worth noting that the research and arguments here apply to not only gender diversity but also to that of race, ethnicity and sexual orientation.
Despite the clear benefits of gender diversity—and 74% of companies stating their CEOs have a high commitment to furthering diversity—less than half of all employees believe it is a top priority according to Women In The Workplace. Many companies already recognize the benefits and have programs in place for employees, but the fear of negative repercussions lead many employees to avoid participation. For a true shift around gender in our workplace, we all need to participate as investors, employees and entrepreneurs. Babson College’s Diana Report cites that the number of women venture capital partners declined from 1999 to 2014. Of course, this has a compounding impact on female-led startups since VC firms with female partners are twice as likely to fund companies with a woman on the management team. Gender diversity isn’t easy, but the reasons for every company, and employee, to get involved are compelling.
Want better financial returns than your competition? Of course, who wouldn’t? The most gender diverse companies are 15% more likely to outperform their industry averages according to McKinsey. How about a 15% increase in profitability? A Harvard Business Review study found that a transition from women representing 0% of leadership positions to 30% of positions is linked to a 1% increase in net margin, or a 15% boost in profitability for the average company.
At Cora, as a company focused on women’s rights and health, we’re perhaps unique in having a male on our founding team. While our team so far consists of majority women (71% female), we know diversity allows us to approach both our day-to-day challenges and broader strategy with perspective that wouldn’t be possible in a less-diverse team. We think this perspective comes from greater creativity and better problem solving, two skills proven more proficient within gender-diverse teams.
Looking towards innovation to grow and survive? Companies that prioritized innovation (measured as a ratio of R&D expense compared to assets) saw better financial gains when women held at least a portion of leadership positions. But it’s not just studies that recognize the benefits of a more diverse team. Global powerhouse adidas has identified diversity as a strategic goal and is building this asset into the core of its operations. Adidas increased the number of women in management significantly to a 2015 target of 35%. Diversity and gender equality are hot topics in the business world, but big companies are changing their behavior for one primary reason – diversity is good for business.
At Cora, we developed our modern method for period management as a result of our diverse team. During the first concept stage of our startup, co-founder Molly Hayward was primarily concerned with the health, safety, and performance of the organic tampons we would offer. As a longtime user of tampons, that was the most critical part of our offering from her perspective, and indeed for our customers. As a non-user of tampons, Co-founder Morgen Newman had no history or preconception of what managing one’s period could or should feel like or entail. From his perspective, he was able to see an opportunity to introduce innovations, including a novel way to store and carry tampons.
Is problem solving critical to growing your business or boosting performance? Increased diversity on teams correlates to teams that handle conflict (and solve problems) better. How does this work? Margaret A. Neale, Professor of Organizations and Dispute of Stanford, discovered that it was actually the awareness of diversity on the team itself that drove the difference in behavior. When teams could see diversity, like a teammate’s gender or race, the team was cued that opinions amongst the group could differ. In turn, they weren’t surprised when conflict or varying opinions eventually surfaced, and tended to enhance the team’s ability to deal with the conflict.
The research of Katherine Phillips of the Kellogg School of Management reveals that homogeneous groups process information less carefully because of the inherent comfort of their group. Groups with more diversity, on the other hand, saw increased performance because the awkwardness or understood differences in the group caused them to interpret information more carefully.
Easy Isn’t Best
Phillips is clear that diversity isn’t always easy. In fact, increased diversity is associated with discomfort, perceived interpersonal conflict and a lack of trust, among other problems. However, it is precisely this pain that leads to greater creativity, problem solving and innovation. Being with colleagues similar to us allows us to believe we share the same perspective, have the same information and thus we prepare and interact less thoughtfully which diminishes creativity and innovation.
Our team at Cora hasn’t exactly agreed on every critical decision initially. However, the mixture of genders involved in a business focused on women’s wellness and rights leads us all to a more cautious approach and more open minds to the optimal path forward. What began as a disagreement over whether we should offer free samples led to the rollout of an incredibly successful referral model, which utilizes free samples. I don’t think we would have arrived at that customer-pleasing, growth-driving solution with a team that wasn’t so open minded.
Prioritizing diversity in your team isn’t supposed to be easy, just as building a tampon business as a female/male team at Cora isn’t easy. But then again, growing your business isn’t supposed to be easy. We know the easy path isn’t always the best path, and the evidence is clear: include more women (and create more female-friendly policies) in your ranks not just because you should, but because you will have a better performing, more innovative and faster growing business.
Molly Hayward & Morgen Newman