Finance Industry

3 Keys to Closing the Leadership Gap in Finance, According to Female CFOs

Last year, search giant Google made headlines for reasons the company would probably have rather not. On November 1, 2018, more than 20,000 employees walked out of Google offices around the world in protest of the handling of sexual misconduct allegations that had been made against several top Google executives.

Among those who walked out: Alphabet’s Chief Financial Officer, Ruth Porat.

(Source: Business Insider) Ruth Porat, CFO of Alphabet

Not that long ago, a sight like that would have been unthinkable. Not just the sight of a CFO walking out of her office alongside her team, but the sight of a female CFO, period. As recently as 1980, there were no women in the top executive ranks of Fortune 100 companies.

That’s starting to change. According to Fortune, there are now 64 female CFOs in the Fortune 500, a 2x increase from a decade ago. But there’s still a long way to go. After all, 64 spots represent just 12.5% of all CFO positions in the F500.

Women are starting to make cracks in the glass ceiling in finance. In honor of International Women’s Month, we’re looking at what it will take to shatter that ceiling once and for all. Or, to put it in financial terms: if the outcome we’re trying to drive is advancement and empowerment of women, then where should we be putting our investments in order to yield a 10x return?

The answers are structural, and they go all the way to the top. If the goal is more women in leadership positions in finance, there are three main areas where we should be putting our focus:

  1. Increased access to sponsorship from senior executives — both women and men
  2. Company cultures and policies that promote better work-life balance
  3. Transparent, metric-driven hiring and promotion practices that prioritize diversity and inclusion

By focusing on these areas—and removing the structural roadblocks that are creating undue friction in women’s careers—we can build on the momentum of the women who have already reached the peak of the finance world and unlock a flywheel effect that propels more and more women into finance’s upper ranks.

The persistent myth of the pipeline problem

When talking about problems of diversity and gender representation in the workplace, be it in finance or any other industry, there are two words that are virtually guaranteed to come up: “pipeline problem.” There aren’t more women in these industries, or in leadership positions within the industries, because there are simply not enough women to fill them. Women just aren’t studying these disciplines or applying for these roles at the same rates men are. We can’t hire or promote people who aren’t there.

The only problem with this reasoning is that it’s not true.

While the pipeline problem may be a real challenge in other industries, there’s no evidence of it in finance. Over half of all accounting degrees are being obtained by women, and females make up 51% of entry-level associates in North American financial-services firms.

But something happens as you move up the chain of command. By the time you get to the VP level, just 26% of positions are held by women. At the senior VP level, it’s 20%. Then we come to the C-Suite, where just 18% of roles are held by women. The drop-off is more precipitous for women of color than it is for white women. While women of color make up 21% of entry-level financial services employees, they make up just 1% of C-level executives.
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Overall, there is a huge disparity in promotion rates between women and men, particularly white men. And the biggest impact happens early. According to McKinsey, women are 24% less likely to attain their first promotion than their male peers, even though they request promotions at similar rates.

As Ruth Porat said back in 2014, when she held a different high-profile role as CFO of Morgan Stanley, “If a woman ‘leans in,’ but is leaning against a door that is nailed shut, no amount of leaning will bust down the door.”

Concern for female advancement is not pure altruism or idealism; it’s a business consideration. A 2016 study by the Peterson Institute of more than 21,000 organizations found that a company with 30% female leadership could expect to add up to six percentage points to its net margin when compared with a similar business with no female leaders.

“Companies need to make sure they’re not just recruiting women in, but helping them to stay on and move up,” says Nextdoor CEO and former Square CFO Sarah Friar. “There’s so much research out there to show that companies with diverse teams make better business decisions and have better financial returns. Honestly, what more evidence do you need?”

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The role of mentorship

Sarah Friar knows a thing or two about staying in and moving up. Today, she’s the CEO of Nextdoor. Before that, she was the CFO at Square and took the company public in 2015.

But back in 2011, Friar found herself at a career crossroads: should she stay on at Goldman Sachs, where she had worked her way up to a Managing Director role over 10 years with the company? Or should she take the leap into a completely new company and industry with a VP job at software company

According to Friar, the clinching factor came in the form of a conversation with one of her mentors. “He told me that I would be a great operator. And he told me this every time I would see him,” she recalls in an interview. “It caused me to question my career choice to date and gave me such confidence to take the leap. Any time I’m thinking small, he’s always thinking big on my behalf.”

Sarah Friar’s story underscores the critical role that mentorship plays in advancing women’s careers. According to the 2017 Women in the Workplace report from and McKinsey, women who receive advice from managers and senior leaders on career advancement are more likely to be promoted.

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But that mentorship can be difficult for women to come by. According to McKinsey, less than half of the financial services companies surveyed have formal sponsorship programs, while only 58% have formal mentorship programs. And research shows that entry-level women as a whole are less likely to receive support from managers and senior leaders than their male counterparts.

Recognizing the crucial role mentorship played in their own professional lives, senior women in finance are doing their part to pay it forward to the next generation. Gilead Sciences CFO Robin L. Washington established the Women’s Leadership Forum with the express purpose of providing career guidance and support to women professionals.

“As a senior female leader, it is an honor and responsibility to support and encourage women along their career and life journeys in the same way that my mentors and sponsors have supported me,” she has said.

Mentorship and sponsorship from senior women to junior women are vital. But it’s unrealistic to expect the small percentage of female leaders to shoulder all of the burden for championing younger women’s careers. Given the demographics at the top, if we want to see greater advancement for women, powerful men will need to do their part to mentor and champion the promising women who work for them.

“When I was in my twenties, I had what I call a ‘first believer,’ a man who said, ‘Why don’t you apply for this principalship?’” Jacqueline Molnar, Chief Compliance Officer of Western Union, told McKinsey. “I had excluded myself in the typical way: ‘I’m too young. I haven’t done this before. I only hit seven and a half of the ten requirements.’ Having had that sponsorship, particularly by a man, was profound for me.” 

Promoting work-life balance

Kim Jabal has had the kind of career trajectory plenty of ambitious women might aspire to. After stints at Goldman Sachs and Andersen Consulting (now Accenture), she spent eight years at Google, including two leading investor relations for the company. Since 2013, she’s held the CFO title at three different companies: first at startup Path; then at website builder Weebly, which sold to Square under her leadership; and currently at Unity Technologies.

At the same time, Jabal has also raised a family—a balancing act she talked about in an interview:

“I think the key is to let yourself off the hook on at least some things,” she says. “For example, I truly prioritize family dinner with the kids. I am almost always there unless there is a legitimate need to stay in the office. And I prioritize time with the kids on the weekends. However, I absolutely never volunteer for field trips or the carpool lane and I don’t usually make it to routine doctor appointments (having help at home is key to making all of this work). My kids often eat cereal for breakfast and that’s ok.”

It’s one thing for a woman to feel comfortable setting clear work-life boundaries once they’ve already reached the pinnacle of their field, as Jabal has. For women earlier in their career—those critical years when the gender discrepancy starts to widen—the dynamic can be harder to navigate.

It’s a fact that Jabal herself recognizes. “It gets easier as you get more senior in your career,” she says in the interview. “I remember teetering after I had young children on whether I should drop out of the work force or try to juggle it all.”
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(Source: Wall Street Journal) Women continue to report shouldering a greater share of domestic responsibilities than men.

That women leaders are so often asked questions about balancing work and home, when their male counterparts seldom are, is telling in itself. Nearly half of senior-level women say that they continue to shoulder most household responsibilities, while just 13 percent of their male peers say the same.

That imbalance in home obligations can have very real and very devastating consequences for women’s career trajectory. “One of the surefire ways for an individual to feel overwhelmed and burned out is to take on an overwhelming share of housework and child-care responsibilities in addition to their regular job,” says Karen Rubin, managing director of Talking Talent, a coaching consultancy that focuses on working parents and women’s advancement.

The challenge of balancing work life and home life can be particularly difficult to manage in finance, an industry that has a long history of requiring rigid schedules full of late nights, two factors that don’t mix well with daycare pickups and doctor’s appointments.

As Kim Jabal notes, the way out of the motherhood penalty is for organizations to normalize and encourage participation in flexible work initiatives like parental leave and work from home, for men and women alike.

“Until there are equal leave times for both maternity and paternity, until there are more leaders that have priorities outside of work (whether children or partners or otherwise), it will be hard for anyone trying to balance multiple priorities to be respected and to succeed.”

Hiring and promotions

Sallie Krawcheck has turned women’s financial empowerment into a personal mission. After rising through the ranks in the banking industry, including stints as CFO at Citi and CEO at Citi Wealth Management and Merrill Lynch Wealth Management, she co-founded a digital investment company, Ellevest, with a specific focus on women’s finance.

In 2018, Krawcheck made waves in the finance world when she posted a photo on social media showing the names of 46 newly appointed managing directors at the banking firm Morgan Stanley.