By Erin Hoffman
Forty percent of all businesses in the United States are owned by women. Women business leaders have come a long way over the decades, but research and anecdotal evidence supports the idea that there are still some ingrained traits that hold women leaders back. In our work with business leaders, we’ve found many differences between female and male business owners. Some of these differences are a source of strength, while others hinder the success of a women-owned business.
According to the Kauffman Foundation, women-owned businesses tend to be smaller than their male counterparts, financed at a lower rate, less profitable, and slower to grow. Also, women-owned businesses employ an average of 0.7 workers, while privately-held companies employ 1.9 workers on average.
Take for example this story of one of our clients. Two leaders, one man and one woman, took our Collaborative Leader™ Assessment. The woman’s scores were some of the highest we’ve ever seen, yet she still expressed doubt in her leadership abilities and wondered if she should be leading more like her male counterpart (who actually scored lower than her in the leadership assessment).
Why do women often feel this way? Here’s a closer look at some research that provides solid evidence about why women face these specific challenges.
Women Decline to Take Risks
We find that women business owners are less comfortable with risk than men. From a young age, women are strongly socialized to follow the rules in school, and are often rewarded for doing so. According to an article in Harvard Business Review, girls excel in school compared to boys due to their insistence on following the rules. In business, however, women end up succeeding less than men because of their conditioning to follow the rules.
This is especially true when it comes to applying for jobs. Women are likely to only apply for a job when they meet 100% of the qualifications outlined in the job description; men, on the other hand, will feel confident to apply if they only have 60% of the qualifications. As noted in the Harvard Business Review article, 78% of women who don’t apply for a job based on the listed qualifications believe that the qualifications are requirements, when in reality they are guidelines for the position. This ‘by the book’ behavior is not just detrimental in job promotions, but for women business owners. Pushing the boundaries can lead to business success when risks are taken to go after a big client or develop a new product; overall, women are less likely to push as hard as men.
Another risk women are more averse to is taking on debt. Not utilizing debt can actually hinder a business’ growth. A study conducted by Biz2Credit found that the average size loan for women-owned business is 31% less than male-owned businesses; this translates to women holding an average loan of $48,341 vs. the average male business leader loan of $70,239.
Women Are More Self-Critical Than Men
Since childhood, women are socialized to get along with the group; we’re taught not to brag or self-promote, making us hardwired to be more critical of our performance at work. Research from McKinsey & Company found that women are also less likely to receive credit for their work than men, and criticism for failures is louder. This criticism or failure sticks with women, and they tend to be overly critical of themselves and take actions to avoid failing, such as not going after a big account or selling a new product or chasing a new market. These hindrances affect a woman’s ability to assertively promote herself or her business, which can limit her ability to acquire clients, partners, and financing.
Interestingly, a study out of Cornell University found that there is really no difference in quality or quantity of the work performed by men and women — however, men tend to overestimate their performance while women underestimate theirs.
While the research and personal experiences in business can feel disheartening, there are so many ways women can improve their confidence and take the risks that they need to in order to succeed. In fact, one of the best ways to battle these statistics is to be aware of them. When a woman business owner assesses her behaviors that are inhibiting her and/or her company’s growth, she can overcome them. Utilize trusted business advisors to get their perspective on how to play at a higher level.
Changing a way of thinking and acting won’t happen overnight. And, perhaps, a woman has no desire to change. Use these differences as a strength; for example, less risk can lead to greater stability within the company.
Women can adopt a “ready, aim, fire” mentality and work on not letting the fear of risk become paralyzing. Instead, determine the goal to be achieved and move forward, making adjustments along the way. ‘Firing’ and taking risks is the first step to gaining traction and climbing the success ladder.
Finally, realize that no one has all the answers! Think “10%, not 100%” — in this context, it means a business leaders just has to be 10% better than their competitors, or 10% ahead of their clients. No one is ever 100% ready/better/smarter/more prepared. Become inspired with this knowledge and take those risks to build confidence and success.