After a month of celebrating Women’s Small Business Month, I decided to write one final post on the Integrated Marketing Blog to wrap things up and call attention to an article in Harvard Business Review that asks what the growing number of women-owned SMBs really means. The piece, “More Women Starting Businesses Isn’t Necessarily Good News,” by Morra Aarons-Mele, takes a look at the bigger picture — women and corporate America — and points out that perhaps the statistics reflect continued dissatisfaction in large-business circles.
To review, first the stats. According to the National Woman’s Business Council:
- There are 7.8 million women-owned businesses in the United States. This reflects a 20.1% increase from 2002 to 2007.
- Women-owned firms make up 28.7% of all nonfarm businesses across the country and generate $1.2 trillion in total receipts.
- A full 88.3% of these firms are non-employer firms.
- The remaining 11.7% of the firms have paid employees, employing a total of 7.6 million people across the country with a payroll of $217.6 billion. These employer firms have average receipts of $1.1 million.
And, according to the American Express analysis of Census Bureau:
- Between 1997 and 2014, the number of women-owned businesses in the U.S. rose by 68 percent.
- Women are starting an estimated 1,288 companies each day, up from 602 in 2011-12.
The numbers look fantastic. The growth is ongoing. But, Aarons-Mele is troubled by the numbers and I must say, I concur. She writes:
“New data show women starting new businesses at a ‘torrid’ pace … They are starting businesses twice as fast as men.”
So, why are women starting businesses so fast?
According to the American Express analysis as written by Morra Aarons-Mele, “Women self-report that they often start businesses often to seize control of their time and schedule at work. And I understand the pull of leaving a strict corporate job for your own venture; I started my business in direct defiance of working for someone else.” I did the same.
Here’s the problem according to Aarons-Mele. “The economic impact of most women’s small businesses may not be what’s best for women, their families or the economy in the long run. As Alicia Robb from the Kauffman Foundation notes, ‘Less than 2 percent of women-owned firms reach that [million dollar] revenue threshold, and that is the same exact percentage as a decade ago.’ Women-owned businesses are disproportionately in industries where the median receipts are less than $225,000 (and businesses with receipts less than $100,000 are more likely to fail). Most women struggle to replace their corporate salary, and 88% of women owned businesses are sole proprietorship, non-employer firms.”
So let’s take a look at what’s happening:
- Women are graduating from college in higher numbers than men and permeating the workforce — at least at the entry and middle management levels.
- The women who make it to leadership roles perform better than their male peers, by several metrics.
- More women are C-suite executives than at any time in our nation’s history.
Yet, writes Morra Aarons-Mele reporting the widely known statistics, “women earn less money than men for the same work, and the difference in pay is especially stark for women of color… Boards that drive corporate and personnel decisions are largely ‘male, pale and stale.’ Women’s wages as compared to men have only increased about a half a penny a year for the last 30 years—and even more slowly in the last ten years. Women are now stuck in middle management. According to the Feminist Majority Foundation, ‘At the current rates of increase, it will be 475 years – or until the year 2466 – before women reach equality in executive suites’.”
Progress has stalled. I had hoped things would be different for my daughters’ generation. My mother had hoped things would be different for my generation.
“Perhaps it’s not surprising that so many women choose to go freelance, consult, or start small businesses,” writes Aarons-Mele. The push factors of work-life conflict combined with pull factors of more autonomy and potential for real engagement and reward feel tough to beat. And yes, starting your own company is a great solution for many women, but it also creates a brain drain for many industries and increases economic insecurity for most women entrepreneurs. I bet many women would love to remain in companies, earning more money, working with more autonomy, and playing a leadership role.”
We are at a crossroads. Without parity we all lose. We do need more successful female women entrepreneurs – but not at the expense of more great female corporate executives.
Aarons-Mele writes, “Economist Claudia Goldin notes, ‘The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours.’ Goldin’s research finds the smallest gender pay gap for women in technology, pharmacies, and tax preparation. Female pharmacists make 91 percent of what men do, the smallest professional pay gap. It’s about control and time flexibility: ‘Jobs in which employees can easily substitute for one another have the slimmest pay gaps, and those workers are paid in proportion to the hours they work’.”
To advance women through the management ranks, Aarons-Mele says give women sponsors; not mentors. Offer them the game-changing assignments offered to their male colleagues. Evaluate men and women on the same metrics, “rather than judging the men on potential and the women on experience.”
So, though we spent the month cheering our clients and other small businesses started by women, I do agree with Aarons-Mele in her argument that asks us to take a look at why.
“Perhaps instead of unquestioningly cheering women starting new businesses, we need to more critically examine why so many women are leaving, and how we might get them to might stay,” Aarons-Mele concludes. “Entrepreneurship has been marketed as a great alternative to the strictures of a traditional job — but that vision is often a fantasy … It’s time to implement solutions that are proven by data and supported by leadership at the top, not just cobbled together by each individual alone.”
