€146 billion in annual GDP could be unlocked by 2030 by closing the gender gap
Since the transition to a market economy three decades ago, Central and Eastern Europe (CEE) has enjoyed what many have called a golden age of growth. The region recorded an increase in per capita GDP of around 110 percent in the 15 years between 2004 and 2019. However, the factors driving that growth—such as labor cost advantages and strong traditional industries—are now losing momentum. CEE needs to find new sources of competitiveness. One promising source of growth: closing the gender gap in the workplace. In the seven CEE countries analyzed here—Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia, and Ukraine—women are underrepresented in corporate leadership. Our research shows that stepping up efforts to close this gender gap in CEE could unlock as much as €146 billion in annual GDP by 2030, or roughly the size of the economies of Slovakia and Croatia combined. This great gender opportunity could put the region squarely back on a path to dynamic growth.
McKinsey studies have shown that a larger share of women in top management positions correlates to better financial performance by individual companies. To confirm that this correlation also applies to companies in CEE, we augmented a five-year global study of 1,000 large companies with new information from more than 200 major companies in the Czech Republic, Hungary, and Poland. Our analysis of the entire data pool revealed that companies with the greatest gender diversity in their executive teams have shown above-average profitability 26 percent more often than those with the least diverse executive teams.
CEE companies aiming to increase the representation and power of women in the workplace face unique challenges. Their societies lag behind Western European neighbors with regard to gender parity, as measured by the McKinsey Global Institute’s Gender Parity Score. One statistic that confirms this: CEE women have just a 21 percent share of positions in national government. It’s true that these countries are currently on par with most other European regions regarding workplace parity. But societal inequities and a lack of leadership representation could undercut that.
Only 8% of CEE companies have a female CEO
In CEE countries, women account for more than 60 percent of college graduates—but just 8 percent of CEOs and 19 percent of corporate executives. Some 44 percent of companies don’t have even one woman on their board. As we’ve mentioned, this hits companies on the bottom line. But it also affects corporate cultures. The McKinsey Organizational Health Index Survey has shown that companies with a higher proportion of women in leadership positions employ management practices that are better aligned with the future needs of organizations, including an employee-centric approach to communication, engagement, and supporting colleagues; creating a clear purpose and compelling vision of the future; and building strong business partnerships.
By 2028, Western European countries may have better gender parity than Eastern Europe
Back in 2012, CEE countries were virtually on par with Nordic nations and far ahead of Western Europeans with respect to the representation of female executives. Fast-forward to 2020 and the gap between CEE and Nordic countries has increased sixfold, while Western European countries are on track to surpass CEE nations in 2028. How slowly are CEE countries moving? At their current pace, they may not achieve full executive-level parity until almost a decade after Western Europe and perhaps two decades after Nordic countries.
How can CEE companies accelerate gender equity? For starters, they should listen closely to employees. Executives McKinsey interviewed expressed optimism about achieving gender parity and focused on flexible work options as a key tool. But they also cited fair evaluation and promotions and mentorship and sponsorship programs as other top tools, while employees told us that better childcare and maternity leaves were much more important. More broadly, leaders can drive diversity by role modeling a progressive approach, transparently tracking progress toward diversity goals, ensuring that formal mechanisms support the effort and their employees, raising confidence and building skills via several avenues: sponsorship and mentorship, training on diversity and unconscious bias, and implementing behavior standards that support an inclusive culture. These actions work, which is just one reason we are optimistic that CEE countries can reinvigorate their progress toward gender parity.
Correcting the gender imbalance in Central and Eastern Europe would radically benefit women in their careers and personal lives—and could even transform national economies.