Especially during the past two crisis-ridden years, it has become clear that small and medium-sized enterprises (SMEs) serve as an anchor of stability, an engine of the economy, and a driver of innovation and technology for the German economy. German SMEs are a model of success that is the envy of the international community.
To ensure that they remain vital, strong, and innovative in the future, challenges must be actively addressed. In addition to starting a business, securing succession in existing companies is one of the fundamental elements of a dynamic and successful market economy. It is estimated that, on average, more than 70,000 family businesses face a handover each year. This handover can take place within the family or externally. According to various analyses, women still play a subordinate role in business succession. Although approximately 45% of the workforce is female, women in the role of entrepreneurs are still not the norm.
Are companies missing the leap into the modern era and squandering valuable potential? For small and medium-sized enterprises (SMEs) and family businesses to unleash their potential and strengths more effectively, a shift in mindset must take place and the framework conditions must be improved. Women and men should by no means be pitted against each other. However, a shift in mindset is needed in Germany. By international standards, Germany lags far behind other industrialized nations such as the U.S., the U.K., or France. Ultimately, the untapped potential of women in leadership positions weakens Germany as a business location. Numerous studies show that the more diverse a company’s leadership is, the more successful and innovative the company becomes.
Strong women for a strong and sustainable economy—now is the time! The new federal government has adopted the motto “Dare to Make More Progress” for its legislative term; in my view, this is also a fitting guiding principle for embarking on a new decade of women’s advancement in the economy. We all still have the image of the Munich Security Conference fresh in our minds, where 30 men—the CEOs of major German companies—are seated at a lunch table. Such images seem as though they belong to the past—yet they are a bitter reality of the present. This must change urgently.
The financial industry and the private equity sector will also have to do their part here. May 1, 2021, marked the tenth anniversary of my tenure as managing director of the Federal Association of German Private Equity Firms. Looking back on the past decade, many things have already moved in the right direction. While women in investment teams and leadership positions were an absolute rarity at the beginning, the numbers have since improved significantly.
Today, 20% of the members of investment teams at German private equity firms are women. At the senior level, however, the figure is only 8%. Nevertheless, women as investors are much more visible today and serve as role models for future generations. A large number of organizations and networking events have now emerged that are committed to sustainably improving the environment for women.
Through the diverse activities of these organizations and mentoring programs, we have succeeded in attracting more women to the private equity industry. It will be crucial in the future to offer these women medium- and long-term career prospects so that they remain in the industry and can deepen their experience and expertise over the long term. In the past, we have lost too many talented individuals due to challenges balancing family and career. If we succeed in this, we will see more women in senior positions in a few years. More women in leadership roles mean more role models for young talent and serve as an incentive to pursue a career in private equity.
A higher proportion of female investors will also go hand in hand with a rising number of female founders in the long term. Currently, only 1.6% of venture capital goes to female founders, and over 90% of investments go to male founding teams. These figures speak for themselves and are discouraging for many female founders. It is important to break this cycle.
Diversity is a crucial factor for the future success of our economy. Given the social and economic challenges we face, we cannot afford to do without the entrepreneurial drive and creativity of women. It’s time to address the current injustices and break down barriers to bring about social change. To paraphrase Margaret Thatcher: “If you want something said, ask a man; if you want something done, ask a woman.” Let’s get to work!
