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  • Writer's pictureiKadre

Maintaining Equity When You Exit Your Business: Why it Matters for Women

Updated: Oct 17, 2023

Equity is a key element in DEI (diversity, equity, inclusion) and a core tenet for many women-owned businesses. Maintaining — or even growing — that equity when women leadership exits the company, however, isn’t guaranteed without the right management mindset and vision. With some clear planning, equity can continue to be a solid part of the business, and an ongoing opportunity to bring marginalized groups into leadership positions.

Equity in business has two meanings. Along with the obvious financial reference, it also applies to fairness within a company. In the latter case, equity is the idea that similar roles in a business are equally available and compensated regardless of gender, ethnic background, or any other factor that leads to marginalizing specific groups of people. Running a business with equity as a core principle fosters diversity and inclusion, which is an important part of breaking the generations-old “men are the leaders” cycle that’s preventing too many people from advancing in the business world.

Women entrepreneurs are in a strong position to guide their business so it operates with equity in mind while they’re at the helm. Ensuring that continues when they exit the business calls for planning in advance and instilling their values and vision into the company culture.

Start Planning Early

Your leadership values start even before your business launches. Building that into the company from the beginning helps make those values part of the company’s lifeblood. Leading by example is part of the equation, but also requires strong business and exit plans.

Building a solid business plan is more common for women entrepreneurs because they often face greater scrutiny when seeking investors and funding, according to Boston Consulting Group data. While strong business plans are useful for raising money, they also set expectations for how the company should run, and by extension, how fairly employees will be treated under your leadership, and the leaders who follow you.

Build an Exit Strategy

While waiting until it’s time to retire before thinking about an exit strategy might be tempting, starting on a plan much earlier increases the likelihood of a successful transition when it is time for you to move on. It also helps foster a mindset where you’re considering who — or what types of people — should be in leadership roles after you leave.

Planning for your exit is also about setting up your legacy. Grooming employees with the intent to craft them into leaders not only instills your vision for the company but also helps reinforce equity at all levels of your business. In essence, training with DEI in mind breaks through the barriers that have historically held back marginalized groups such as women, the LGBTQ+ community, and people with disabilities.

Make a Fair Playing Field

Don’t just assume leadership will continue to assert your values after you leave. Set rules and guidelines to ensure employees are treated fairly, define compensation packages that prevent underpaying people in similar roles, and endorse transparency. Including those guidelines, and even explicitly stating discussing compensation is not forbidden, in company policy goes a long way towards ensuring transparency and equity.

The idea that employees shouldn’t talk about compensation with each other is losing popularity, and it’s taking one obstacle to equal pay with it. Employees who know they’re being paid fairly compared to their coworkers are less likely to leave and have a greater sense of trust in the company. At least some of those people will be key employees and leaders — the very people you want to make sure are still there to keep your vision and company culture alive after you move on.

California, Colorado, Washington, and a few other states already have pay transparency laws. The federal government also passed the Lilly Ledbetter Fair Pay Act in 2009 prohibiting discriminatory pay practices. Despite any legal requirements that may impact your company, it’s just good business to promote equity for your employees.

Closing the Door on the Good Old Boys Club

According to a Harvard Business School alumni survey, 76% of senior executives feel “a more diverse workforce improves the organization’s financial performance.” They found more diversity leads to higher team satisfaction, along with higher quality work and better decision-making. Looking at diversity from employees outside of the leadership team, a study conducted by Indeed revealed DEI in the workplace is important to 55% of job applicants.

Equity in the office clearly matters to the leadership and rank-and-file levels in a growing number of companies. That’s creating a great opportunity for women business owners to act as a catalyst to increase equity in the wider business community. The historical reality of white males domineering in the business world created an environment with limited equity where the people who look and act just like they do get promotions and serve as business leaders, perpetuating the “good old boys club.” That mindset is increasingly leaving employees frustrated, unhappy, and more likely to leave for a different job.

When a man exits a leadership role, the chances he would be replaced by another man have been historically high because that’s how businesses worked. When a woman leaves a leadership role, however, that’s an opportunity to break the cycle in favor of equity. Exiting a leadership role as a woman can open the door for an otherwise marginalized person to take on that responsibility and help build the diverse and equity-focused businesses leaders and employees alike want.

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