Rock Health: Gender diversity leads to better performance of digital health companies

By Aditi Pai
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Gender diversity in leadership roles can improve the performance of a company, but that diversity is still hard to find in digital health, according to a report from seed fund Rock Health.

Although 2014 and 2015 were record years for women CEOs leading Fortune 500 companies, among the 45 healthcare companies on the 2015 Fortune 500 list, just 11 percent had a woman CTO or CIO. Additionally, only 35 percent of these companies had at least 25 percent women on their executive teams. 

“We are trying to understand why there hasn’t been as much progress in healthcare as we’ve seen in other industries, especially given that 80 percent of the healthcare decisions are made by women, often considered the chief medical officer at home. They make up the majority of the healthcare workforce as well,” Rock Health Strategy Manager Teresa Wang told MobiHealthNews. “Being such an important in constituent in healthcare, we are trying to understand what we can do to to really bring more diversity into leadership ranks, because at the most fundamental level, it makes your business better. You perform better as a company.”

When Rock Health broke out the top 10 healthcare companies in the Fortune 500 list, they saw more women in senior level positions at those companies than at healthcare companies lower on the list. Seven of the top 10 healthcare companies on the list had at least 25 percent women on their board and 9 companies had women in C-level positions across their departments.

Wang explained that one of the reasons other industries are ahead of healthcare in gender diversity is that in other industries, companies are starting to value different skillsets than they used to and are therefore bringing more attention to some of the roles traditionally filled by women, like HR and marketing roles.

“I think in healthcare we see a lot of women stuck in administrative roles or nursing roles, and so I think there just hasn’t been enough conversation around why that perspective is actually valuable,” Wang said. “Not because they are women, but because of their exposure and experience. As we shift more to a value-based world in healthcare, I think we are going to see a shift in that. There’s going to be more emphasis on leaders that can help reflect and voice opinions for the patient experience or really value quality and safety and know where to make improvements. I think a lot of women are on the front lines working in that capacity and so they will be able to bring that to the table.”

Rock Health found that gender diversity leads to better performing companies in digital health as well. 

In an analysis of 56 "zombie companies", which Rock Health defines as companies that don’t need or haven’t raised more than $2 million since 2012, 37 percent do not have any women in their executive team and only 15 percent are led by women. Wang said that last year about 13 percent of all companies were led by women. While this may make the 15 percent of women-led zombie companies seem like a high number, she explained that their interviews and secondary research showed that women entrepreneurs often have more difficulty fundraising.

And for "dead pool companies", which are companies that have either declared bankruptcy, no longer have websites, or do not have a team anymore, none are led by women CEOs.

Gender diversity in venture capital is improving, according to Rock Health. In the company’s 2015 funding report, Rock Health counted 29 companies led by women, which is double 2014’s total. And the average deal size for women-led companies that were funded in 2015 was $12.1 million, just below $13.9 million which was the average deal size for companies with male CEOs. Additionally, some 31 percent of companies that were founded and funded in 2015, had a woman CEO. 

But one of the ways that digital health can improve its gender diversity is by working on the gender imbalance in venture capital. 

Rock Health found that, of the 150 venture capital firms that invest in healthcare, 59 percent of them do not have a woman partner and 69 percent do not have a woman partner focused on healthcare. And of the VC firms that invest specifically in digital health, biotechnology, and life sciences, 51 percent do not have a woman partner.

In future research on gender diversity, Wang said Rock Health will continue to look into the role of mentorship in increasing gender diversity as well as what makes a successful leader.

“I think there has historically been this mentality that you have to be more like a man,” Wang said. “You need to be loud and confident and always be the first one to speak in a room, or be able to stand up in front of a large room and present. There are stereotypes or images of what people consider to be a leader, and I think there’s going to be some education or conversation around different types of leaders. And I think that will benefit gender diversity not just saying that women are different types of leaders but just so that women don’t force themselves into a mold that isn’t necessarily the best for them just because they think that’s what they should be.”