Shops Corporation Case Interview | Case Studies - Interview Preparation PDF Download

Client goal

Our client is Shops Corporation. Shops Corporation approached McKinsey for help to improve diversity, equity and inclusion within their company.

Situation description

Shops Corporation, is a US-based retail company that is committed to ensuring that its own employees—especially those at their corporate headquarters—represent its customers. The majority of Shops Corporation’s customers are women, while only about a quarter of their executive team is women. The CEO has shared the following with your team

• Companies in the top-quartile for gender diversity on executive teams are more likely to outperform on profitability.
• Companies in the top-quartile for ethnic/cultural diversity on executive teams are more likely to have industry-leading profitability.

For these and other reasons, Shops Corporation would like to improve diversity, equity, and inclusion throughout their organization. In particular, they are dedicated to enhancing the representation of women and other minority employees within senior leadership.

McKinsey study

Shops Corporation has recently created full-time, director-level roles to lead a number of inclusive affinity groups and has engaged McKinsey to help Shops Corporation with their diversity and inclusion goals.

Helpful hints

• Write down important information.
• Feel free to ask the interviewer for an explanation of any point that is not clear to you.

Q.1. What types of factors would you want to explore to understand how Shops Corporation might improve its diversity within senior leadership?

The following are key areas that Shops Corporation should focus on to promote diversity and inclusion in their organization:

(i) Hiring: Shops Corporation needs to evaluate where they hire from and how diverse the candidate pool is. They should have processes in place to ensure a fair assessment of diverse profiles, such as unconscious bias training.

(ii) Retention: The organization should ensure equity in compensation and have policies or programs in place to retain the best and most diverse talent, such as parental leave or Ramp On/Ramp Off.

(iii) Promotion: The organization should have measures in place to ensure equity in performance reviews and foster greater sponsorship of diverse employees.

(iv) Planning: The company should set target levels for diversity groups and identify the biggest roadblocks in an employee's journey towards senior leadership, such as retention. Hiring entry-level employees may not have a significant impact on diversity in senior leadership if retention rates are low.

(v) Goal Setting: Shops Corporation needs to communicate their diversity goals effectively and ensure that employees are aligned with the company's priorities. If the company is undergoing significant changes in other areas, employees' capacity to address diversity challenges may be limited.

Q.2. One of the things the joint team of Shops Corporation and Mckinsey has been working on is what they are calling a Talent Pipeline. The pipeline displays the career progression for women and their representation across the following 4 levels. From most junior to most senior, they are:

• Professional: this includes entry level hires and support staff (e.g., executive assistants).
• Manager: slightly more senior professionals (e.g., hires after business school) and select support managers.
• Director: vast majority are aligned to revenue generating functions; at this level, individuals typically manage teams.
• Executive: business unit leaders, executive team, etc. managing tens to hundreds of people.

The pipeline shows the proportions for hiring, attrition (proportion of people in that group that left Shops Corporation), and promotion.

What can be possible explanations for the challenges that Shop Corporation faces in achieving and maintaining higher rates of women executives according to this data?

In summary, the answer provides three main points:

Women are not leaving the workforce earlier than men, and even at the senior levels, women are motivated to stay, perhaps because of sufficient connectivity within each level. However, there might be a lack of opportunities for women to advance to the next level.

Junior-level hiring is not a significant issue, but senior-level hires are predominantly men, potentially due to a smaller pool of senior women, making it challenging to find and hire qualified women for those roles.

The primary reason for the under-representation of women in executive positions is lower promotion rates for women. Women tend to get "stuck" in middle management, potentially because there are fewer women in senior positions to sponsor or mentor other women, or there might be fewer women role models for junior women to follow.

Q.3. Shops Corporation is considering hiring more women as managers from external sources to increase its proportion of women executives. They have a goal of reaching 40% women executives in the next 10 years. To understand the impact, the team has gathered the following information:

• The total number of executives today is 300, and is expected to stay the same over the next ten years
• Over the next five years, the team projects that two-thirds of these hired Managers will become Directors; Over the subsequent five years, one-third of those Directors will become Executives
• Over the next ten years, assume a total of 50 percent of these hired Managers will leave
• Everything else stays the same (i.e., existing women employees move through the pipeline at the same rates as they do today)
• As a reminder, 25 percent of Executives are women today

How many additional female managers would need to be hired next year to reach Shops Corporation’s goal of 40% executives in the following 10 years?

In order to increase the number of women executives, Shop Corporation needs to calculate the number of additional women executives to target in the next 10 years. This is done by subtracting the current share of women executives from the target share and multiplying the result by the total number of executives. In this case, the calculation is (40% - 25%) * 300 = 15% * 300 = 45 additional women executives.

To achieve this target, Shop Corporation needs to hire a certain number of new managers today, assuming that these hires will transition along the talent funnel from managers to directors to executives. The calculation involves multiplying the number of new hires by the manager to director rate, the director to executive rate, and the retention rate, which is the rate at which employees stay with the company. In this case, the calculation is X * (1/3) * (2/3) * (1-50%) = 45.

Solving for X, the number of new hires required, we get X = 405. This means that Shop Corporation needs to hire 405 additional managers today to achieve its target of 45 additional women executives in 10 years.