Companies with more female executives make more money—here’s why
Among the world’s largest 500 companies, only 10.9 percent of senior executives are women, according to Weber Schandwick’s Gender Forward Pioneer Index. A significant share of the companies, 37 percent, have all-male leadership teams, while an additional 21 percent have only one woman.
That’s their loss, because there’s substantial evidence that gender diversity at the management level enhances a company’s performance.
While researchers are still trying to figure out exactly why companies with more women at the top make more money, here’s what they know so far.
Diversity helps make companies profitable, innovative and respected
The Peterson Institute for International Economics completed a survey of 21,980 firms from 91 countries and found that having women at the C-Suite level significantly increases net margins.
“A profitable firm at which 30 percent of leaders are women could expect to add more than 1 percentage point to its net margin compared with an otherwise similar firm with no female leaders,” the report notes. “By way of comparison, the typical profitable firm in our sample had a net profit margin of 6.4 percent, so a 1 percentage point increase represents a 15 percent boost to profitability.”
Joe Carella, the assistant dean at the University of Arizona, Eller College of Management, has found that diverse companies become more creative. “We did our own analysis of Fortune 500 companies,” he tells CNBC Make It, “and we found that companies that have women in top management roles experience what we call ‘innovation intensity’ and produce more patents — by an average of 20 percent more than teams with male leaders.”
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Carella has witnessed this contrast in his own research on the workplace. “Men tend to be more driven to action while women tend to be a lot more conservative in the action that they take,” he says.
“When organizations make decisions, you want to be able to have both” of those influences, he adds.
That is, of course, a generalization. In some studies, women have out-scored men in their ability to take initiative and drive for results. The research into sexual dimorphism is by no means definitive yet and, overall, in terms of their brains, men and women are far more similar than different.
Nonetheless, the benefits of diversity are evident.
The impact of putting women in charge
Having female senior leaders creates less gender discrimination in recruitment, promotion and retention, according to the Peterson Institute. That gives a company a better chance of hiring and keeping the most qualified people.
A strong female presence also benefits the workplace environment. For example, a large U.S. tech company brought in Carella to help lower its high turnover rate of both male and female employees. His solution was to promote two senior female execs to positions where they could influence what had formerly been a boardroom run exclusively by men.
The move ended up making the whole company more transparent and employees stopped leaving at such a high rate.
Without diversity, problems arise beyond a poor retention rate, and some of those can be dire. After the financial crisis, Sallie Krawcheck, co-founder and CEO of Ellevest and former executive at Morgan Stanley and Citibank, asserted that Wall Street’s issue with “groupthink” was partly to blame.
There was a “false of comfort of agreement” among the homogeneous male leaders, she told CBS. “There was no doubt that had we had more diversity of thought, perspective, education, gender, color, the crisis would have been less severe.”
https://www.cnbc.com/2018/03/02/why-companies-with-female-managers-make-more-money.html