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If Businesses Don’t Just Perform “As Well” When Women Join the Ranks of Leadership—They Do Better—Why Don’t All Companies Want to Bring Women On Board?

Administrator Uncategorized

If there were a proven strategy that could triple your company’s revenue, double its profitability, and increase the engagement of half your workforce, would you do it?[1]

 

With the exception of a few noteworthy and much-remarked-upon female CEOs or entrepreneurs, male supremacy has always defined the business world.

Although equally bright and talented, women have made scant progress in securing executive or board positions. In June of 2017, the Fortune 500 list included a record 32 women CEOs (and 468 men.) By the end of 2017, what had been a promising start fizzled: that number dropped to only 26 women—or about 5%, including Meg Whitman, who left her post as CEO of Hewlett Packard Enterprises on February 1, 2018.[2]

The same holds true in the boardrooms. The number of female directors appointed to Fortune 5oo board seats actually declined between 2016 and 2017. Just over 20% of board seats at Fortune 500 companies are currently held by women. Moreover, “diverse” board members (women and minorities) are significantly less likely to be chairmen of the board or to chair audit and compensation committees and are paid 3% to 9% less that their non-diverse counterparts.[3]

The power dynamics of the workplace still remain rooted in traditional patterns of male dominance. This statement would be unsurprising but for a decade of highly publicized empirical studies analyzing the factors that increase corporate productivity and management effectiveness. The data-driven result of these studies is both simple and powerful: Promoting women to senior positions makes companies more money.

In 2016, a study from the Peterson Institute for International Economics and Ernst & Young reviewed the business performance of almost 22,000 publicly traded companies in ninety-one countries around the world. They found that having women in the top ranks was tied to better overall profitability. In fact, increasing the number of women in company leadership roles from zero to 30 percent correlated with a 15 percent increase in profits.[4]

Similarly, an older study by Catalyst found that the Fortune 500 companies with the most women on their boards of directors performed significantly better financially, on average, than the companies with the lowest representation of women. Companies with three or more female board directors performed even better than that. Companies with the most women on their boards outperformed those with the least in three crucial financial metrics: return on equity (53 percent higher), return on sales (42 percent higher), and return on invested capital (66 percent higher). The correlation was also found across many industries, from consumer goods to IT.[5]

Many other studies support the same conclusion: Companies simply perform better when they have more women in leadership positions.

That leads back to the question: As a business leader, if there were a proven strategy that could increase your profitability and double your return on equity, return on sales and return on invested capital, why wouldn’t you do it?

Never mind the high-minded principles of increasing diversity, encouraging inclusion and acting fairly. Good old-fashioned greed alone should justify elevating more women. Now that the increased profitability of companies with women in leadership has not only been chronicled in a slew of research studies, but has received extensive coverage in Forbes, the Harvard Business Review, Business Insider, Fortune, and the Wall Street Journal, it’s time for male executives and board members to listen. Money talks louder and clearer than good intentions. If business leaders are as smart as they think they are, and if they want to boost their companies’ performance, they’ll start promoting women to executive and board positions.

Women, stay strong and fight for the leadership roles we deserve. Together, we can unleash our power.


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[1] Leadership Research Institute, “Women Leaders and Profitability: Are You Playing with Half a Team?,” August 12, 2016.

[2] Catalyst. Women CEOs of the S&P 500. New York: Catalyst, February 2, 2018.

[3] Field, Laura Casares and Souther, Matthew and Yore, Adam S., Does Diversity Pay in the Boardroom? (November 17, 2017). 2nd Annual Financial Institutions, Regulation and Corporate Governance Conference.

[4] Daniel Victor, “Women in Company Leadership Tied to Stronger Profits, Study Says,” The New York Times, February 9, 2016, based on a study by Joelle Jay, Marcus Nolan, Tyler Morgan, and Barbara Kotschwar, “Is Gender Diversity Profitable? Evidence from a Global Survey,” Peterson Institute for International Economics, February 2016.

[5] Nancy Carter, Lois Joy, Harvey Wagner, and Siriam Narayanan, “The Bottom Line: Corporate Performance and Women’s Representation on Boards,” Catalyst, October 15, 2007.

 

 

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