More Women, More Money: Companies Getting Both

During most of my nearly thirty years in corporate America, working with public and private companies of all sizes and industries, I’ve held a senior leadership role – had a “seat at the table,” surrounded almost exclusively by men.  This is not surprising.  Only twenty-three Fortune 500 companies are led by women, only nineteen percent of public board seats are held by women, and only fifteen percent of senior leadership roles are held by women.  We’re barely moving the needle; we need to actively build and keep our pipeline of female talent. 

My view on gender balance in corporate leadership roles comes from a grounded, executive’s point of view:  The reason we need the change has to do with money.  Imbalance dilutes business performance.  Gender balance improves it.

Companies can and do thrive with men firmly in control, but given the growing evidence about the business value of gender-balanced leadership, you have to wonder how much more successful they could be with this additional resource in the management ranks. What is the real cost of maintaining these men’s clubs? Is it worth the price?

The boardroom gender gap has spurred various initiatives, along with plenty of research to support what is common sense: If a roomful of men can draw on their experiences and insights to help a business succeed, a roomful of men and women drawing from a deeper pool can achieve even more.

In a 2010 study, a group of professors from Carnegie Mellon University and the MIT Center for Collective Intelligence found that a group’s gender mix is among the factors affecting shared aptitude: The more women a group has, the better it performs on tasks such as brainstorming, decision-making, and problem-solving. By measuring the ability of groups to perform a wide range of tasks, they determined that it was not the intelligence of group members that affected performance but the correlation to the social sensitivity of the groups, which affected turn taking in conversation, and the proportion of females in the groups. They refer to the measurement of this type of group intelligence as the c factor, or collective intelligence.

Having more women in leadership affects culture, and behaviors change in ways that improve their overall effectiveness when more women are part of the conversation. Some of these include enhanced dialogue, better decision-making, including the value of dissent, and more effective risk mitigation and crisis management, with better balance between risk-welcoming and risk-aversion behavior.

Credit Suisse Research Institute’s 2012 Gender Diversity and Corporate Performance report presents findings that show better financial performance and stock market valuations among companies with gender-balanced boards. The data is striking: Since 2005, publicly traded companies with more than one woman on their boards have seen stock market returns of a compound 3.7 percent a year higher than those with no female representation. Firms with a higher proportion of women on the board have higher valuations, better returns on equity, and higher payout ratios. In every sector, from telecommunications to utilities, companies with no gender balance on the board have lower-than-average market capitalization; those with three or more female board members exceed the average.

In 2014, Credit Suisse Research Institute expanded research to include data on women in senior management. It paints a similar picture: Firms with women in fifteen percent or more of their top jobs consistently outperform those with under ten percent. And as the leadership team becomes more balanced, results improve, according to Credit Suisse, which surveyed 3,000 companies across forty countries and all major sectors.

There are organizations that don’t need further convincing, such as global personal-care products maker Kimberly-Clark Corporation, which created its Unleash Your Power Initiative in 2009, when only two of the nine corporate officers who reported to the CEO were women, despite the company’s predominantly female customer base. By 2013, five of the nine executives were women, and annual revenues and profits had increased. Companies like Kimberly-Clark understand that women are playing an increasingly crucial role in the global economy, controlling more than eighty percent of United States consumer spending, for example, and representing about half of all shareholders.

The companies who are changing their ways and building pipelines of talent with more women and seeing improved results are doing so based on the insistence of top male executives.  Proctor & Gamble, Johnson & Johnson, IBM, Dove Brands (owned by Unilever), and consulting company Ernst & Young are all examples of companies thriving with more women in leadership. This momentum can continue if men will continue to supply the critical mass needed to drive this change because men hold most positions of power.

From 2014 to 2016, I interviewed thirty CEOs and other top executives from retail, financial services, health care, law, biopharmaceutical, distribution, marketing, publishing, consumer services, technology, and other industries, as well as government. The leaders who are driving change recognize that women need more flexibility at certain times in their lives, but are just as productive as their male colleagues. These executives also push outside their comfort zone to find female talent by going outside of their established networks, or take a second look around their organizations and sometimes take a risk on a woman who wasn’t raising her hand. They understand that women often need to be invited to the party rather than inviting themselves.

[Image Courtesy: Tumisu/Pixabay]

About the Author

Melissa Greenwell is the author of MONEY ON THE TABLE:  How to Increase Profits Through Gender-Balanced Leadership (Greenleaf Book Group, January 2017).  She is Executive Vice President and Chief Operating Officer of national retailer The Finish Line, Inc. You can learn more at www.melissa-greenwell.com.