GENDER DIVERSE COMPANIES HAVE INCREASED PROFITABILITY
As a global survey of 21,980 firms from 91 countries by the Peterson Institute for International Economics found last year, the presence of more female leaders in top positions of corporate management correlates with increased profitability of those companies.
Researchers found that going from having no women in corporate leadership (covering the CEO, the board, and other C-suite positions) to a 30 per cent female share was associated with a net margin increase equivalent to a 15 per cent increase in profitability for a typical firm.
The key, it seems, is not about making ‘star’ female recruits or putting the same women on multiple boards (dubbed ‘the golden skirt effect’). Nor is it about appointing a single woman CEO in an otherwise male-dominated company. Having a female CEO, in fact, was not found to have a positive or negative impact on the bottom line. What does make a difference is substantial female representation throughout the top levels of a company, demonstrating a pathway for women to succeed through the ranks.
Another survey last year, this time by Catalyst, analysed Fortune 500 companies. That piece of research found that firms with the highest percentages of women board directors delivered stronger performance: on average, a 53 percent higher return on equity and 66% higher return on invested capital.
Data from Australia too, supports these findings. Research by La Trobe university into 500 ASX-listed companies over a seven-year period found a positive association between board diversity and firm financial performance and concluded that ‘the results suggest that bringing together a diverse range of skills and experience on boards improves business performance and could improve decision effectiveness’.
WHAT WOMEN BRING TO THE BOARDROOM
I’m always wary of prescribing some behaviours as more female than male, but there is evidence that, whether as a result of social conditioning or innately, women and men do apply different skills as leaders in the workplace.
McKinsey & Company has identified three behaviour sets more typical of female leaders.
Women tend to define expectations and responsibilities clearly amongst their direct reports and reward achievements. They mentor their staff and listen to individual needs and behaviours. They also have the ability to act as role models within an organisation, displaying strong and consistent values.
Clearly, you can deduce that a senior leadership team lacking in these behaviours is unlikely to perform to its full potential, especially when we discover that men prefer such leadership behaviours as individualistic decision making and taking corrective action on underperformance.
It’s the balance of all these skills and behaviours that make for the strongest possible team.
These findings are backed up by female board members such as Barba Norris, a director of Vic Super. As she told researchers from a landmark report on Women on Super Boards by The Australian Institute of Superannuation Trustees (AIST), “generally women work very well at getting everybody included and coming up with a consensus.”
“Women bring a mindset in that they actually want an outcome. They don’t bring ego into the room. Men tend to play nicer in the room when women are around.”
Once women make it to senior management, the positive effects continue, as their presence ends the ‘boys club’ mentality and decreases gender discrimination throughout the ranks, which helps to recruit, promote, and retain top talent.
PRACTICAL SOLUTIONS TO BRIDGE THE GENDER GAP
If we can accept that increasing the number of women in C-level positions is a good thing for economic performance, it’s time to look at what we need to do to make this a reality.
One way to do this is to look at countries which have a high number of female leaders and see which social policies may have contributed.
The Peterson study I referred to earlier identifies a few key trends, which have their roots in our education system.
Countries where girls performed better in maths at age 15, (based on PISA results) were more likely to have a higher proportion of women at C-level and on corporate boards. Just another reason why we need to engage our girls in STEM from a young age.
Moving on tertiary education, it makes sense that when more women undertake degree programs associated with management, they go on to attain those management positions (how can we attract more young women toward these degrees?)
Generous parental leave policies (including paternal leave) are another key factor, helping to ameliorate the impact on a woman’s career so common during childbearing years.
Lastly, having a society which does not have discriminatory attitudes toward female executives creates an environment in which women are encouraged to achieve, and are more likely to be hired. This is something we can all play a part in.
Other groups are taking more decisive action, calling for penalties for companies which fail to appoint any women to their boards. Australia's peak super investment body, the The Australian Council of Superannuation Investors (ACSI), will instruct its members to vote against any incumbent director who sits on an all-male board when investors meet with companies during this year's annual meeting season in October.
We can no longer accept that appointments based purely on merit don’t have built in biases which maintain only serve to maintain the status quo - hence all those Johns and Peters.
As ACSI chief executive Louise Davidson says, "It seems odd to me, if you appoint on merit, that you end up with a whole lot of blokes of a similar age and similar background."
This is a very positive industry development from an influential peak body - though I echo the concerns of Fortescue's Elizabeth Gaines, in that we don’t want to drain the C-suite of women to meet board targets - increasing the overall pool of talent is what we need to aim for.
JOINING THE 30 PER CENT CLUB
The good news is that there are many people fighting the good fight to achieve greater diversity for women at C-level and on boards. One such organisation is the 30 Percent Club, which has chapters all over the world, including Australia, focused on achieving a minimum 30 per cent female representation on S&P/ASX200 boards by 2018. This is certainly achievable, given that we reached 24.6 per cent by 2016.
But why stop there? Women make up 51 per cent of the population. Why not aim for 40, or even 50 per cent representation?
The reality is that we have to start somewhere, and we know that 30 per cent is the tipping point where we actually see company performance positively affected. All it takes is for every person of influence to make a genuine commitment to diversity.
Will you join me?
If you are inspired and would like to join the revolutionary movement that Imalia is creating, you can request to join our Facebook group The Wolfpack, to share ideas and learn from other like-minded women.
