The argument goes like this: getting more women into leadership is the right thing to do. The just thing to do. The moral imperative for diversity is powerful enough to have women leaders.
Except that it’s not.
Morality isn’t enough. The case for gender diversity is primarily a business one. Companies with greater gender diversity on their boards and among their leadership teams win. By a LOT. They out-innovate. Out-maneuver. Out-hire. Out-perform financially.
Gender diversity is about competitive advantage and performance. “Because it’s the right thing to do” simply isn’t enough — and certainly doesn’t reflect the value and performance that female leaders drive. The climate of the last couple of years from #MeToo to Social Injustice has pushed the morality argument to the forefront of everyone’s mind. However, if we want to demolish tokenism, we have to focus the conversation on performance and outcomes, not just what’s “just.”
Crushing the competition
The proof is in the data. A 2007 McKinsey study identified, assessed, and tracked nine leadership behaviors that drive organizational excellence and corporate performance. Of the nine behaviors, women leaders applied five of them more frequently than their male counterparts. The result: stronger organizations that delivered better performance. The magic is in critical mass: only multiple women leaders at multiple levels working together delivered these impacts.
The benefits are sizable. Compared with companies with no female senior leaders, companies in the top 25% for female representation on their executive committees saw a return on equity 47% greater, and a 55% bump on their EBIT margin. Companies with only one female senior leader saw modest gains, but again – the magic is in the critical mass.
Women impact boards, too. A 2012 Credit Suisse report, which analyzed the performance of 2,360 companies globally for six years, found that organizations with women on their management boards were a better investment. “We also found that companies with one or more women on the board have delivered higher average returns on equity, lower gearing, better average growth, and higher price/book value multiples over the course of the last six years,” the report states. More diverse boards were less volatile, creating more stability and higher returns.
Women leaders are good for business. This is not a men vs. women issue. It is about the power of greater balance to drive superior outcomes.
Wired for success
Greater gender diversity in leadership is also sound science. A 2013 report published by the Proceedings of the National Academy of Sciences explored the differences in men and women’s brain structure. The study found that “male brains are structured to facilitate connectivity between perception and coordinated action, whereas female brains are designed to facilitate communication between analytical and intuitive processing modes.”
Why does that matter? These findings suggest that women are better at intuitive thought, memory, and critical listening. All these skills are closely correlated to innovation, communication, strong personal skills, and driving performance. As Insigniam’s Building A Competitive Advantage report details, “this reinforces how disruptive leaders — and women, in particular — can influence an organization’s ability to unlock competitive edge.”
Power of the Purse
Women also represent a huge chunk of consumers. In the U.S., women control 90% of household spending, make 80% of healthcare decisions, have the final say on 68% of new car purchases, are the primary household shopper 75% of the time, and make 85% of all consumer purchases in the U.S.
Simply put: women exercise decision-making power over the majority of purchases made in the U.S. – even for products marketed to men.
Here’s the challenge: 91% of women say they don’t think advertisers understand them.
Female leaders not only bring specific advantages to the boardroom, they also bring deep insights into a huge consumer segment. Companies with greater gender diversity in all levels of leadership gain an additional competitive advantage here: a better path to meeting the needs of a crucially influential consumer segment.
A Stagnant Needle
So why, if companies gain such a competitive advantage by advancing more women, aren’t more women getting promoted? Why isn’t the needle on gender diversity among senior leaders moving? That is the subject of another article. However, it begins with moving towards not only what is “just” but is a real competitive and business advantage that creates big financial returns.
About EWF International
Tanis Cornell is CEO of Executive Women’s Forums (EWF) International, a leadership accelerator dedicated to driving business results by increasing the representation of women in the C-Suite and senior management ranks. In addition to their focus on development programs for women, EWF provides a wide variety of customized development programs for companies and teams to expand the leadership pipeline and drive business results for their clients.