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Female leaders deliver better financial results, studies show
Want your company to have a healthier bottom line?
Put a woman in charge.
A new survey published by HR consulting firm Development Dimensions International (DDI) and The Conference Board reveals that organizations with better financial performance have more women in leadership roles.
Those findings are backed by other research—and experiences on Wall Street.
She’ll Show ’Em the Money
British banking and financial services firm Barclays created the Barclays Women in Leadership Total Return Index to track the performance of U.S. companies with a female chief executive or a board consisting of at least 25 percent female membership, according to The Wall Street Journal, which also stated that those companies "trading on the New York Stock Exchange have generally traded just above issue price."
“Everyone is talking about women in leadership,” said Barbara Byrne, vice chairman in investment banking at Barclays, in the Journal article.
Barclays isn’t the only company taking note of the trend.
“Research from multiple sources shows that companies with more women on their boards have stronger finances,” said Eve Ellis of the Matterhorn Group at Morgan Stanley, also quoted in the article.
Between 2004 and 2008, Fortune 500 companies that had three or more female directors had an 84 percent healthier return on sales and a 46 percent improved return on equity, according to The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004–2008), a report by Catalyst Inc., a nonprofit that seeks to expand opportunities for women in business.
And studies continue to show companies helmed by women do better financially.
Gender Diversity Works
According to the DDI/Conference Board study, Global Leadership Forecast 2014/2015 survey report Ready-Now Leaders: Meeting Tomorrow’s Business Challenges, women trump men when it comes to leading companies.
Gender diversity has been a rousing success for those organizations where at least a third of leadership roles are held by women, the study found. The difference can be seen between the top and bottom financial performers.
Companies in the top 20 percent of financial performance had 37 percent female leadership; among organizations in the bottom 20 percent, an average of only 19 percent of leaders were women. “The same trend emerges in the percentage of leaders who were ‘high-potential’ women: Among organizations in the top 20 percent for financial performance, a statistically significant higher percent of leaders were high-potential women,” stated the DDI study, which included responses from more than 16,000 business leaders and global human resource executives.
Yet, even though female leaders consistently outperform their male counterparts, “women remain underrepresented in higher levels of leadership,” the DDI study said.
Women lack confidence, the study found.
“Men considered themselves more effective as leaders,” the study stated. “This self-confidence is reflected in how highly they rated their leadership skills and ability to tackle management and business challenges. Women, on the other hand, were less likely to rate themselves as highly effective leaders compared to their peers.”
The study also found women were less likely to finish international assignments or lead across geographically dispersed teams.
“Missing out on these key developmental opportunities makes a difference,” according to DDI. Those who took those critical opportunities were likely to be more visible in their organizations and far likelier to advance and be promoted faster in their fields.
From a different perspective, in a 2012 Harvard University study titled Women vs. Men in Leadership, researchers asked why female leaders were so successful despite not having the same opportunities as men.
“When we asked [women] to explain why women were perceived as more effective, what we frequently heard was, ‘In order to get the same recognition and rewards, I need to do twice as much, never make a mistake and constantly demonstrate my competence,’ ” the Harvard report stated.
According to the Statistical Overview of Women in the Workplace, a survey by Catalyst Inc., although women made up nearly 52 percent of management, professional and related positions in 2012, only 14.6 percent held positions in executive offices in 2013, and just 16.9 percent held positions on the boards of Fortune 500 companies.
The DDI study suggested companies do the following to improve opportunities for women in business:
Strengthen current development plans or begin new practices that encourage women to obtain professional development. “Development opportunities build confidence,” the study stated.
Put formal policies in place that encourage the selection of women for leadership roles, and provide opportunities for women to take international assignments.
Encourage women to participate in mentoring programs. They are critical in developing women for leadership opportunities, and women often cite such programs as being instrumental in advancing their careers.
Aliah D. Wright is an online editor/manager for SHRM.
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