Women in leadership - The Return on Representation
How many women do you know—and how many of them are in leadership positions where they work? Probably not as many as you think. Associate Consultant Bailey Ottley investigates the benefits of having female leaders.
While we often speak about the growing number of women in leadership roles, the unfortunate reality is that only about 10 percent of Fortune 500 companies are led by women. Ten percent. However, that 10 percent has shown that having women in leadership positions is actually incredibly beneficial to overall company performance regardless of the industries they play in.
Women in leadership can propel financial performance forward:
“Should I invest?”
It’s a question that we often ask ourselves when deciding how to support our favorite companies—usually through the purchase of things like stocks, assets, etc. To determine if it's worth it, we usually look at financial data because we want to see some form of financial return. Generally, we as investors associate financial success with overall success — but what does this have to do with women in leadership positions?
Research shows that while we only see a sliver of women in leadership positions, “companies with greater than 30% female representation in management and executive leadership outperform their peers. Firms with female chief executive officers (CEOs) and chief financial officers (CFOs) have above-average stock performance, according to research from SP Global. Additionally, companies with a gender-diverse board of directors are often more profitable than those with less gender diversity (Forbes).”
This shows us that while diversity in leadership teams may seem like an overall "nice to have," it is actually much more impactful in financial performance than many of us may have known.
Employee sentiment:
The balance sheet isn’t the only beneficiary. In the world of employee sentiment, there seems to be a correlation between female leadership and trust in the organization. This goes beyond the superficial and delves into employee perception of their own value within a company.
According to the APA, “The mere presence of a female leader relative to a male leader led perceivers to anticipate fairer treatment in that organization and greater projected salary and status, according to a 2022 study led by social psychologist Mansi P. Joshi, PhD (APA).”
It is understood that an employee who feels valued at work tends to be happier and thus stays longer and performs better. In order to achieve this, companies tend to invest in wellbeing and diversity, equity, & inclusion (DE&I) initiatives to encourage employees to feel like they can bring their whole selves to work.
These value initiatives do not happen overnight. According to a LeanIn Women in the Workplace report, “women leaders do more to support employee wellbeing and foster diversity, equity, and inclusion—work that dramatically improves retention and employee satisfaction.” Therefore, it is no surprise that employee trust is higher in companies that have higher leadership investment in DE&I.
The link between leadership diversity and business performance as told by women in leadership roles:
As the popular saying goes, “there is no one way to skin a cat.” The most difficult problems are solved by individuals bringing their own perspectives, impacted by their own experiences, and applying them to the issues at hand. Take it from Linda Rendle, CEO of Clorox who understands that from a product development and sales perspective, embracing diversity is the key to increasing revenue.
Rendle emphasized in a recent interview that when a company,“bring[s] a group of people together who have varying experiences, you avoid things like group think, you avoid having just one way of solving a problem. And that's incredibly important and...we need more of it. It is the case for why I think it seems so obvious why inclusion and diversity matters.”
Rendle isn't the only one who has seen the impact of representation and is pushing the business case for diversity. Ruth Porat, SVP and CFO of Google Alphabet knows that regardless of industry, “businesses perform better when you have diversity of view in your senior leadership positions. This is not just the right thing to do socially; it’s the right thing to do for your business.”
Conclusion:
According to Forbes, “Developing innovations that meet women’s needs can be a “blind spot” for companies in which women are largely absent from senior leadership positions. Although women drive the majority of consumer spending through their buying power and influence, they represent only 6% of the CEOs of S&P 500 companies.”
From tangible products to digital drivers, recruiting women in leadership positions introduces the perspectives that may help connect companies to their key consumer demographics and ultimately gain market potential revenue.
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