I periodically update the research that forms the business case for improving gender balance in organizational leadership. There are new studies linking gender diversity and better financial results every year. I include some in my latest (spring 2017) update.
Most people don’t change, or willingly go along with change, because the change is “the right thing to do.” They are more likely to change if there is a good reason to do so. Businesses are unlikely to change their corporate cultures because doing so is “nice” for women. They may do it if there is a compelling business reason to do so. The bottom line reasons to achieve gender diversity in leadership are indeed compelling.
The business case for diversity and inclusion generally:
- Gallup has convincingly linked engagement with positive business metrics including productivity, profitability, quality, employee commitment and retention. Diversity can improve the bottom line. When combined with an inclusive culture, diversity has an even greater impact on business outcomes.
- An inclusive workplace is one where more of today’s diverse workforce is engaged. According to studies cited by Scientific American, organizations with inclusive cultures have greater innovation, creativity and bottom line results.
- Turnover has significant direct and indirect costs. Companies with inclusive cultures have lower turnover.
- An organization with a reputation for being a good place to work for diverse groups has an easier time recruiting talent from today’s diverse hiring pool. That saves money and time.
- Many people believe that a group with diverse backgrounds and perspectives makes better decisions than a homogeneous group. Research shows that diverse teams process facts more carefully and are more innovative.
- A diverse culture that mirrors its markets tends to do better than its homogeneous competitors. The buying power of “minority” groups is large and growing rapidly.
The business case for a gender-diversity
The business case for gender diversity includes all of this and more:
Returns: Gender diversity in leadership is strongly correlated with higher returns, profitability and share price. Diverse groups (while harder to manage) simply perform better.
- Catalyst research shows that companies with a higher percentage of women in executive positions have a 34% higher total return to shareholders than those that do not. Another Catalyst study found that companies with the most women directors outperform those with the least on return on invested capital by 26%.
- McKinsey found that, in a group of publicly traded European companies, those with gender diversity in leadership experienced higher return on equity, operating profit, and stock price.
- SCI Inc. studied the financial performance of U.S. companies from 2011-2016 and found that those with at least three women on the board had median gains in return on equity 11% higher, and earnings per share 45% higher, than companies with no women directors.
- Gallup studied 800 business units from the retail and hospitality industries in 2014. They found that gender-diverse business units had better financial outcomes, including revenue and net profit, than those dominated by one gender. Financial performance was dramatically better for gender-diverse business units that were also highly engaged.
- Credit Suisse Research Institute reported that companies with at least one woman on their board outperformed the peer group by 26% over the preceding six years.
Talent Pipeline: To have the most skilled and talented workforce, a business must attract and retain women as well as men. In most industries, the talent pipeline includes and will include a large percentage of women. Engaging as much of your workforce as possible is good business; engaged employees do more and better work and are less likely to leave.
- According to Catalyst, women are nearly half of the workforce and hiring pool.
- According to the U.S. Department of Education, for school-year 2016-17, women were projected to earn 57.3% of B.A.’s, 58.3% of M.A.’s and 52.2% of doctoral degrees.
- Gallup has shown a correlation between high employee engagement and a number of performance outcomes including higher productivity, quality and profits.
Women’s Market: Women represent a growing portion of the customers, clients and partners of many businesses. Women have tremendous buying power. Tapping this market is crucial to business growth.
- Women influence more than 85% of retail decisions.
- The women’s market is crucial to many industries.
- Women are of growing importance in business-to-business relationships; they make up 43% of purchasing managers.
- Women-owned businesses have a huge impact on our economy.
- Women control trillions of dollars of wealth.
NOTE: you can download a shorter version of the business case here.