In my last post, I gave some thoughts on the “leaky talent pipeline” issue–that women leave the business world and professions at a much higher rate than men. Right after (4/11/11), the WSJ published a long report on “what’s holding women back in the workplace.” I love seeing focus on this issue. In this and the next few posts, I’ll explore the business case—i.e., why you should care that women are leaving or not making it to the top.
The first reason you (leaders, managers, men and women) should care is that diversity is very good for your bottom line. If you aren’t tapping the talents of half your workforce and are allowing much of it to leave, you are not getting a good return on your investment. But, worse, you are losing this very important driver of results.
You know this from experience, but the research backs it up: the best decisions come from groups with a variety of perspectives. This is surely behind the research that shows a strong correlation between gender diversity and bottom-line results.
Catalyst, the global leader on topics related to women and business, studied the 2004 financial results of the Fortune 500. Comparing the results of companies with the greatest gender diversity in senior management with results of companies with the lowest representation of women at the top, they found significant differences. Those with the most women (greatest diversity) had 35% higher return on equity and 34% higher total return to shareholders. http://www.catalyst.org/press-release/2/catalyst-study-reveals-financial-performance-is-higher-for-companies-with-more-women-at-the-top. Looking at financial results for the same year, Catalyst found an even greater difference between companies with the highest number of women on their boards and those with the lowest number of women directors—53% better return on equity, 42% higher return on sales and 66% higher return on invested capital. http://www.catalyst.org/file/139/bottom%20line%202.pdf In 2009, Catalyst compared results of companies with “sustained high representation of women” (three of more women directors in at least 4 of 5 years) with those with no women directors. They found that those with sustained representation of women on their boards had 84% better return on sales, 60% better return on invested capital and 46% higher return on equity. http://www.catalyst.org/file/445/the_bottom_line_corporate_performance_and_women’s_representation_on_boards_(2004-2008).pdf;
In business, the norm is for men to be in charge—and therefore predominantly masculine perspectives to influence decisions. With gender diversity in management, there is a greater chance that there are both masculine and feminine perspectives doing the thinking, leading and decision-making. Having women at senior levels doesn’t magically produce great financial results. What produces great results is having diverse perspectives in the decision process. This is a powerful reason to stop the leakage of women from your talent pipeline, retain and engage them, and be sure more make it to the top!
Share any facts or stories you have demonstrating that diversity pays!