Why We Need Women in Leadership (the post that started it all)

I first posted this on my Reclaiming Leadership blog in June 2012. It still gets positive responses today.

I’m a woman and I like to hear about women making it big in business, but I keep running across data that says that we still aren’t up there with the guys – despite “overwhelming evidence” that companies that have women in leadership roles outperform those who don’t. Curious and wary of my female ego puffing up the whole gender for my personal benefit, I decided to research this “overwhelming evidence.”

Here’s what I found out. It’s true. More women in leadership measurably helps companies succeed.

Here’s a little summary of some of the data out there on women in leadership and the benefits they bring to the organizations they serve, starting with the hard line performance and profitability numbers.

• “…. Companies with three or more women in senior management functions score more highly on average (on nine dimensions of company excellence). It is notable that performance increases significantly once a certain critical mass is attained, namely, at least three women on management committees for an average membership of 10 people. “  (Women Matter, McKinsey 2007)
• “Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors.” (Catalyst, October 2007)
• “A selected group of companies with a high representation of diverse board seats (especially gender diversity) exceeded the average returns of the Dow Jones and NASDAQ Indices over a 5 year period.” (Virtcom Consulting)
• “An extensive 19-year study of 215 Fortune 500 firms shows a strong correlation between a strong record of promoting women into the executive suite and high profitability. Three measures of profitability were used to demonstrate that the 25 Fortune 500 firms with the best record of promoting women to high positions are between 18 and 69 percent more profitable than the median Fortune 500 firms in their industries.” (European Project on Equal Pay and summarized by researcher Dr. Roy Adler  in Miller McCune).

There are many other studies about the softer benefits of female leadership.

• “The standard argument is that diversity is good and you should have both men and women in a group. But so far, the data show, the more women, the better.” From the Audio: In part this may be because women in a group change the behavior of the men. (Harvard Business Review on group intelligence, June 2011)
• “The status and role of women is a very good clue to a company’s growth potential. When women are at the table, the discussion is richer, the decision‐making process is better and the organization is stronger. Integrating a gender lens into investment strategies can, in my view, improve long‐term investment performance. Investors need to start taking notice.” (Joe Keefe, President Pax World Investments, February 2011)
• “Female managers – as rated by their bosses, themselves and the people who work for them – were rated significantly better than their male counterparts. This difference extends beyond the ‘softer’ skills such as communication, feedback and empowerment to such areas as decisiveness, planning and setting standards.” (Pfaff & Associates, September 2009)
• “Of particular interest is the fact that overall trust in female CEOs remains higher than trust in male CEOs, as was the case last year. And most of this increasing level of trust was experienced by non-managers, who registered an increase of a massive 11 index points in their trust for their female CEO between 2009 and 2010.” (Management Today September 2010).
• “Women leaders are more persuasive, assertive and more willing to take risks than male leaders. Women leaders were found to be more empathetic and flexible, as well as stronger in interpersonal skills than their male counterparts. These qualities combine to create a leadership style that is inclusive, open, consensus building, collaborative and collegial.” (Caliper Corp. 2005)

I found it intriguing that two of the studies (HBR and Virtcom) tried to focus on diversity, but still ended up calling out the presence of women as a decisive factor

Despite the fact that these studies have been published across the last decade, little has changed in our business culture.  The “30% solution” – identified by McKinsey (above) and coined by Linda Tarr-Whelan in her book Leading the Way – now commonly references the point at which individual businesses and the business sector in general will benefit from women’s special talents and skills in their leadership ranks. However, “(i)n (the last) 10 years the proportion of women board members on Fortune 500 companies has barely crept up from 12 to 15 per cent and 60 have no women.” (Linda Tarr-Whelan, Financial Times April, 2011). So we’re barely half way to the tipping point and as Calvert Investments reports recently, there are still many all white, all male boards who do not believe they have a diversity issue.

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UPDATED 11/10/11: I’ll add new data in this section to keep this post current.

• How Women Can Contribute More To the US Economy – McKinsey (you have to register to see the whole report, but it’s worth it. Good data.)
• A Solution for a Struggling Global Economy: Gender Equality – Forbes 10/11 (women are the world’s 3rd largest emerging market after China & India, Goldman Sachs found reducing barriers to women’s participation in the labor force would increase America’s GDP by 9%, the Euro Zone’s by 13% and Japan’s by 16%.)
• Gender Equality Boosts Development – World Bank (full report)
• Women-led Startups Are The Key To Job Creation – Kaufman Foundation (as reported in FastComapny)
• Women in Tech Help Startups Succeed – Illuminate Research (2010)
• Girls Count – Research on the impact of healthy adolescent girls in developing economies (2009)
• Women in Leadership Make Companies More Generous (Philanthropically) – Harvard Business School (2011)
• INFOGRAPHIC – Statistical review of women in the workforce (Forbes 2011)

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I don’t blame the men and I don’t blame the women for not “fixing” the system, because this is a cultural issue and culture doesn’t tend to change overnight. We humans – even when faced with objective information – tend to be irrational when the alternative is change.

However, the facts remain that our economy can’t find its way out of a paper bag and yet there are untapped resources right under our noses for higher performance in our businesses. These resources – women – constitute:

• 40% of the management workforce
• 46.8% of the total workforce
• 42% of MBAs
• 59% of bachelor degrees
• 61% of master degrees
• about 50% of of law and medical degrees.

So… it’s not like we’re scarce or anything.

There are good ideas and strategies about how to help women break the glass ceiling to reach the 30% solution tipping point to power-up our economy, but it’s easy to overthink a thing as complicated as culture and years of such corporate planning has yielded little change.

So what do we do without overthinking? Some advice seems self-evident and very cheap.

• Men – put your irrational fears aside. Open yourselves up to a new way of doing business and invite this plentiful resource in to help you thrive.
• Women – you’re powerful no matter where you are or what you’re doing. The research says that your very presence in a group helps the group become more intelligent. Don’t hide your natural talents even though they look different than what the male-dominated culture around you says they should look like. It’s what they need from you even though they don’t know it. Step out and stop waiting for someone to give you permission and just shine. What are you waiting for?

Try it. See what happens.

Join the discussion on LinkedIn: How can we best explore the special nature of women’s power – how to cultivate it and nurture it – across the cultural divides that separate us? Add your thoughts!

Special thanks to Marcia Reynolds, Jane Perdue and Dr. Anne Perschel for many of these links and insights.