If a roomful of men can draw on their experiences and insights to help a business succeed, a roomful of men and women drawing from a deeper pool can achieve even more. Given the growing evidence about the business value of gender-balanced leadership, businesses have to wonder how much more successful they could be with this balance in the management ranks.
In today’s ultracompetitive global economy, even high-performing companies can’t afford to rest on their laurels. Corporate heavyweights spend hundreds of billions of dollars on research and development each year, fine-tuning products and nurturing innovations they hope will give them an edge in the marketplace. Yet most still overlook a far simpler and more affordable investment in human capital that’s been proven to make a difference: getting more women onto their leadership teams and governing boards.
Companies can and do thrive with men firmly in control, but given the growing evidence about the business value of gender-balanced leadership, you have to wonder how much more successful they could be with this additional resource in the management ranks. What are firms missing when women are left out of key decisions? What is the real cost of maintaining these men’s clubs? Is it worth the price?
Following the Numbers
The boardroom gender gap has spurred various initiatives, along with plenty of research to support what is common sense: If a roomful of men can draw on their experiences and insights to help a business succeed, a roomful of men and women drawing from a deeper pool can achieve even more.
In a 2010 study, a group of professors from Carnegie Mellon University and the MIT Center for Collective Intelligence found that a group’s gender mix is among the factors affecting shared aptitude: The more women a group has, the better it performs on tasks such as brainstorming, decision-making, and problem-solving. By measuring the ability of groups to perform a wide range of tasks, they determined that it was not the intelligence of group members that affected performance but the correlation to the social sensitivity of the groups, which affected turn taking in conversation, and the proportion of females in the groups. They refer to the measurement of this type of group intelligence as the c factor, or collective intelligence.
Credit Suisse Research Institute’s 2012 Gender Diversity and Corporate Performance report presents findings that show better financial performance and stock market valuations among companies with gender-balanced boards. While researchers caution that they don’t yet have enough information to conclusively prove cause and effect, the data is striking:
– Since 2005, publicly traded companies with more than one woman on their boards have seen stock market returns of a compound 3.7 percent a year higher than those with no female representation.
– Firms with a higher proportion of women on the board have higher valuations, better returns on equity, and higher payout ratios.
– In every sector, from telecommunications to utilities, companies with no gender balance on the board have lower-than-average market capitalisation; those with three or more female board members exceed the average.