Research explains why women in business can improve business performance and decision making.
In 2009 the Guardian reported on research showing that financial funds managed by women fell in value half as much as funds managed by men during the financial crisis. A former partner at Goldman Sachs, who initiated the report, comments: “Where women are present at decision-making tables, the quality of those decisions improves.” A 2008 Cambridge University study of men on financial trading floors hypothesised that economic booms raise testosterone levels, leading to greater willingness to take risks, whereas crashes made men risk averse. A paper from the University of California added that in contrast women were found to make more consistent decisions in all types of situations.
Research by Catalyst analysed financial data and management gender breakdowns of 353 fortune 500 companies. Here’s what they found: “Companies with the highest representation of women on their top management teams experienced better financial performance than companies with the lowest women’s representation.” Catalyst explains that gender diversity provides companies with access to “a large part of the available talent pool” and ensures the inclusion of “individuals who reflect a substantial part of their consumer base”.
Researchers at McKinsey & Company selected “89 European companies with the highest level of gender diversity in top management posts”, and “then analysed financial performance of these companies relative to average for their sector”. Their findings: “There can be no doubt that, on average, these companies outperform their sector in terms of return on equity”. “These statistically significant studies show that companies with a higher proportion of women on their management committees are also companies that have the best performance.” Interestingly, McKinsey also found that companies with three or more women in top management functions score more highly than companies with no women at the top within the following business dimensions: work environment and values, vision, leadership, motivation, capability, accountability, and innovation.
Looking below the boardroom, London Business School found that “when work teams are split 50-50 between men and women, productivity goes up”. Commenting on the research, a Harvard Business article said: “Gender balance, the research posits, counters groupthink – the tendency of homogenous groups to staunchly defend wrong-headed ideas because everyone in the group thinks the same way.”
Several key messages resonate: women can think differently to men; the female perspective can improve decision making; women constitute a large proportion of the available talent pool; women represent and can thus better empathise with female consumers. Such diversity provides balance in business thinking, decisions and behaviours. Research previously discussed in business i further supports the case for diversity of any kind – gender, ethnicity, or age – as it provides improved variety of thinking, ideas and debate, which ultimately leads to improved decision making and business innovation.
In light of these findings companies may choose to work towards two goals. First, companies with little female representation in management may decide to focus on better enabling talented women to rise up the ranks. One approach to achieving this goal is supporting non-linear career paths and flexible working; more generally companies should identify and remove barriers to women rising into management positions. Second, in the broader organisational context, diversity should be considered not just when recruiting, but also – for instance – when assembling teams to work on projects or make decisions.