Gender Diversity in Top Management and Its Impact on Company Performance

I think the real benefit of having women and diversity in a team is that you have a richer set of ideas. So, I truly believe there is a direct relationship between team performance and having a diverse team with the best talents. – A Vice-President of a leading global healthcare company Nowadays it seems that everyone has something to say about gender diversity in the corporate environment.

There are a lot of issues and concerns in this field, such as why there are still so few women in top leadership positions, or why women are increasingly choosing to leave the corporate workforce to start their own companies or to focus on motherhood, for example. There are a lot of theories and hypotheses about its causes and results. In the past few decades, women have made great progress in their involvement in economic activity.

Today women’s college participation and graduation rates exceed those of men, and more and more women are pursuing “traditionally male” college majors and jobs, particularly in professional fields such as law and medicine. However, the proportion of women in managerial occupations is still very small. And the higher one climbs within a company or institution, the fewer women one tends to find.

Our goal in this term paper is to prove that there are some proven business reasons for including women in corporate leadership positions. It should not be just intention for businesses to favor female in the sense of positive discrimination or quotas. And companies with women on top positions can really benefit from it. To achieve this goal we set the number of objectives: • to select a couple of articles which consists some significant research related to the topic.

In order to trace the transformation of attitudes over time the articles should be from different time periods; • to review the situation about women’s leadership in different countries; • to analyze all the information and draw conclusions; • to offer some ways to achieve gender-balance on top of company’s hierarchy. Two articles have been chosen as a base for our research: “Women leaders and the bottom line”, by Robin Cohen and Linda Kornfeld, Bloomberg Corporate Law Journal, Vol. , Winter Issue 2005-2006 and “Moving women to the top: McKinsey global survey results” by Charlotte Werner and Sandrine Devillard, Harvard Business Review, October 2010. We start with the synopsis of each of the articles in order to give present the information. WOMEN LEADERS AND THE BOTTOM LINE, By Robin Cohen and Linda Kornfeld (Synopsis) There needs to be a shift in the focus of the gender diversity debate to a discussion about the proven business reasons for including women in corporate leadership positions In order to prove this fact several studies were reviewed. Study |Detailes |Results | |“The Bottom Line” case for gender diversity | |1) “The Bottom Line: Connecting | 353 Fortune 500 companies were examined in order to prove|“The group of companies with the highest | |Corporate Performance and Gender |the correlation between increased gender diversity at the |representation of women on their top management| |Diversity,” by the independent |highest levels and improved financial performance. |teams experienced better financial performance | |research organization Catalyst | |than the group of companies with the lowest | |(2004) | |women’s representation,” with a 35. % higher | | | |Return on Equity (ROE) and 34% higher Total | | | |

Return to Shareholders (TRS). The same results | | | |were shown, when examined by industry. | |2) “Women in the Executive Suite | 215 Fortune 500 firms were evaluated for their support|The Fortune 500 companies with a higher number | |Correlate to High Profits”, Harvard|of women executives and respective profitability. In this |of women executives outperformed the median | |Business Review |study, companies were reviewed from 1980 to 1998 for their|firms in their industry on all three measures. | |(November 2001) |promotion of women to leadership positions. In addition, the firms that had the best scores| | |Then, the top 25 firms for women were examined on three |for supporting and promoting women were more | | |different measures of profitability relative to the median|profitable than their peers with | | |Fortune 500 companies in their industries. These measures |merely “very good” scores. | | |included profits as a percent of revenues, assets, and | | | |stockholders’ equity. | | |3) “Florida Census of Women | Florida’s top 150 public companies were examined. |Companies with the highest revenues generally | |Directors and Executive Officers” | |have more women on their boards. |(2005) | | | |4) The Forum of Executive Women in | The boards at the 100 largest publicly held companies in|Those in the two highest revenue groups ($5 to | |Philadelphia (2005) |the Philadelphia region were examined for the fact how |$9. 9 billion and more than $10 billion) have | | |they reflect gender diversity |women on their boards, while those in the | | | |lowest revenue groups (less than $500 million) | | | |have none. | |5) Annual Survey of Fortune 500 |Fortune 500 counsel companies run by women While the number of women running the legal | |Women General Counsel (2005) | |departments of Fortune 500 companies grew by | | | |only one person between 2004 and 2005, revenues| | | |for the companies with female general counsel | | | |grew from $73 billion to $79. 9 billion over the| | | |same period. | |6) “Stock Returns and the Promotion|Firms that appear on Fortune’s list of top diversity |A positive stock price reaction following | |of Workforce Diversity”, by K. M. |promoting firms from 1998 to 2002 were examined. |publicity over diversity promoting initiatives | |Ellis and P. Y.

Keys (2003) | |was documented, supporting the idea that the | | | |market values | | | |workplace diversity. | |7) Center for women’s Business |Women-owned companies were examined. |Between 1997 and 2002, sales for privately | |Research, Press Release dated May | |held, women-owned businesses (50% or more) | |6, 2003. |increased by 32%, while the average increase | | | |for all firms was only 24%. | |Additional business reasons for gender diversity | |8) National Center for Education |American educational system in 2002 was examined. |Women earn more than one half of all | |Statistics. Digest of Education | |bachelor’s and master’s degrees in the United | |Statistics (2002) | |States (57. % and 58. 5%, respectively), nearly| | | |one half of all doctorates and law degrees | | | |(44. 9% and 47. 3%, respectively), and comprise | | | |about one half of the U. S. paid labor force | | | |(46. 5%). | |9)National Association for Law |Nation’s major law firms were examined. It is estimated that the cost to lose a third | |Placement research (2005) | |to a fifth year associate can range from | | | |$300,000 to $500,000 once recruiting, | | | |training, and development costs are | | | |considered, and even more for minority | | | |associates, who are | | | |fewer in number in the legal marketplace. | |10) Simmons School of Management |Over 400 women volunteered to take our survey. These women|75% aspire to be influential leaders in their | |and Hewlett Packard research (2004)|averaged 43 in age, with an average work experience of 20 |organizations, and nearly half have the | | |years. |highest leadership positions in sight. | |11) “Behind the Exodus of Executive|General Electric, Procter ; Gamble and I. B. M. , as well as |Why executive women leave their companies: | |

Women: Boredom,” by Claudia H. partnership firms like Booz Allen Hamilton, Ernst ; Young |“the answer has less to do with discrimination| |Deutsch, The New York Times, |and Deloitte ; Touche were examined. |in the corporate suite or pressures at home | |(2005). | |than with frustration and boredom on the job”. | |12) Simmons School of Management |Over 400 women volunteered to take our survey. These women|“contrary to conventional wisdom asserting | |and Hewlett Packard research (2004)|averaged 43 in age, with an average work experience of 20 |that women are often ambivalent about power, | | |years. 80% indicated that they were comfortable with | | | |power, respected it, and liked what they could| | | |accomplish with it, 65% said that they saw | | | |power as important to effective leadership, | | | |and 70% wanted power in order to change their | | | |organizations”. | Furthermore, women provide unique management styles that can be beneficial to an organization. Women tend to have the following important tendencies: working to form connections with others in order to develop relationships, • focusing on team building and working collaboratively toward a common goal, rather than individual success, • having a greater natural tendency to deal comfortably with “multitasking”, • tending to focus on the “big picture” when making important business decisions or developing strategies, • developing and motivating others through positive reinforcement, and • talking through business approaches and incorporating the ideas of others before making final decisions. The studies are clear: businesses that embrace gender diversity throughout their organization and up to the highest ranks will have a competitive advantage.

The bottom line is that the business case for diversity is strong. Companies with gender diverse leadership teams have seen the positive results and are outperforming those without women at the helm. The prospect for improved financial performance is a business case that cannot be ignored. MOVING WOMEN TO THE TOP: MCKINSEY GLOBAL SURVEY RESULTS, by Charlotte Werner and Sandrine Devillard (Synopsis) 72% of respondents to a recent McKinsey survey (September, 2010: 772 men and 1,042 women) believe there is a direct connection between a company’s gender diversity and its financial success. It is 12 percentage points more since last year’s survey. It is notable that a majority of men agree.

But the survey shows that diversity isn’t a high priority at most companies and that there’s great variability in the number of gender-diversity policies that companies have pursued. The results suggest that at companies where gender diversity is higher on the strategic agenda and more related policies are implemented, the company leadership is also the most diverse. By contrast, the share of respondents whose companies have gender diversity as a top-ten agenda item has held steady at 28%. There has been some movement at the bottom: last year, 40% said it was not on their companies’ agenda at all, and this year that figure has fallen to 32%. Where diversity is a higher priority, executives also report a higher share of women in their senior ranks.

There is also some geographic variability: respondents in Asia-Pacific and developing markets are more likely to say that gender diversity is a top-ten agenda item for their companies (35% and 34%, respectively) than those in other regions. In Latin America, just 21% of respondents say their companies’ agendas include gender diversity as a top-ten item, with 27% of those in Europe and 28% of those in North America also saying so. Around the world, more than 80% of respondents say that since the financial crisis began, there has been no change in their companies’ view of gender diversity as a strategic issue, no matter what that view is; this figure seems at odds with the rise in the past year in the share of those who believe that companies with more women leaders perform better.

Respondents in Asia-Pacific and developing markets are likelier to say gender diversity has become a more important strategic issue at their companies. The higher the priority of gender diversity, the more likely a company is to take actions in support of it. The amount of actions rises at companies where gender diversity is a top-three agenda item. The most frequently chosen action was flexible working conditions (43%). After flexible working conditions, the companies are likeliest to have implemented support programs for reconciling work and family life, as well as programs to encourage female networking and role models, both in equal shares (29%).

Larger companies are likelier to take more actions to achieve diversity. The responses of C-level executives highlight a few actions that seem to boost gender diversity markedly. For each potential action, companies were divided into two groups: those where they had taken the action and those where they had not. Then the companies with more than 15% of women at C level were examined. Three actions stand out: visible monitoring by the CEO, skill-building programs aimed specifically at women, and encouraging or mandating senior executives to mentor junior women. There were some region-by-region differences in approaches to recruiting, retaining, promoting, and developing women employees.

Companies from China and developing markets are more likely to use hard measures—gender quotas or requirements for female representation in promotion pools, for example—than those in Asia-Pacific or North America, where companies rely more on soft measures such as flexible working conditions or mandates for senior executives to mentor junior women. How CEOs can overcome barriers. Just 18% of respondents say their companies’ CEO and executive team visibly monitor some efforts, though nearly half say visible monitoring has the biggest impact on increasing gender diversity in general—more than any other tactical measure. Twice as many women as men say a low level of CEO and top-management ommitment is one of the biggest barriers to implementing gender diversity at their own companies; the single most frequently chosen barrier among all respondents, however, is a lack of awareness of or concern for gender diversity as a critical matter. Just 7% of all respondents say their companies have had difficulty in implementing a top-management monitoring policy. Of those respondents whose companies have implemented monitoring in the past five years, 65% say the measure was impactful. C-level executives are aware of their potential impact: 49% of men and 60% of women in top management agree that their visible monitoring has the biggest impact on increasing diversity at corporations in general. Looking ahead: A majority of executives believe that gender diversity improves financial performance, but far fewer translate that belief into action. Improvement in gender diversity can result from increasing top-management attention and positioning it higher on the strategic agenda. • The actions that senior executives indicate boost diversity the most: visible monitoring by the CEO, skill building specifically aimed at women, and mentoring, even on a mandatory basis. • CEOs and top-level executives who are aware of their potential impact on this issue can benefit their companies by paying visible attention to it. Conclusions and suggestions After synthesizing and analyzing the information provided, we made the following conclusions.

There is a clear correlation between women’s presence on managerial positions and company financial performance. The authors of the first article give us the results of numerous studies and surveys in order to prove it. A higher number of women executives directly affect such financial indicators as return on equity, total return to shareholders, profits as a percent of revenues, assets, revenues, stock price, and etc. There are also additional reasons for gender diversity such as higher percentage of educated women than men, the cost of loosing an employee, women’s aspirations and willing to become leaders, frustration and boredom on the job as the main reason why executive women leave their jobs.

Women, possessing some important characteristics such as ability to form connections with others in order to develop relationships; focusing on team building and working collaboratively toward a common goal, rather than individual success; “multitasking”, focusing on the “big picture” when making important business decisions or developing strategies; can provide unique management styles that will be beneficial to an organization. The diversity isn’t a high priority at most companies and that there’s great variability in the number of gender-diversity policies that companies have pursued. And the attitude toward it hasn’t changed too much over the last ten years. It is definitely growing, but the rate of growth is still low. There is also some geographic variability: gender diversity is more likely to be a top-ten agenda item for Asia-Pacific companies and for developing markets. North America, Europe and Latin America have significantly lower rate.

The most frequently action to support gender diversity is flexible working conditions, then implemented support programs for reconciling work and family life, as well as programs to encourage female networking and role models. Three actions that really bring the results: visible monitoring by the CEO, skill-building programs aimed specifically at women, and encouraging or mandating senior executives to mentor junior women. Low level of CEO and top-management commitment is one of the biggest barriers to implementing gender diversity at companies; the next barrier is a lack of awareness of or concern for gender diversity as a critical matter. Thereby, gender diversity is not an evolution, but an imperative in today’s marketplace.

It may take an effort to accommodate a changing workforce, but the business benefits are unmistakable. In addition to the unique characteristics inherent in women, the other important element they bring is that they can help boards and executive committees and other business heads understand how to market their products and services to women. The proportion of women now responsible for the buying decisions of high-priced products such as cars and computers is staggeringly high. Given the opportunity, proper support, and effective role models, women will pursue power and leadership, and goals much broader than their personal benefit, such as strengthening their companies and contributing to their business communities.

Women’s goals today are to achieve management level positions and to use leadership roles to affect positive results. Women’s abilities and work approaches are assets in a corporate leadership position, and when properly utilized, can contribute to greater business success. Examples of steps that businesses can take to achieve gender diversity may include: supporting unique networking and communication styles; providing customized professional development; focusing on the development of role models to assist younger women in identifying a path to success; offering alternative work schedules; and leveraging specific skills and talents of individual employees.