It’s not just gender diversity. It’s business impact.

“We become not a melting pot, but a beautiful mosaic,” said Jimmy Carter, 39th President of USA, describing diversity. Organizations the world over celebrated the essence of this message – diversity is essential, inviting and rewarding. Thus, in lieu of its myriad benefits, diversity has been in the spotlight for over a decade. In particular, gender diversity, whose impact has been examined with much rigor.

Amidst all accolades, one specific edge of gender diversity has captured our attention – its footprint on business outcomes.

  • A 2014 Credit Suisse study of 3,000 companies assessing women in management roles found that more diversity coincides with better corporate performance and higher stock market valuations.
  • A 2014 Thomson Reuters report concluded that companies with no women on their boards had higher tracking errors, indicating potentially more risk.
  • McKinsey found that in a group of European companies, net income growth for companies with women has averaged 14% over the past six years, compared to 10% for those with no female representation.
  • The average return on equity of companies with at least one woman in senior-leadership over the past six years is 16%; 4 % higher than the average ROE of companies with no female leadership.

These numbers are compelling! What about gender diversity makes this happen?

  1. Increase in collective effort. Gender diverse teams generate a wide range of ideas and data. Thus individuals are more likely to prepare extra for any exercise involving such groups, rather than a homogenous one. This attention to detail results in more acute problem solving, says Prof. Catherin Phillips of Columbia University. Moreover, women are more attuned to social cues, and display more sensitivity towards the group. According to Woolley (2010), this distributes conversation in the group, ensuring contribution from all members. As a result, the sum of a group’s work is higher than its parts.
  2. Better mix of leadership skills. NASA studied leadership traits of men and women, and found a significant difference. Women are competent in defining responsibilities, mentoring and building team spirit, whereas men are effective at taking individual decisions and corrective action should things go awry. When gender diverse teams bring these traits together, it positively impacts an organization’s growth. Plus, 75 % of NASA’s male crew reported a reduction in rude behavior and improved cleanliness!
  3. Improved governance. Gender-diverse boards were more likely to focus on clear communication to employees, to prioritize customer satisfaction, and to consider corporate social responsibility, says a study by Harvard Business School (2010). This results in better monitoring of metrics, and off-sets group thinking of all-male boards.
  4. Risk aversion. Research shows that optimistic men add to investment volatility. Their portfolio performance is likely to be extreme – great or poor. The same does not hold true for women: there is no difference in investment styles of more or less optimistic women. Women just remained more risk averse regardless of their outlook. A study by Leeds University showed that having at least one female director on the board appears to reduce a company’s likelihood of becoming bankrupt by 20%. This holds good irrespective of company size, sector or ownership.

Considering such evidence, to gain strategic advantage, it’s only natural that organizations would want access to talent pools which bring all genders together. Thanks to the spike in immigration and globalization, such talent is within our reach. Thus, it’s time to recognize not just our heroes, but our she-roes too!

LEAVE A REPLY

Please enter your comment!
Please enter your name here