Over the last few months I've noticed that there seems to be a
resurgence of interest in discussing the dearth of women in senior
positions in New Zealand. We recently wrote about the gender
pay-gap following the public furore and now I feel it is time
to train the spot light on the business case, the research-based
evidence and the thinking behind encouraging and advocating for
more gender representation in senior leadership and governance
This piece is intended for you to use when you are having these
conversations in the workplace, which I hope you do, and do a
lot! I also hope you might forward it to some of your male
colleagues and mentors.
The business case
The business case has many facets, and there is research
specifically concerned with the financial impact of having more
women on Boards and on Senior Leadership Teams (SLTs). This
piece reviews the research on the impact on companies' bottom lines
when they have more women on their SLTs. If you want us to
write about the reasons as to why might this be the case, please
leave a comment to that effect so we know you are reading!
I chose four pieces of research and digested them for you - so now
you can be armed and dangerous when having these
Catalyst is an American based leading research and advisory
organisation working to advance women in business. At
Professionelle, we look to them for hard, business centric,
research-based evidence on this topic. Their 2004 publication
comprehensively tackled this proposition.
Catalyst studied 353 Fortune 500 companies and used two measures
to examine financial performance: Return on Equity (ROE) and
Total Return to Shareholders (TRS). They divided companies
into quartiles, based on the gender diversity of their top
management teams. The 88 companies with the highest gender
diversity in their top management teams were referred to as
"top-quartile" companies, and the 89 companies with the lowest
representation were referred to as "bottom-quartile"
companies. Top quartile companies had an average of 20.3% of
women on top management teams. The bottom quartile had 1.9%
women on their management teams.
Catalyst's key findings
Top quartile companies experienced statistically significant
higher performance using their measurements.
• ROE which was 35.1% (or 4.6 percentage points)
• TRS which 34.0% (or 32.4 percentage points)
Of the industry sectors studied, the differences between the top
and bottom quartiles were most pronounced in:
• Consumer Staples - 17.5% greater ROE and 87.7%
• Consumer Discretionary - 7.8% greater
ROE and 70.2% greater TRS
• Financial - 4.1% greater ROE and 84.0% greater
The differences were smaller in industrials and reversed in
Information technology/telecommunication Services - 2.0% greater
ROE and 66.9% less TRS.
Catalyst are careful (as they should be) to say that although
these results show that gender diversity and financial performance
are linked, it doesn't necessarily mean that gender diversity
causes better financial performance. Interestingly, when they
recut their sample into quartiles based on financial performance
measures they found that on average, the companies with the best
financial performance had more women on their top management teams
than lower performing companies.
McKinsey and Co, one of the world's leading strategic consulting
firms conducted similar research on this topic in 2007-8. First
McKinsey established nine organisational criteria that they
determined to be linked to higher operating margins. These
3. External orientation
6. Coordination and Control
9. Work environment and values
Second, where they were able, they looked to see if companies had
women on their SLTs. What they found is that companies with
three or more women in their senior management teams scored higher
on all of these organisational criteria than did companies with no
senior level women. And in turn, the companies with the highest
organisational ratings significantly outperformed those with the
lowest in terms of operating margin and market
In this 2007 study by Cristian Dezso from the University of
Maryland and David Gaddis Ross from Columbia Business School the
authors found that women's participation below the CEO level has a
positive association with several measures of companies' financial
performance. The authors found that positive associations below the
CEO level were entirely driven by companies pursuing an "innovation
intensive strategy." This meant greater R&D activity,
where collaboration among colleagues, something women do well, may
be especially important.
The researchers used4 financial measures:,, return on
assets, return on equity, annual sales growth, and Tobin's Q (this
is the ratio of the market value of a firm's assets to the
replacement value of those assets). Desz and Ross looked at
both the associations between financial performance and the
percentage of women in top management team positions below the CEO
level and having a female CEO.
Over a period of time, 1992 to 2006, they found a strong positive
association between Tobin's Q, return on assets, and return on
equity and the percentage of women in top management team positions
below the CEO . Interestingly the association with these
performance indicators and having a female CEO was negative or
neutral. The researchers suggested that there might something
special about the symbolic and real role of the CEO position that
interferes with the effectiveness of female managers.
Indeed, in research on the effectiveness of women leaders in male
dominated environments we find that this is exactly the case - but
this should be a subject for a separate piece.
(Courtesy of Sheffield via the EEO Trust,
Fresh off the press, research by the global talent management
experts, DDI, found that leaders from organizations with a majority
of women had over 50% more leaders rating their leadership quality
as high compared to organizations in groups with fewer women.
Furthermore, organizations with a higher percentage of women in
leadership positions more frequently reported their financial
performance as better than the competition. Most convincingly, the
relationship between having female leaders and financial
performance was the strongest of all the criteria they looked at,
including engagement and retention.
DDI found that organisations with more effective talent management
mechanisms such as succession planning, performance management and
selection has significantly higher percentage of women in
leadership positions, and this was most pronounced at the executive
Let the research-based evidence do the talking!
I hope this short piece gives you sufficient evidence to feel
you can back yourself up when having these discussions. If
you'd like us to outline the possible reasons as to why having
women at the top of organisations leads to better financial
results, just let me know by commenting on this article.