How companies with women in management positions do better

Studies show significant correlation between women in leadership and the company performance

Studies show significant correlation between women in leadership and the company performance
Studies show significant correlation between women in leadership and the company performance

(Wo)Men Leaders?

Women in leadership positions are not hard to find in today’s day and age. Kiran Mazumdar-Shaw and Indra Nooyi are famous examples. Banking industry is replete with examples of women in leadership roles. If private banks took the lead, the largest public sector bank of India, State Bank is not far behind. The increasing trend of women in leadership roles is easy enough to spot. About 24 companies have women leaders in the Fortune 500.

…women are no different (no less, if that sounds progressive) than men.

Several well intentioned studies highlight the positive correlation between company performance and presence of women directors on their board. A recent study by Peterson Institute for International Economics and professional services firm Ernst &Young revealed a significant correlation between women in leadership and company profitability. The study also reported that companies with “at least 30% female leaders had net profit margins up to 6 percentage points higher than companies with no women in the top ranks.” There was no significant difference in the performance of CEOs on the basis of gender.[i]

The results of these studies should really drive home the point. If the point, of course, is that women are no different (no less, if that sounds progressive) than men. These studies seek to make a strong case for the presence of women in workplace. While such studies should be a shot in the arm, and point towards increased participation of women in workforce, the ground reality suggests something else – their proportion in the workforce in India is just 27% in 2014, one of the lowest in the world.

The less than proportional presence of women in top leadership positions points to a larger syndrome – similar patterns in middle and lower level leadership positions creating a supply gap. So are the results of these studies incorrect? Do they highlight the exceptions and ignore the average? Not necessarily, but they perhaps hide more than what they reveal. A video of an interview with Ms. Indra Nooyi that has gone viral, has causes for concern since she admits that “women cannot have it all”. Balancing career demands, professional aspirations, family demands, family requirements and personal aspirations is a daunting task, especially for them because of the burden of expectations that they come with. Ms. Nooyi speaks of the need to co-opt extended families and share child rearing responsibilities.

The need for women to form a significant part of the workforce has been adequately focused upon. In fact some of the studies move beyond the profitability parameters and focus on core values-benevolence, universal concern and power orientation and found that female directors were more “benevolent and universally concerned but less power oriented than male directors”. Impact of presence of women in boards on team performance has also been measured. Women were also found to be loath to making decisions that they did not fully understand.[ii] Other variables taken up for study are long term orientation, sensitivity to needs of women and corporate reputation.

Stable families are as much a necessity for the society as profitable corporations.

Yet, we need to move beyond institutional requirements and start viewing gender diversity and the problem of women dropping out of workforce from a larger, social perspective. We must assess gender diversity priorities simultaneously from the family, societal as well as institutional perspective. Our current focus of gender diversity from just an institutional perspective looks like telling a part of the story and may end up harming the cause instead of furthering it.

The starting step is to recognize that maternity leave is not a favour granted and raising well balanced individuals is in the larger interest of the society. Stable families are as much a necessity for the society as profitable corporations. A fulfilling career is equally important to her as it is for everybody else. So while we measure the performance of a corporate, we need studies that also go beyond profitability variables. While the employer and the employment eco system is a significant part of this value chain, ignoring performance in every other aspect can only be perilous. There is a pressing need to include all the other stakeholders such as the family and the society while addressing the problem of women in workforce. The focus should shift away from just what women need to do to have successful careers to what women require from the stakeholders to ensure meaningful participation in the workforce. Even anecdotal evidences from women who have a fair degree of success in their careers tend to harp more on women having to co-opt support, being more planned and being ready for sacrifices to enjoy a successful career. The focus should shift, instead in creating enabling structures and support systems that do not demand women to make difficult choices at every turn. In short, a woman should not be required to make choices that will require her to think and behave like a man.

Should the impact of gender diversity be measured through the prism of profitability and risk? In the process of breaking the all-powerful glass ceiling, should women start becoming like men? If the answer is yes, it neutralises the relevance of diversity efforts and makes it a non-starter. There is clear need to study the impact of gender diversity. But oversimplification and repeated attempts to link short term measures to gender diversity may do more harm than good, however well intentioned.

Bibliography:
[i] “Is Gender Diversity Profitable? Evidence from a Global Survey” Marcus Noland, Tyler Moran, and Barbara Kotschwar, February 2015
[ii] “Beyond the Glass Ceiling: Does Gender Matter?”Renée B. Adams,Patricia Funk, December 2011

Ranjani Sadashiv

Ranjani Sadashiv is Assistant Professor, NITIE, Mumbai. She teaches Accounting and Finance. Views expressed herein are personal.

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