Why You Should Want More Women at the Top

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Study after study confirms one very clear lesson: Companies with women in leadership positions tend to perform better. Yet few companies are acting on this valuable information.

Why women work well
Evidence abounds that companies with women leaders can deliver impressive performances. Consider that in 2010, when the Dow Jones Industrial Average rose in price by about 11%, both of its female-led components beat the average. DuPont (NYSE: DD  ) , led by Ellen Kullman, soared 54%, while Irene Rosenfeld's Kraft Foods (NYSE: KFT  ) gained 20%. These companies are clearly not afraid to have women at rather lofty levels, and both have been doing well.

Longer-term studies of many companies provide even more impressive data. A report from Corporate Women Directors International listed 15 studies worldwide linking women board members to increased corporate profitability.

For example, in 2010, the folks at McKinsey found that the quartile of companies with the most women on their boards were more than twice as likely to have above-average EBITDA (earnings before interest, taxes, depreciation, and amortization), and twice as likely to sport an above-average valuation. The Catalyst research firm has found that the Fortune 500 companies with the most women in senior management had returns on equity that were more than a third higher than other companies'. Goldman Sachs researchers have estimated that by closing the employment gap between women and men, U.S. GDP could rise by 9%, and Europe's by 13%. 

Female leaders tend to excel in different behaviors than men, offering several strengths that are rather useful to companies. Out of nine important behaviors identified by McKinsey, women on average were much better at people development, serving as role models, and setting expectations and rewards. They were also slightly more likely to inspire and to support participative decision-making.

The value of women to companies is actually sinking in with business leaders. McKinsey found that 61% of top management at leading companies believes that gender diversity boosts corporate performance.

Success stories
Companies that understand this include Cisco Systems (Nasdaq: CSCO  ) and IBM (NYSE: IBM  ) , which have been actively working to recruit and retain female IT workers. Verizon (NYSE: VZ  ) sports a 79% participation rate among women in its management training program. One of the most important ways to support women in the workplace is through flexible scheduling, and Hewlett-Packard (NYSE: HPQ  ) has 80% of its employees using flextime, while 34% telecommute.

Not a priority
Despite all that, though, most companies are not doing enough. McKinsey found that only 28% of companies across the world make gender diversity a priority action item.

Catalyst has noted that, based on information filed midyear in 2010, 60 companies in the Fortune 500 have no women directors on their boards. (Overall, 16% of board members are women.) And 136 of the companies have no women among their top five executives. 

Plenty of companies are performing terrifically without many women in top management. But their leaders don't seem to sufficiently appreciate that they could be doing even better.

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Longtime Fool contributor Selena Maranjian doesn't own shares of the companies mentioned in this article. The Fool has created a bull call spread position on Cisco Systems. The Fool owns shares of IBM. Motley Fool Alpha owns shares of Cisco Systems. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.

Read/Post Comments (5) | Recommend This Article (8)

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  • Report this Comment On January 05, 2011, at 8:04 PM, D2Kool wrote:

    Pure unadulterated sexism. When will we begin to talk about these behaviors and traits which are 'good' without inducing gender bias? Are young boys to read that they will somehow have less of the mentioned qualities simply because of their sex? Very limited, blurbish and what-you-come-to-expect story. I don't suppose anyone is claiming any objectivity... so just a hypothesis: could it be that women are really great cutthroats, perfect for short-term gains? Just saying (which I am not supposed to be saying anymore). Full disclaimer: I don't hold any stock in any women..... or men).

  • Report this Comment On January 05, 2011, at 9:58 PM, bbmaven wrote:

    Ah - D2 - the "reverse discrimination", "sexism" canard. It often is difficult to understand why we pay attention to the identity issues that attach to the "marginalized" group (in this case women) while seeming to be dismissive of the identity issues that attach to the dominant group (in this case, men). It is because the business world, our culture, our economy, is set up for those in the dominant group to succeed. That doesn't mean that men don't work hard to succeed - or that women can't. It is just that there are more obstacles for the marginalized group to overcome.

    This same confusion arises when one hears the ridiculous claims of "reverse discrimination" against white people or straight people - or allegations that certain marginalized groups are seeking "special treatment."

    One's racial, gender, sexual orientation, and ethnicity affects success - and the solution is not to pretend to be "color blind", "gender-neutral" or to "treat everyone the same." To do so is to perpetuate the status quo - which then operates to the benefit of the dominant groups and identities.

  • Report this Comment On January 05, 2011, at 10:22 PM, kedo76 wrote:

    It's sexism to go out and look for a specific gender, pure and simple. Hire the best candidate. Period.

  • Report this Comment On January 06, 2011, at 7:15 AM, h0tr0d9 wrote:

    There has yet to be a study completed that showed causation from women in leadership positions. There are many correlation studies, which could easily be a result of the most successful companies (cisco, ibm, etc.) having the ability to add female leadership.

  • Report this Comment On January 09, 2011, at 8:51 PM, bbmaven wrote:

    Kedo76 - your comment

    "It's sexism to go out and look for a specific gender, pure and simple. Hire the best candidate. Period."

    will appear to make sense to most people. However, it is wrong. The assessment of "the best candidate" is subject to all sorts of assumptions by who is doing the assessing. Most often, the one doing the assessing will, with all sincerity and no sexist or racist attitudes personally, rate candidates based on their sense of who will "fit in" - which has the impact of perpetuating the dominance of one group over another, whether that be male/female, white/black, heterosexual/same sex orientation.

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