Gender Diversity and Business Performance

A recent study completed at National University of Singapore found a correlation between gender diversity within business leadership and that company’s performance.

This is not the first time this has been demonstrated, even in Asia. One 2015 study in different Asian countries found that companies with more diverse leadership saw a higher return on equity. Global studies from the Peterson Institute for International Economics in 2016 and from McKinsey in 2018 found higher profitability among companies with greater gender diversity on their boards and/or within their senior leadership.

Of course, any first-year statistics student will happily tell you “correlation does not equal causality.” Just because these studies show what they show does not prove that these companies perform better because they have more women in senior roles, nor do they guarantee that broadening the diversity of your leadership leads to better performance. But after awhile, when you see repeated correlation, and when you can demonstrate good reasons for why that relationship can exist, then causality starts to seem clearer.

Why could there be a relationship? Well…

First, because the bigger your pool of potential talent, the more likely you are to find the best talent for you. Consider that if you have a dozen spots to fill, and you’re only looking at male candidates, you’re likely to have to take someone you might not normally want, just so you can fill a spot. When your search includes both genders, you have the potential to double the size of your talent pool, and with more candidates to choose from, your odds of getting the best people go up. This is especially important when you are facing a talent shortage.

Second, think about the prime advantage of diversity: more perspectives from which to approach problems. Whether you think it’s right or wrong, the reality is that men and women have different experiences in a culture, and that creates a different way of looking at the world. It’s not biological, merely social, but that “merely social” difference can have a big impact in attacking a challenge or taking advantage of a new opportunity. Having a more diverse set of perspectives offers you more chances of finding the best solution to an issue.

Finally, consider the impact on the rest of your workforce. Companies that are more diverse at the top can attract employees who are more inclined to innovate; if people see you as a company where they are accepted for their abilities rather than their gender, or a place where everybody has a voice, then talented people who are willing to invest more discretionary effort will likely be more interested in working for you than for your more close-minded competitors. If you demonstrate greater inclusiveness, you are more likely to attract employees who want to contribute to that.

Does this mean you should only hire women, or that you should have a quota, or that you should insist on a 50/50 gender mix? No. In fact, one of the studies noted above suggests that such “forced diversity” can actually reduce performance, much as “forced lack-of-diversity” does. Putting people into a role simply because of their gender, whether with good intentions or bad, is generally an unhelpful idea.

What it suggests instead is that you should make an effort to expand your pool of potential talent and attract female leadership candidates who might not otherwise be looking at your company. Since there’s a correlation between having female leaders and improving business performance, why not make it as easy as possible to attract, hire, and retain qualified female leaders?

Ensure pay equity across genders This should be a no-brainer, but too many companies still have trouble with this. People who do the same job and who demonstrate the same abilities and potential should be paid the same. Why is this so difficult for some people to understand?

Support the growth of female leadership As noted above, men and women typically face different expectations in their society, and we can look for ways to ways to help women meet those social expectations as well as their professional goals. We do it with men, we just don’t think about it because that’s been happening so long that we consider it to be “normal” rather than “supporting men.” Things like family leave policies, support for dual-career couples, mentoring and coaching, and other support and development programs can encourage more women to take on leadership roles.

Expand your recruiting One reason you might not have a lot of female leaders could be that you don’t recruit them. If your company or your industry has been seen as a “boys’ club” (looking at you, STEM jobs) you might need to make an effort to reach female candidates who haven’t been reached before. Hopefully, this would be a temporary measure that you can back away from once you build a more inclusive employment brand, and in the future your recruiting will be as appealing to both genders. In the short-term, though, you might need to make a special effort to reach audiences whom you have not reached before.

Many people push back against diversity concepts. Some do so because they hold prejudices against other people. Some do so because they don’t like the idea of “diversity for the sake of diversity.” When you look at the data, though, you see there can be real business value in gender diversity at the top. If you’re still opposed to the idea, then you should probably ask yourself exactly why that is. There’s a lot of business potential to be unlocked once you start broadening your business leadership.

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