Companies with more women in senior management roles make more money

According to new research by economics experts, companies that have women in senior management roles make more money. Here are the statistics.

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There’s an old song that goes “You don’t tug on Superman’s cape, you don’t spit into the wind, you don’t pull the mask off the ole Lone Ranger, and you don’t mess around with Jim.”

After a few years of blogging about Career Management on TechRepublic, I feel confident that I can substitute the messing around with Jim part of the lyrics with my own: You don’t blog on TechRepublic about gender differences in the corporate world. (Because, man, you get an earful from readers.)

But because I don’t learn lessons well, I’m going to do that very thing. However, I will be using the likes of Katty Kay and Claire Shipman (writing for The Washington Post), and researchers at Pepperdine and Columbia as human shields as I walk onto the battlefield.  Consider the following facts:

• Economists at Davos this year speculated that the presence of more women on Wall Street might have averted the downturn.
• Ernst & Young rounded up studies that show that women can make the difference between economic success and failure in the developing world, between good and bad decision-making in the industrialized world, and between profit and loss in the corporate world. Their conclusion: American companies would do well with more senior women.
• Organizations such as Columbia University, McKinsey & Co., Goldman Sachs, and Pepperdine University, have done research that document a clear relationship between women in senior management and corporate financial success.
• Pepperdine found that the Fortune 500 firms with the best records of putting women at the top were 18 to 69 percent more profitable than the median companies in their industries.
• Catalyst, a research firm focused on women and business, found that Fortune 500 companies with three or more women in senior management positions score higher on top measures of organizational excellence. In addition, companies with three or more women on their boards outperformed the competition on all measures by at least 40 percent.

So, these are the stats. The “why” is less straightforward. Do companies that have female executives fare better on the bottom line because they pay those women less than their male counterparts? That wouldn’t explain long-term success.

Maybe it has more to do with diversity, and the effect that comes from having (and considering) varying points of view before making decisions. According to the piece in The Washington Post, testosterone can make men more prone to competition and risk-taking. Women, on the other hand, seem to be wired for collaboration, caution, and long-term results. In fact, an economist at the University of Michigan, Scott Page, uses mathematical models to demonstrate that a diverse group will solve a complicated business problem better than a homogeneous group. So, maybe it’s not that women make better leaders. Maybe it’s that women and men make better leaders together.

I’m happy to see some solid statistics on this topic. For too long, right-brained skills involving circumspection, forethought, and diplomacy have been denigrated to “soft skill” status (whether the skills are practiced by women or men). It’s about time these skills have come to the forefront and been given some teeth.