Monday, August 10, 2020

More women at the top means more profits for businesses — and a stronger economy for everyone

UK shareholders and the economy as a whole are missing out on an additional £47bn in pre-tax profit thanks to lack of gender diversity in the boardroom 


Written by: Margaret McDonagh

A warm-up act will normally dismiss the first polite round of applause from an audience and insist they can demonstrate more enthusiasm than that.

Many a time I’m the warm-up act on the boardroom stage. I may never manage to work the crowd into a frenzy, but at the very least I wake them from their slumber.

We did the research — in total, UK shareholders and the economy as a whole are missing out on an additional £47bn in pre-tax profit thanks to lack of gender diversity in the boardroom.

Read more: Lack of UK female bosses leads to £47bn profit gap

The evidence is clear: companies with more than 33 per cent female executives have a net profit margin more than 10 times greater than those companies with no women at this level. Isn’t that worth a cheer?

More women at the top means more profits. Sceptics suggest that this has nothing to do with women, but simply the fact that more profitable sectors tend to promote more women. But this pattern can be seen across all sectors and industries, irrespective of their profit margins.

Companies which succeed understand customer needs and have better risk management and higher collective intelligence. Research teams from Harvard, MIT, McKinsey and countless others studied these capabilities and characteristics and, in every instance, found higher scorings where women were involved in teams than when men worked alone.

It is a myth that women simply help other women. What is true is that, in the real world, women bosses get it. Female chief executives on average have ratios of 1:3 women on their executive committees, compared to male chief executives who have 1:5.

Gender is not the only metric of diversity, but it is a crucial one. And don’t forget that women make up 51 per cent of the population — so if companies want to improve diversity in other areas as well, from race to disability, increasing female representation can be part of that solution too.

You shouldn’t be surprised at this research. At the Pipeline we’ve been measuring diversity for five years now, and the results are always the same. We’ve worked with more than a thousand senior female executives and over a hundred organisations, and will continue to play our part transforming leadership in business — because without women at the top, a company is underperforming.

So the message for all business is: the evidence is there. You have a template to change for the better. Use your enthusiasm to draw on the talents of women, and you’ll be applauding yourself when your profits escalate and you have a more inclusive workplace drawing on the talents of all.

Nobody is asking companies to jump out of their seats, but female executives everywhere will happily take a sit-down ovation.

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