Women in Senior Leadership Roles

December 26, 2012 -- Sal Silvester

I recently read an article in PR Newswire titled Study Shows the Current State of Women in Leadership. The article cited a study by The Women's College of the University of Denver and The White House Project that presented some interesting findings comparing women to their male counterparts:

  • Government and Politics: Women constitute 26 percent of senior leadership roles on average across all governmental agencies in 2012, and 26 percent of federal judgeships.
  • Business: Women's overall representation in the business labor force has climbed from 48 percent in 2008 to 49.1 percent in 2012 (Catalyst 2012b). Yet, on average, women comprise 11.76 percent of all leadership roles among the top ten companies in this sector. Net income growth for companies with women on the board has averaged 14 percent over the past six years, whereas companies with no female representation have seen a 10 percent growth.
  • Entrepreneurship: The entrepreneurship chapter explains that women receive just 11 percent of the capital investment and yet comprise 20 percent of the top entrepreneurs of 2011. Conversely, male entrepreneurs receive 89 percent of the capital investment and comprise 80 percent of the top entrepreneurs of 2011.
  • Non-profit: Among non-profits with budgets in excess of $25 million, women constitute only 21 percent of leadership roles even though they make up 75 percent of the workforce. Yet, in some areas such as social entrepreneurship women clearly dominate in terms of success and impact.

The inequity of women in senior leadership roles has a real business impact. Notice I used the term "business." We've all hear, anecdotally, that having a diverse team helps generate diverse opinions and ideas. After all, if everyone is thinking alike, no one is thinking at all. And, one of the most important roles of senior leaders is to engage in dialogue and debate so that they can effectively make the consequential decisions for an organization.

OK, so that's the anecdotal side of a case for women in senior leader roles. Now, let's look at the facts.

A study posted in the April 2012 edition of McKinsey Quarterly makes the "business" case for top-team diversity. This study looked at the executive board composition, returns on equity (ROE), and margins before interest and taxes (EBIT) of 180 publicly traded companies in France, Germany, and the United States from a period between 2008 and 2010. To score a company's diversity, they focused on two groups that can be measured objectively from company data: women and foreign nationals on senior teams. They found that for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile. At the same time, EBIT margins at the most diverse companies were 14% higher, on average, than those of the least diverse companies. The results were similar across all but one of the countries that were studied; an exception was ROE in France; but even there, EBIT was 50 percent higher for diverse companies.

Back to the first study above - with the slow growth rate of women in senior leadership roles, it will be 2085 before women are at parity with men.

Are you looking for a competitive advantage in your organization? Given that women tend to outperform their male counterparts, you might not have to look that far.

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