Women Execs Boost Company Profits, Study Finds - InformationWeek

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Women Execs Boost Company Profits, Study Finds

Companies with more women in executive positions correlated with increased profitability, according to a new study.

10 Best Tech Jobs For 2016
10 Best Tech Jobs For 2016
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Increasing gender diversity in technology companies has been considered an ongoing challenge by many, and now a recent study by the Peterson Institute for International Economics and sponsored by EY (formerly Ernst and Young) shows that it isn't just a social justice issue, but a matter of economics. The study found that companies with women in executive leadership roles can see substantially better profits, and offered some insight into a few practical ways that tech companies and CIOs can improve gender diversity to see increased performance.

The study looked at 21,980 publicly traded companies from 91 different countries in 2014 to determine the number of women in CEO roles, C-level positions, and on the board of directors. It found that across the study, nearly 60% of companies had no female board members, and nearly 50% had no female executives. Fewer than 5% had female CEOs. It also found that tech companies had one of the lowest rates of female executives by industry, with only energy and industrial companies having a lower rates.

The study found no statistical evidence of female CEOs performing better or worse than male CEOs, and it only found minor connections between female board members and better performance. However, the study found very robust connections between female executives and profitability. It found that for profitable firms, going from no female leaders to 30% was associated with a 15% rise in profitability.

(Image: IntoConnection via Youtube)

(Image: IntoConnection via Youtube)

The study did not attempt to explain why companies with women in executive positions correlated with increased profitability, but the authors suggested that it was possible that bringing a broader range of skills leads to better performance. The authors also wrote of a "pipeline effect" where women in leadership roles attract and inspire women to eventually perform similar roles.

Marcus Noland, executive vice president and director of studies at the Peterson Institute for International Economics, said in a phone interview with InformationWeek that, "We have also done studies on sports. If you have lots of high school and middle school girls participating in sports, you generate more female coaches. And if you generate more female coaches, you generate more female executives in sports like athletic directors, general managers, and heads of committees and organizations."

That pipeline effect is one of the reasons why Noland said he believes that the study can be extrapolated to the CIO level as well. While the study could not drill down below the C-level, Noland said that CIOs would get better-performing IT departments if they were more gender diverse. "What we've captured is the tip of the iceberg," Noland said, "because this is what the data permits."

Noland said he hopes to get more funding to study the data set over more years (both back in time and in the future), and to drill down deeper to see the value of more women in middle management.

[Want to find a company that already respects women? Try these. See 10 Trailblazing Companies for Women.]

One other important finding from the study was very eye-opening. It found that paternity -- not maternity -- leave strongly correlated with the female share of board seats. "It makes sense when you think about it," Noland said. "If you give men the chance to take part in raising children, women don't take on as much of the double burden of raising children and having a career."

Any company or leader that can help men become a part of the childcare process will help its female employees succeed. Noland was quick to point out that the study was on a global scale, so some of these issues require large-scale institutional or cultural changes to have a deep impact.

Finally, Noland gave a suggestion that did not come directly from the study, but might have a positive effect in tech companies and IT departments. He suggested adopting something that is known in the NFL as the "Rooney Rule." Noland pointed out that in the NFL, all teams must interview at least one minority candidate for every head coaching vacancy.

Noland said that even if a majority candidate is ultimately hired for the job, the interview often gets candidates on the radar for other positions. It also gives them practice and exposure to higher interviewing processes that might ready them for the next position. The NFL has recently expanded their Rooney Rule policy to require that women be interviewed for team executive positions.

However you bring more women into leadership roles in tech companies and IT departments, it is clear there is an economic incentive to do so. Bigger profits and broader skill sets are something you can't afford to ignore.

"One thing this study shows is that discrimination is alive and well," Noland said. "Discriminating firms pay for it. Non-discriminating firms can say, 'Hey, if people aren't hiring them, we will,' and they can gain an advantage."

What have you done to advance the cause of Women in IT? Submit your entry now for InformationWeek's Women in IT Award. Full details and a submission form can be found here.

David has been writing on business and technology for over 10 years and was most recently Managing Editor at Enterpriseefficiency.com. Before that he was an Assistant Editor at MIT Sloan Management Review, where he covered a wide range of business topics including IT, ... View Full Bio

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Li Tan
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Li Tan,
User Rank: Ninja
2/14/2016 | 2:06:16 AM
Re: women executives
It's a good thing to see more balance in gender at executive level - I don't see any reason/data why women cannot perform as well as (or even better than) man did.
Ariella
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Ariella,
User Rank: Author
2/13/2016 | 7:08:40 PM
Re: women executives
@Technocrati Indeed, it is.
Ariella
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Ariella,
User Rank: Author
2/13/2016 | 7:05:52 PM
Re: women executives
@Broadway yes, that's exactly what I thought. I recall my aunt telling me that back in the 60s or so they officially justified paying women less than men for the same job because "men have to support their families." She wasn't working just for something to do and also had children to support (having been widowed at a very young age). But that was the climate then. You'd expect we should have made a lot more progress in half a century!
Technocrati
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50%
Technocrati,
User Rank: Ninja
2/13/2016 | 4:15:03 PM
Re: women executives
@Ariella @ ImpactNow   It is amazing that with all the great technological advances made in the past century - we are still very much living in the "Stone Age" when it comes to equally of gender and race.

Really embarrassing when you think about it.
Technocrati
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50%
Technocrati,
User Rank: Ninja
2/13/2016 | 4:11:47 PM
Re: One possible explanation
Nothing really surprises me about these findings, Women are generally much more reasonable and thus more effective than Men.
jries921
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jries921,
User Rank: Ninja
2/13/2016 | 2:03:49 PM
One possible explanation
Female executives are less likely to let their egos get in the way of doing the right thing by the company (this is biological, if you don't believe me, then watch the animals).  I'm guessing that they're also more likely to have work in balance with the rest of their lives (they're less likely to wear themselves ragged on the job than are the men, which means they're not making as many fatigued decisions).
Broadway0474
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Broadway0474,
User Rank: Ninja
2/13/2016 | 12:05:19 PM
Re: women executives
Ariella, that Intel news is incredibly sad and eye-opening. Great for the employees at the company of course ... but its commentary on the rest of business is pretty obvious. Research like this, though, is hitting the "numbers guys" right where it proverbially hurts. As more data like this comes out, the business case for increased diversity in senior leadership will be an imperative that goes far far beyond good pr and quotas.
jastroff
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jastroff,
User Rank: Ninja
2/13/2016 | 12:03:59 PM
Re: women executives
interesting study. but sounds like there's much more work to do

>> The study did not attempt to explain why companies with women in executive positions correlated with increased profitability, but the authors suggested that it was possible that bringing a broader range of skills leads to better performance. The authors also wrote of a "pipeline effect" where women in leadership roles attract and inspire women to eventually perform similar roles.
Ariella
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50%
Ariella,
User Rank: Author
2/12/2016 | 2:38:40 PM
Re: women executives
@impactnow Indeed. It made the news that Intel was able to say that it has no pay gap between men and women at the same jobs in 2016!
impactnow
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50%
impactnow,
User Rank: Author
2/12/2016 | 2:34:27 PM
Re: women executives
Ariella sad but very true there are still different rules for men and women and different criteria for pay and promotion. Unfortunately, we need to see some change in though processes to see the equality gap change for women.
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