The Business Case for Gender-Balanced Leadership

By: Bernadette Smith

Question: Why should we as employees, shareholders and managers of corporations be concerned about gender-balanced leadership?

Answer: There is a clear correlation between gender-balanced leadership and better corporate performance.

Women continue to be scarce in senior management. Our approach to gender balance in leadership has been largely motivated by ethical reasons. Although commendable, this approach misses the mark of the issue. If ethics is the driving force, women’s potential and contributions to the bottom line are discounted. Furthermore, this approach tends to consider women as “victims,” focusing on making women adapt to male career models and leadership styles. The question is not how to make women feel comfortable in an environment designed by men in another era, but how to capitalize on the synergies of gender-balanced leadership in today’s fast-paced, ever-changing business environment.

A recent McKinsey survey listed the top three trends in business today: 1) accelerating pace of technological innovation, 2) increasing availability of knowledge; and, 3) intensifying competition for talent. The business case for gender balance in leadership capitalizes on these trends by taking advantage of a larger talent pool, the increasing influence of women consumers and a positive correlation of gender-balanced leadership with company performance.

In the US, women comprise more than 60% of undergraduate and more than 50% of graduate students. Making good use of half of the country’s brain power – particularly in senior management – is a significant business opportunity.

In the developed world, more than 80% of consumer purchases are made by women. Significant opportunities exist for companies able to address the needs of the world’s largest consumer segment – women. In order to capitalize on these opportunities, it is imperative for leadership teams to include women.

Research shows a correlation between gender-balanced leadership and organizational performance. A 2007 Catalyst study found that Fortune 500 companies with three or more women on their boards of directors have a strong competitive advantage when compared to those with the lowest number (i.e. zero). Return on equity was 83% higher, return on sales was 73% higher and return on invested capital was 112% higher.

A new study co-authored by researchers from CMU, MIT and Union College defines group intelligence as more than the sum of the cognitive abilities of individual members. What impacted group performance the most was its level of “social sensitivity” defined as the ability to perceive each other’s emotions, cooperate and work well as a team. Key finding? Teams with more women demonstrated greater social sensitivity and in turn greater collective intelligence compared with teams with fewer women.

Key leadership behaviors imperative to compete and win in the future include intellectual stimulation, inspiration, participative decision-making and clearly defined expectations and rewards.

A survey of more than 9,000 male and female managers (McKinsey 2008) revealed that compared to their male counterparts, women tend to exhibit behaviors beneficial to organizational performance: serving as a role model, clearly defining expectations and rewards, developing human capital and participative decision-making. On the other hand, women tend to avoid negative behaviors such as exerting control, issuing corrective actions and individualistic decision-making.

As the CMU/MIT/Union College study demonstrates, the complementary skills of men and women have a positive impact on business. Gender diversity is known to foster creativity and strengthen leadership teams.

For companies looking to gain a competitive advantage, it is necessary to understand women and the differences between genders.

1. Communication styles – women tend to have a relationship-oriented communication style and are often more modest. Men typically oversell their abilities while women undersell them.
2. Career motivations – women tend to be motivated mostly by making a difference, being challenged, believing in the company’s direction and experiencing a sense of satisfaction in their team and receiving recognition.
3. Career cycles – women, obviously, bear children and are more likely to take time off which results in a career path that differs from the upward path often considered the norm. As a result, women careers often peak a decade later than their male peers.
4. Approach to power – women are not usually comfortable with the power structures of their organizations despising “politics” as self-promoting and power-grabbing. It is particularly important to question the assumptions on who is ready for promotion. It is often assumed that only those who visibly want power are ready to exercise it. Perhaps those best able to exercise the responsibility and service of leadership are those not necessarily hungering after power. Promoting “power-reluctant” women is a way to achieve a larger range of leadership styles.

To succeed in an increasingly multicultural and complex world, our leaders need to focus on integrating new ideas, participative decision-making, collaboration and inclusiveness. Corporations eager to capitalize on their investment in women will allow women to get to the top by staying themselves, not forcing them to borrow the styles of their male colleagues. They will strive to create work environments where gender differences are appreciated and valued. The complementary skills and styles of men and women foster creativity and synergy – elements key to future success.

Bernadette Smith, CFP, is Senior Portfolio Manager at Fifth Third Private Bank. She serves on multiple boards, including the Women & Girls Foundation.  Recently, she was appointed by Gov. Rendell as a member of the Inter-branch Commission for Gender, Racial and Ethnic Fairness,  received the YWCA “A Tribute to Women Leadership Award and the Athena Award.