Women Leaders and Profitability

 Are You Playing with Half a Team?

If there was a proven strategy that could triple your company’s revenue, double its profitability and increase the engagement of half your workforce, would you do it? Most leaders would answer yes, yet every day, business leaders neglect to take these steps that would increase their company’s competitive edge. There is definitive research that shows this can be accomplished by including more women in positions of leadership.

It’s not as though companies haven’t recognized the need for gender diversity. Fortune 500 companies spend $8 billion a year on diversity initiatives, much of it aimed at advancing women. This kind of investment suggests an awareness of the potential benefit in having more balanced leadership teams. What it does not explain is the persistent failure of that investment to yield a return. Eighty-five percent of the leaders in most top leadership roles are still men – a figure that hasn’t changed much in the last fifteen years. Is this because companies are more interested in looking good than actually being good?

Lack of progress in this area is especially astonishing when you consider the research.

• Companies with more women in leadership roles are more profitable. A Pepperdine University study showed that twenty-five Fortune 500 firms with the best record of promoting women into high positions were 18 to 69 percent more profitable than the median firms in their industries.[i]
• Companies with more women in leadership roles are more competitive than their peers. One USA Today report found the stocks of 13 Fortune 500 companies led by a woman for all of 2009 outperformed the S&P 500 (companies primarily led by men) by 25%.[ii]
• Companies with more women in leadership roles reflect the marketplace. Women are responsible for 83 percent of all consumer purchases in the U.S. and control nearly $20 trillion of the world’s spending power.[iii] [iv]

Despite these advantages, most companies don’t come close to achieving an equally balanced team of leaders that would help them capitalize on all of their talent. Companies that believe leadership effectiveness produces a competitive advantage cannot continue to neglect half of their employee population, when doing so limits their success.

The real question is:  What is the smartest thing to do?  What is often overlooked is the benefit in the diversity of thought and perspective that results from having more gender diversity. Quotas and standards are important, but what really serves shareholders is reducing “groupthink” and improving decision-making that comes with having a stronger team. Are your company’s diversity efforts more focused on metrics or are they driving real change?

In our work at LRI, we’ve encountered many progressive leaders who are committed to balancing their teams with both talented women and men. Their challenge is they often don’t know what to do or where to start.

In the past few years, we’ve interviewed over 100 senior level executives – both men and women – to understand what helps women excel as leaders. We’ve also delivered numerous executive coaching engagements and leadership development programs for women, and conducted a thorough review of the research on this topic. Here’s what we’ve learned:

• Women benefit from leadership development designed exclusively for women leaders. The challenges faced by women in business differ from those faced by men. When women have the opportunity for leadership development focused exclusively on them, they are able to safely articulate their struggles and their aspirations, overcome the barriers they face, and build competence and confidence to expand their leadership to a higher level. 
• Men play an important role as sponsors and advocates. Research from the Center for Talent Innovation clearly identifies a missing link for women: Sponsorship. Without an awareness of the underlying patterns in which men – consciously or unconsciously – promote men over women, those patterns are perpetuated. Men can help break this pattern by championing talented women, helping to prepare them for advancement, and advocating for them to be promoted into leadership roles.
• Companies gain from striving for critical mass. For organizations to embrace diversity of all kinds requires a culture change, but it’s tough for the culture to change when only one culture leads the organization. True change occurs when companies reach a tipping point. As one executive woman explained, “It used to be that I had to fight to be heard as the only woman in the room. Once we had a decent number of women, I didn’t have to fight my way in. We didn’t have to make the culture change. It changed, because we changed. The makeup of the group changed.”

Achieving a balance of men and women at the executive level isn’t easy, and frustration with the lack of progress is palpable. Several women opened their interviews by commenting, “I can’t believe we’re still talking about this after thirty years.”

But there are bright spots. One company we’ve worked with, MetLife, made a conscious effort to develop its most talented women and became recognized as a Best Place for Women to Work.  Executive Vice President Tony Nugent, one of the men sponsoring efforts to develop women, commented:

“I have found that senior male leaders still have a long way to go in understanding how to interact, understand, listen and hire/promote female talent. It requires a dedicated partnership between men and women, where women work harder at getting men to think differently and men commit to thinking differently. The corporation has to have a real strategy in place as part of its culture to get it right.”

Nugent makes an important point: instituting a program is only the first step; the second is ensuring those programs make an impact.

Other organizations we’ve worked with have showed marked progress in the advancement of women into positions of higher leadership and influence, and substantially increased profitability. One executive described the business impact this way:

“We want to field the best team and in order to do that, we need to go out and attract the best talent. When we can advance women and promote them, they become more engaged. When you love your job, you’ll be good at it, so sales are going to go up. It’s a double win.”

Organizations that don’t take similar steps hold themselves back from being a better business. Women leaders are highly educated, engaged and experienced, and their perspective is absent when they’re missing from the table. Businesses lose by leaving them out.

Here are a few questions to consider.

• Have you engaged in dialogue and taken specific actions to change your organization’s culture?
• Have you invested in specific programs to develop and equip your women leaders?
• Have you identified talented women in your group or organization AND assigned them a powerful advocate and sponsor? 
• Are there concrete annual goals and metrics for balancing your senior level leadership teams?

This is not an easy issue to address, and it often has deep roots and emotional undercurrents. Gender balance is an evolutionary field, and we have the benefit of being on the front end of that evolution. At LRI, we are partnering with companies on the leading edge of this field to develop best practices and implement solutions that genuinely move the needle and get results.

If your organization is concerned about the need to attract, engage and retain talent as a part of your strategy, we can help. We invite you to send us your thoughts and questions. Please send them to useletter@LRI.com.