Improving the diversity of leadership teams has long been associated with better decision making. Despite this, change has been slow in arriving, so fresh evidence is always welcome, and the latest comes from new research from the Curtin University, which highlights that 10% growth in female representation in senior leadership is associated with a 6.6% increase in the market value of Australian companies.
“When businesses are looking to a post COVID-19 world, our research shows that having a female CEO has the potential to help companies navigate through the crisis,” the authors explain. “In this report, we have identified a compelling causal relationship between an increase in the share of women in leadership and subsequent improvements in company performance.”
What’s more, the increased number of women in leadership roles also increased the chances of a company outperforming their peers on a number of key profitability and performance metrics, such as return on assets, return on equity, and sales per worker.
“Workplace gender equality is not just about fairness, it also has a compelling commercial imperative,” the researchers say. “This research provides hard evidence that more women in top-tier management levels will deliver improved profitability for business. Now more than ever, achieving workplace gender equality is an absolute necessity for every organization in Australia.”
Performance gains
The report clearly shows that greater female representation in senior roles has commercial implications, with a 10% rise in female representation on boards resulting in a 4.9% rise in market value, and a similar rise also increasing the likelihood of outperforming one’s peers. What’s more, a female CEO was associated with a 12.9% increase in the likelihood of outperforming the sector.
These gains percolated down the organization as well, with a 10% rise in female representation in key managerial roles linked to a 5.8% increase in the likelihood of outperforming the sector.
Despite this, however, female representation remains low, with women representing only 14.1% of board chairs, and just 17.1% of CEOs. Indeed, 8% of companies have no female representation on their board, with a similar number having no women in their senior management team.
“Women are far less likely than men to be the chair of the board. While there has been progress towards a 30% target for the share of women on company boards, three in 10 companies in the WGEA dataset still have no female board representation at all,” the researchers conclude. “Greater female representation on boards and in senior leadership positions is better for business. Increasing the talent pool and taking into account the experiences and views of a broader group will ultimately lead to better decisions. This is particularly important as we look to rebuild our economy and broaden business and employment opportunities.”
