It has long been suspected that the presence of more women in boardrooms improves the performance of organizations. Research from the University of Texas at Austin believes that it has proved this fact.

The researchers examined nearly 400 Fortune 500 firms over a six year period to understand the role female executives play. They found that firms with female bosses are more likely to focus on customer relationships than firms led by men. This in turn encourages more customer-oriented discussions in the boardroom, which encourages a greater customer orientation for the firm as a whole.

Profitable approach

This then has a knock-on effect on the financial performance of the firm, which is boosted by this customer focus. This boost was not uniformly observed across industry, however, as this impact was reduced by around 17% in industries where customer preferences are more unpredictable, or where technological changes are more fast-paced.

The boost was greatest when the boardroom has a significant amount of control over the strategy of the firm, especially when there is a high representation of women on the board and when those women have marketing experience.

“In effect, companies that operate in relatively stable environments, are not family-owned, have female and marketing-experienced board members, and whose executives have more latitude to decide firm strategy are best suited to unlock the benefits of female leadership,” the researchers explain. “The relatively unregulated nature of their industries offers strategic and tactical freedom. Thus, the inclusion of female executives may provide a ‘turnaround’ strategy for these firms, helping them instill and benefit from a greater customer orientation.”

A smarter approach

The study builds on previous research that suggests that female executives tend to reduce risk-taking, but the new study rejects this stereotype and instead argues that female executives have a stronger customer orientation. If firms match this focus then risk-taking is generally not an issue.

“CEOs and boards should consider if their organizations could benefit from a greater gender balance in the C-suite to facilitate customer orientation, thus leading to greater shareholder value,” the researchers explain. “Even if there are only a few female executives on the top management team, companies can strengthen the relationship between these female executives and customer orientation by adding female directors and marketing-experienced board members to support customer-centric strategies.”

The authors suggest that diversifying boards is therefore a good thing, and if boards are unable to do that, then making a conscious effort to focus more on customers would be a valuable strategy to enact.