The Addition of Women in the C-Suite Drives Very Positive Outcomes in Companies. But Why?
The percentage of women in the C-suite has been inching upwards slowly. In 2019, women took up 21% of C-suite spots in the United States, with numbers varying globally (approximately 18% in the European Union and less than 10% in Canada).
Yet research shows that women in the C-suite create measurable value for their companies — including measurable increases in profitability. What are the advantages to having women in the C-suite — and why does the presence of C-level women have this effect?
Women (Not “Woman”) in the C-Suite
One of the key findings in research about women in the C-suite centers on the number of women involved. Studies by Nicolai Foss (Warwick Business School) and Jacob Lyngsie (Southern Denmark University) show that the C-suite requires the presence of more than one woman to see positive effects. Innovation occurs once the C-suite sees an average of 1.7 women. Practically speaking, that means at least two women must be at the C-level for change to occur.
Research by Corinne Post (Lehigh University), Boris Lokshin (Maastricht University), and Christophe Boone (University of Antwerp) shows similar results. They found that C-suite thinking changes with the presence of female execs only if the C-suite team already had a woman on board, or if multiple women were promoted into senior roles simultaneously.
The Effects of Women in the C-Suite
So what are the effects of (multiple) women in the C-suite? The presence of women is positive, driving innovation and development. It also boosts the bottom line, delivering increased profits.
The research by Foss and Lyngsie showed that the more women a company has in top management, the greater its innovative abilities. The work by Post, Lokshin, and Boone ratifies this finding, showing that companies become open to change with more women in the C-suite.
Top management seems to shift the way C-suites think. It’s not just that women provide a new perspective not previously present in the room. Instead, the presence of women in top management makes all of top management more receptive to change when making strategic decisions.
Another observation from Post, Lokshin, and Boone is that top management teams that include women move away from focusing on mergers and acquisition. In its place, they focus on internal research and development. This difference can be seen as an emphasis on collaboration rather than competition.
It may also speak to a decreased propensity toward taking risks, which is also seen in C-suites with women present. The combination of risk aversion and openness to innovation results in measurable increases in R&D budgets and activity.
According to a longitudinal, 17-year study from the Standard & Poor Global Market Intelligence Quantamental Research Team, firms with women in the C-suite, especially as CEOs or CFOs, see significant increases in profitability. In the two years after the appointment of women to these positions, their firms show an average 6% uptick in profits and an 8% boost in stock returns.
Why Do Women Have This Effect in the C-Suite?: Some Theories
While the effects of women in the C-suite are marked and measurable, the teams studying the subject can only theorize as to why women have this effect. Some of the suggestions that have been proposed are as follows.
Women Are Held to a Higher Standard
According to the S&P Global Market Intelligence Team, women executives are typically held to a higher standard than are male execs. Average female execs tend to share attributes with the most successful male executives, and the characteristics that lead to success show up more often in female execs than in males.
These findings suggest that, in fact, women who make it to the C-suite are more qualified than their male equivalents. The high selectivity used with women candidates may even mean that the pool of female C-suite execs is richer with talent than some of the male appointees who are chosen for these rare spots.
Women‘s More Difficult Journey to the C-Suite Hones Their Talents and Skills
Women’s journey to the C-suite is different than the male journey. Because women are often seen as illegitimate when it comes to leadership, they can find themselves in precarious positions easily and must walk a tightrope on the path to the C-suite.
That journey involves far more obstacles and hurdles, as well as the need to navigate a world that is often hostile to them. As a result, women executives often develop highly toned management skills out of necessity. In addition, they learn to weigh risks carefully, as one misstep could cost them their careers. Women also have to find a way to stand out positively, which may be part of what drives their tendency to innovate.
Women‘s Leadership Style Often Encourages Change
Women’s leadership styles are markedly different than men’s in several ways. Women are typically less motivated by power than are men, and they are less tied to tradition. Their willingness to challenge the status quo may be a result of the fact that their very presence in the C-suite is exactly that type of challenge. Because they are receptive to change, they promote change within the C-suite, prompting more open-mindedness to new ideas among their male colleagues.
While more work remains to be done to understand the value of women in the C-suite to their organizations, including women at high levels of decision-making clearly adds value to their firms.
By Octavio Lepe
Director, Executive Search
Octavio is the search practice leader for Sales & Marketing, Agribusiness, and D&I in the Americas.
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