Companies Discover More Women Means More Money

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The companies with the best financial performance have higher shares of women in their leadership, according to a new survey.

Development Dimensions International (DDI) surveyed more than 13,000 leaders at 2,031 organizations. One of the findings was that among those that were in the top 20 percent in terms of financial performance, leadership was on average 37 percent female. Those in the bottom 20 percent of performance, however, had leadership teams that were just 19 percent female on average.

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CREDIT: Development Dimensions International

Just one self-reported survey may not be definitive evidence that adding women to leadership begets better performance. But the survey is just the latest in a very, very long line of research finding this to be true. Large companies with female CEOs have returns that beat the stock market. Hedge funds run by women outperform the industry. Companies with women on their boards outperform male-only boards by 26 percent. They beat a benchmark financial index. Companies whose boards have at least three women have higher return on equity and net profits. Women on boards lead to better decision-making and less risk-taking.

But even with all of this evidence, women are still scarce in leadership positions. Among the largest American companies, women make up less than 15 percent of CEOs and hold less than 17 percent of corporate board seats.

The DDI survey has some hints as to why. While it found “no significant difference” between the men and women it surveyed in their leadership skills or ability to handle challenges, men were still much more likely to give themselves high marks. Men were more likely than women to consider themselves to be effective leaders compared to their peers. In an academic setting, the same has been found to be true: men exhibit overconfidence and exaggerate their own performance. That ends up being rewarded, as it makes them more likely to be selected as leaders. People who exhibit narcissism are also more likely to nominate themselves to be leaders.

DDI also found that women were less likely to have worked on international projects or lead geographically dispersed teams, what it calls “a big opportunity gap.” It’s possible that women are passing down international work because they don’t want it or because it conflicts with the demands of children and home. But a study found that even among men and women equally willing to do international work, more men than women got those assignments, while more women than men were never offered the opportunity. Men are also more likely to get work with bigger budgets, higher risk, more responsibility, and visibility to higher ups.