Your Company Would Probably Earn More If It Had More Women

CREDIT: SHUTTERSTOCK
CREDIT: SHUTTERSTOCK

Increasing gender diversity doesn’t just make moral sense, it also makes economic sense.

In a paper recently published in the Journal of Economics and Management Strategy, Sara Fisher Ellison and Wallace P. Mullin looked at anonymous employee surveys between 1995 and 2002 at a professional services firm with more than 60 offices around the country and abroad. The offices ran the gamut in terms of gender diversity: some were all male, some all female, and others were mixed in various ways.

What they found is that higher levels of gender diversity were “positively and significantly associated with office revenue.” The association between greater diversity and higher revenues was so strong, in fact, that going from an all-male office (or an all-female one) to one evenly split along gender lines was associated with a 41 percent increase in revenue (a result so surprising that the researchers included “(!)” next to it).

They aren’t able to definitively say that gender diversity causes higher revenues, but the results still held after they controlled for various geographic characteristics that could impact diversity and revenues. “These results are consistent with a conclusion that the gender diversity of an office improves office performance significantly,” they write.

In explaining why, Ellison noted, “Having a more diverse set of employees means you have a more diverse set of skills,” which “could result in an office that functions better.”

By contrast, the study also found that higher levels of gender diversity is associated with employees saying there are lower levels of cooperation, satisfaction, and morale. Ellison explained the findings thus: “A baseball team entirely composed of catchers could have high esprit de corps,” but “it would not perform very well on the field.”

This phenomenon, that greater diversity demographically leads to greater diversity of skills and therefore increased performance, has been happening throughout the economy over the last 40 years. In a paper last year, researchers from Stanford University and Chicago Booth found that opening professional doors to women and people of color since the 1960s, and thus taking advantage of their talents that had before gone unappreciated, can account for 15 to 20 percent of the growth in aggregate output per worker over that time period. The positive effects of gender diversity have also been proven at the top of the economy.

But women are still shut out in many industries. They are rare at the top, making up 5 percent of CEOs at Fortune 500 companies, less than 15 percent of executive officers, and less than 17 percent of board members. In technology, they make up just a quarter of all jobs. They’re a third of the country’s lawyers and judges and a pitiful 17 percent of equity partners at the largest law firms. More than three-quarters of entry-level Wall Street jobs went to men this year. Overall, occupational segregation has stalled since the mid-1990s, meaning that women stopped making inroads into male-dominated fields.