We’ve seen the reports that tout the benefits of diversity. Two recent studies have further demonstrated the impact female executives have on the success of an organization. Female CEOs generate more gross profit and are better at developing strategy, a key leadership attribute.
A new study from S&P Global Market Intelligence, has shown that companies with female CEOs experienced a 20% increase in stock price momentum and were seen as less risky when compared to their male counterparts during their first two years in the role.
Additionally, over the past 17 years, female CFOs generated $1.8 trillion more in gross profit when compared to their sector average. These companies also experienced better stock price returns in their first two years in the role when compared to their male counterparts, with a 6% increase in profitability and 8% larger stock returns. Doug Peterson, President and CEO of S&P Global said, “As we look at financial performance, this research is yet another confirmation that women provide significant and positive value through C-suite and board leadership positions.”
And according to Daniel Sandberg, the author of the report and a senior director of quantitative research at S&P Global, “The bar is a little bit higher for females. The result is that the male group that is a contender for an executive position is a little over-fished, and the female contingent is under-utilized.”
The study highlights an issue we sometimes see in hiring, passing over a more qualified woman in favor of hiring a male. “The high male-to-female ratio of executives in C-suite positions supports this premise. Being more selective with female appointees means that the board of directors may pass over a more qualified female in favor of a less qualified male,” the researchers wrote. “If this is the case, it follows that the remaining pool of female contenders for C-suite positions remains richer with talent.”
Another study, from Peakon, highlights the impact female led businesses have on strategy. Responses to the statement, “The overall business goals and strategies set by senior leadership are taking [company] in the right direction,” resulted in a 0.3 higher rating for women led companies.
The report defines a women led company as those with greater than 50% female representation in management. If the number is less than 50%, it is considered to be men led. While the difference may not seem significant, it is when you realize the number of responses, 60,000. Beyond the initial question, two sub-questions showed an even greater difference. For strategy communications, the rating was 0.6 higher and for strategy mission, the rating was 0.8 higher for female led companies.
The benefit, according to the report, “A clear strategy is a powerful driver of engagement. It provides a sense of direction and meaning for everyone in an organization, from the CEO to front-line staff.” Another interesting finding of the study supporting engagement is that employees at women-led companies have a deeper conviction about the value of their offering. Again, with a 0.6 higher rating. According to the report, “What’s the connection between Belief and Strategy? Perhaps it’s story. Ben Horowitz, cofounder and general partner at the influential venture capital firm Andreessen Horowitz, this finding makes sense: “The mistake people make is thinking the story is just about marketing. No, the story is the strategy. If you make your story better, you make the strategy better.”
Telling a better story creates greater belief—which improves Strategy going forward. It’s a symbiotic relationship, one that women leaders may understand more intuitively than men.” For more information on diversity at the executive level, or help with hiring minority candidates at the executive level, send us a note.