Women leaders = Smarter decisions + higher profits (here’s the proof)

by Paul Meshanko

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As the focus on breaking the glass ceiling and getting more women into middle and senior level leadership roles intensifies, it’s important to realize that this is not some “kumbaya” initiative. It’s a matter of making smarter business decisions and ultimately (at least in the private sector) making more money. In its landmark 2016 working paper, Is Gender Diversity Profitable? Evidence from a Global Survey, the Peterson Institute for International Economics estimated that having women fill at least 30% of an organization’s C-level leadership roles could be reliably counted on to increase a company’s net profit margin by 6%. Compounded over several years, that can add up to serious gains for shareholders.

To the curious mind, this begs the question: Why, exactly, does having more women in leadership roles potentially lead to a healthier bottom line? While there are many reasons, the one I’d like to draw attention to is compelling all by itself. Women, it seems, oftentimes make smarter business decisions than their male counterparts. Chalk it up to biology and genetics.

In a just-released study from Caltech, the Wharton School, Western University, and ZRT Laboratory, researchers found that higher levels of testosterone (more prevalent in men) were linked to impaired decision making and an increase in impulsivity. “The testosterone is either inhibiting the process of mentally checking your work or increasing the intuitive feeling that ‘I’m definitely right,’” wrote the study’s authors. Put in simpler terms, higher levels of testosterone can cause men to make rash, emotional decisions and then double down on them even when evidence suggests they may not be wise. Women, conversely, are naturally inclined to take more time making decisions and are more likely to self-correct when the initial decision turns out to be unwise. Call me crazy, but this is the kind of mindset that would seem to lead to more consistently healthier gains for both shareholders and stakeholders overall.

Despite the growing evidence showing the value of having more women in senior leadership roles, the PIIE working paper highlighted just how poorly they are currently represented. Of the 21,980 publicly traded companies surveyed globally:

What is keeping more women from key leadership roles? It is centuries of gender bias (masquerading as tradition) and, for many men, fear. Fear of losing our place at the head of the boardroom table (status) and/or fear of genuinely not knowing how to adapt our own work styles to be able to share decision making authority with women. But collectively, we have to try to push through this. Now more than ever, the complexity of the opportunities and problems facing business and government leaders alike demand that we bring the absolute smartest thinking to our approaches and actions. As is becoming more apparent every day, we men cannot do this on our own. We need the fully empowered intellect and unique perspectives of women working side-by-side with us.

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