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Businesses With Women Leaders Are Often More Profitable – 7 Reasons Why Thumbnail

Businesses With Women Leaders Are Often More Profitable – 7 Reasons Why

By Sarah Carlson, CFP®, CLU®, ChFC®

Although the percentage of women who are CEOs of Fortune 500 companies is still small (about one in 10), the number of women in senior management (including vice presidents, senior vice presidents and executive vice presidents) in businesses is growing.1 The benefits of this rising gender diversity for businesses and individuals are significant.

Women tend to bring diverse perspectives and styles on how to go about solving problems, and a study conducted by the consultancy giant McKinsey Company revealed that firms with more gender diversity at the top are 21% more likely to have above-average profitability.2 

Here are additional ways that gender diversity may help firms.

Enhanced Collaboration

Women leaders tend to place higher emphasis on teamwork and collaboration. Research published in Harvard Business Review found that, when women join corporate leadership ranks, employee engagement and satisfaction skyrocket, boosting productivity and profitability while creating more cohesive, more effective teams.3

Risk Management

Where men might be more inclined to take a ‘high risk, high reward’ approach to decision-making, women are more measured and risk-averse. One study by the Peterson Institute for International Economics concluded that firms with a higher percentage of women on executive committees recorded fewer incidences of financial rumors. More women, it seems, may prevent financial defaults. The same might be true for environmental defaults.4

Consumer Insight

Specifically, by bringing women to leadership positions, we gain insights from female consumers’ preferences and behaviors. Perhaps the most convincing incentive for gender equality is profit itself. When female consumers hold the purse strings and account for nearly all household spending, this insight may translate into sales and customer loyalty.

Improved Governance

Female leaders tend to have a positive effect on transparency and ethical behavior. A Credit Suisse report found that corporations with female board representation also tend to have better governance structures, which may increase investor confidence and attract more capital.5

Talent Attraction and Retention

Having women in leadership roles helps companies attract quality talent because it signals spaciousness and innovation. A report by Deloitte reveals that diverse leadership teams are better positioned to attract a broader range of candidates, increase retention, and lower recruitment costs.6

Enhanced Reputation

Finally, gender-diverse leadership may add to an organization’s reputation and identity – and might aid its overall brand image. A study by the Boston Consulting Group showed employees at companies with diverse leadership felt that their firm is more socially responsible.7 Such perception may increase loyalty and brand equity, and may help shape a whole new generation of buyers.

The data is compelling: companies run by women are more likely to outperform their competitors. Investing in women leadership teams is not simply the correct thing to do; it’s the smart thing to do – it may improve every metric and function of the business.





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Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.  
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking #600725
Footnotes
1 Is this the Age of Women in Leadership? https://www.forbes.com/sites/lisalindahl/2024/02/05/is-this-the-age-of-women-in-leadership/
2 Delivering through Diversity https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity
3 How and Where Diversity Drives Financial Performance https://hbr.org/2018/01/how-and-where-diversity-drives-financial-performance
4 Is Gender Diversity Profitable? https://www.piie.com/publications/wp/wp16-3.pdf
5 The CS Gender 3000: Women in Senior Management https://www.credit-suisse.com/about-us-news/en/articles/news-and-expertise/the-cs-gender-3000-in-2019-201904.html
6 Diversity and Inclusion in the Workplace https://www2.deloitte.com/us/en/pages/about-deloitte/articles/diversity-and-inclusion-at-deloitte.html
7 How Diverse Leadership Teams Boost Innovation https://www.bcg.com/publications/2018/how-diverse-leadership-teams-boost-innovation