Want Higher Profits? Smash the Glass Ceiling

According to a near two-decade research study of Fortune 500 companies (from 1980–1998) by Roy Adler, a Fulbright scholar and Professor of Marketing at Pepperdine University and one of a very select few awarded the distinction of Designated Fellow by the Academy of Marketing Science, there is a strong correlation between women in the executive suite and high profitability. In fact, within the 25 Fortune 500 companies with the best record of promoting women into high positions, profits were higher by an astounding 18-69% when compared to the median Fortune 500 firms within their same industry!

And to be sure, since different industries use different measures of profitability, the study included three measures of profitability to evaluate each of the firms – profits as a percent of:

  • Revenues
  • Assets
  • Stockholders' equity.

Revenues

On the measure of profits as a percent of revenues, the 25 firms outperformed the corresponding industry medians by 34%. The women-friendly firms averaged 6.4% while the average of their industry medians was 4.8%.

When taken individually, almost two-thirds of the subject firms outperformed their median counterparts.

Assets

On the measure of profits as a percent of assets, the 25 firms outperformed the industry medians by 18%. The women-friendly firms averaged 6.5 percent while the average of their industry medians was 5.5%.

When taken individually, 62% of the firms outperformed their median counterparts.

Stockholders’ equity

On the measure of profits as a percent of stockholders' equity, the 25 firms outperformed the industry medians by 69%. The women-friendly firms averaged 26.5% while the average of their industry medians was 15.7%.

When taken individually, 68% of the firms outperformed their median counterparts.

Slicing the data

In fact, these results are even more interesting when the "slice of data" is modified from the top 25 firms as shown in the table below:

Percent by which companies exceed the industry median in terms of ...

Profit as a % of >>>          Revenue     Assets     Equity
Top 10 firms                     46              41          116
Top 15 firms                     35              25          85
Top 20 firms                     34              19          78
Top 25 firms                     34              18          69

In other words, the results of the "top 25 firms" featured in this study are quite conservative. The results are even more dramatic when a smaller "slice" of only the most friendly firms for women are highlighted.

Of course, it should be pointed out that "correlation" does not indicate or prove "causality." There may be any number of reasons why the study results are as indicated.

However, despite the interpretation of the data, there is no denying that there is a positive correlation between the existence of larger numbers of women in the executive suite and higher than normal profitability within an industry.

Source: Women in the Executive Suite Correlate to High Profits by Roy D. Adler, Ph.D., Pepperdine University.


Nina nets it out: When you’re ready to earn higher profits and out-compete your industry colleagues, you know what to do!! For an interesting take on this from Inc. Magazine, click here. Nina Simosko's personal blog can be found at www.ninasimosko.com

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3 Comments

  • John Agno

    Des Moines insurer Principal Financial Group (www.Principal.com) is ranked #21 in FORTUNE's 100 best companies to work for where the majority of employees get retirement benefits of 100% of income. Principal Financial has a long history of recruiting women: A 1996 Des Moines Sunday Register ad trumpets job openings for "mothers of schoolchildren" with part-time hours and summers off.

    Nearly two-thirds of the company's 13,438 employees are women. They hold 50 percent of the 1,700 most senior positions, and five of the 14 directors (35%) are female versus the insurance industry average of 16 percent.

    Principal Financial's Human Resource Department focuses on programs that support women employees through the more vulnerable points in the "whole career life cycle." For example, in addition to 12 weeks off after the birth of a child, women can now return part-time and build back up to full-time. What's more, Principal Financial has invested $8 million in a subsidized early-childhood learning center. Principal Financial's James DeVries says those measures cost the company very little. "It's a virtuous cycle," he says. "Just about every metric you review around employee productivity has increased: Our sales results are higher than they have ever been, our investment performance is great, our stock price has tripled."

  • Nina Simosko

    Edward,
    It is due to numerous reasons, but ultimately it is, in my opinion, brought about by different management styles, time horizons and openness to the "wisdom of teams". Generally speaking, in any given situation, a different leadership approach will likely result in a different outcome. So, if as I postulate, women lead somewhat differently than men, it implies different outcomes. Secondly, I believe that women leaders, in general, have more patience and longer time horizons, ultimately leading to different results. And, finally, I believe that women are more open to casting a wide net for input and benefit from the "wisdom of teams". This is not to say that male leaders don't do some of these things as well, but these are my beliefs for the reasons for the undeniable success women leaders have demonstrated per Dr. Adler's research.