In surprising news to old boys’ clubs everywhere, research findings indicate appointing women to company boards and installing them in C-suites has correlated with positive bottom-line performance.
Several studies have shown when boards had at least one woman on them the absolute, and relative share prices–as well as overall financial performance of these organizations–surpassed those of companies who host boardrooms comprised solely of men.
This noteworthy outcome has generated heated debate between two camps: those that believe women are critical to the success of any enterprise, and those that think women are merely coincidental to performance outcomes of these companies, for whom success was already on the docket regardless of a board’s gender makeup.
The debate can be neatly summed up by the old chicken or egg argument: Are organizations performing better because women are on boards and C-suites, or are women being appointed to boards and C-suites of organizations that already are–or are on the cusp of–performing well?
While the research never addresses the chicken-egg conundrum, a logical way to explain this is why a interesting relationship exists. We just have to do some simple math.
Think back to high school when we learned transitive theory in mathematics. The theory asserts if A=B and B=C, then A=C. In our explanation:
- A = Women
- B = Successful teams
- C = Financial performance
First, we need to agree boards and C-suites are teams; not just a collection of executives. According to the Business Dictionary, an executive is a person or group appointed and given the responsibility to manage the affairs of an organization, and has the authority to make decisions within specified boundaries.
It is the collective and coordinated actions of the team of people at the top of the organization that drive corporate performance, either by creating–or diminishing–economic value.
A study published in Harvard Business Review in June 2011 found collective intelligence of work teams rises when more female members are added, and a group’s collective intelligence has more to do with team dynamics than the sum of its members’ brainpower.
Better team performance is attributed to the fact women score better on social sensitivity measures. Women tend to be better listeners, are better able to draw others into conversations, and are less likely to dominate groups with their opinions.
In contrast to men’s competitive leadership style, women’s leadership style is task-oriented, focused on mentoring others, and expresses concern about others’ needs. These gender-specific behavioral attributes are critical in supplementing the collective skills and abilities of team members to produce desired outcomes.
My own research findings, published in Harvard Business Review in March 2014, quantify the impact of team intelligence (TQ) on corporate financial performance.
My research reflects responses of more than 1,000 board and C-suite executives across all industries with revenues from $1 million to $78 billion, and demonstrates a strong and statistically significant relationship between a top management team’s intelligence and its bottom-line performance.
Where board and C-suite TQ was high, organizations outperformed their direct competitors, and where it was low, organizations underperformed their direct competitors. In addition to revealing this strong correlation, my research was able to quantify team intelligence on financial impact from 4% to 20% on bottom-line results.
By quantifying the impact of team intelligence we can prove a direct relationship between teams at the top and bottom-line performance. My findings? Better board and C-suite teams generate better financial performance.
Now we just apply the transitive theory to these relationships and we can conclude:
- A=B: If having women on Board and C-suite teams generates more effective teams; and
- B=C: If more effective teams generate better bottom-line financial performance, then
- A=C: Having women on Boards and C-suite teams generates better corporate financial performance.
So what can you do to improve the potential of your team to create economic value and outperform your competitors?
- Seek Women Directors and C-suite Executives: Adding women to your top management teams has proven benefits.
- Recruit Smartly: Women have the potential to make teams more effective and enhance corporate performance, but you still need to do a good job recruiting. Women candidates still have to possess the skills and capabilities of the ideal candidate.
- Enhance Team Performance: High-performing teams don’t just happen organically, even with women on the team. They take work and effective leadership. Determine your team’s TQ and if it’s high, great. If it’s low, there’s work to be done to position the team to create economic value. The TQ assessment will highlight where the team is weak, and the appropriate intervention can be introduced.
Obviously, there will be individual exceptions to the broad generalization of gender-specific traits. We all know women who act more male-like, and men who act more female-like in the organization–and that’s okay.
But study after study is finding a relationship between the role of female-style team behaviors, leadership, and company financial performance.
—Solange Charas is president of Charas Consulting, Inc., which provides strategic HR advice to boards, C-suite executives, and the M&A community. Her advisory work focuses on assisting organizations in the optimization of their investments in HR programs. She has deep experience in all areas of HR–consulting to both management and boards on appropriate strategies utilizing innovative approaches. She specializes in human capital metrics, using an analytical approach to understand the return on human capital investment and effectively deploy human capital in the organization.