According to a study of Fortune 1000 companies, women-led businesses earned investors a 340 percent return. Need more convincing? Read on.
Carly Fiorina and Meg Whitman are both in the news of late, for different reasons.
Both are former CEOs of what used to be Hewlett-Packard before it broke into two separate companies.
Both are also female, which in a better world wouldn’t be worth mention.
That better world would be one unlike ours, in which the percentage of female CEOs in Fortune 500 companies is only five percent (a running total of 24 women), even though women make up 45 percent of the S&P 500 labor force, according to The Washington Post.
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If we look more broadly at companies with more than 100 employees or more than $50 million in revenue, the percentage is only marginally better—only 17 percent in a gender study conducted by Mintage. But the same study found that these female CEOs headed up companies with up to 18 percent higher revenue per employee than male CEO-led companies.
In general, female-led companies shared the following characteristics in comparison to their male counterparts:
- More robust marketing teams
- Higher levels of publicity
- Stronger event planning
- Greater online presence
Moreover, studies such as those conducted by MIT and cited in The Huffington Post point to women’s superior “emotional intelligence”—the ability to “read” a situation by correctly evaluating the state other people’s emotions as well as your own—that results in higher task performance.
And according to Business Reporter, women are better collaborators, which in part explains why organizations that have a larger proportion of women in higher roles outperform organizations that don’t.
Why Aren’t There More Female CEOs?
Despite the rising numbers of women in the workforce, at the higher echelons it’s still very much an old boys club. As reported in The Guardian, despite some gains, company boards are still made up mostly of men. Moreover, men tend to view women more critically, which is one reason why women in top positions are forced out faster than men when a company is in crisis. Or, perhaps more significantly, when women challenge the male hierarchy.
Sharon Bolton, a professor of organizational analysis at the University of Stirling in Scotland, notes that women managers are primarily in roles that require people skills—human resources, public relations, and communications, for example. But C-suite executives are typically drawn from the male-dominated disciplines of finance, research, operations, and general management. Put another way, women are victims of “institutionalized exclusion.”
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Why Your Next CEO Should Be a Woman
While gender shouldn’t be a primary reason to hire (or not hire) anyone (for legal and moral reasons), a case could be made that all other things being equal, a female CEO could pay off for your company. Literally.
Quartz reports on an algorithm developed by Karen Rubin that correlates female leadership to stock performance of Fortune 1000 companies in the period from 2002 to 2014.
Her findings: women-led companies earned investors a 340 percent return, compared to an S&P 500 benchmark of 122 percent.
You might have even more reason to hire a female CEO if your company is having problems. Research suggests that women are more likely to be picked for leadership roles to run distressed businesses. Women are thought to have a better personality to manage a crisis because they are seen as more intuitive, understanding, and sympathetic than men.
Also, women are viewed as better able to manage people and situations during a time of stress, as well as work behind the scenes and (while this isn’t why you should be looking to hire a female CEO) fill the role of scapegoat. For examples of women appointed CEOs to fix companies in trouble, see Marissa Mayer at Yahoo and May Barra at GM.
The downside for women is what is characterized as “the glass cliff,” a phenomenon in which female CEOs are typically fired faster than men for not achieving the desired results. Shirley Leung of The Boston Globe points out the higher percentage of female CEOS (38 percent) forced out compared to men (27 percent) in a 2013 study of 2,500 public companies. This also tends to, as Marianne Cooper notes for PBSNewsHour, “reaffirms beliefs that women aren’t good leaders anyway.”
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Ultimately, there are a multitude of factors to consider when hiring a CEO. In a better world, the issue of gender would not matter. Since we’re not in a better world, your company’s culture and business conditions might lead you towards the female side of the equation. (Although it’s not legal to consider gender when hiring.) Even if you end up hiring a man, it might be a good idea if he thought more like a woman.
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