Are Women Really Producing a Better Bottom Line?

MergeLane was established on a simple principle: investing in women is not only the right thing to do – it is the smart thing to do. In the time I’ve been working with MergeLane, I’ve researched over 1,600 companies with at least one woman in leadership. I have watched our startup accelerator graduate eight startups in its first year and ten startups in its second. What amazes me most about these companies is the breadth of industries they represent. From clothing to transportation, from candy to cybersecurity, these startups demonstrate that successful female leadership can be found in any kind of business. But, I’ve been wondering…does the fact that these leaders are women really make a difference?

I believe that investing in women makes good business sense, but I’ve learned that not everyone is in agreement. The past several years have produced a wealth of data and opinions on the financial outcomes of gender diversity and female leadership in business. Many studies demonstrate the benefits of having more women in business, particularly in leadership positions. Others show the opposite: that increasing the amount of women in business shows no or even a negative effect on the bottom line.

So what should we believe? I spent some time researching the recent data on this subject. Below are some of the most interesting statistics I’ve found. 

There have undoubtedly been some reputable reports demonstrating equal or even less success for companies with increased female representation:

• Employment and revenue growth patterns are similar between women-owned and all firms of similar sizes. (American Express, The 2014 State of Women-Owned Businesses Report)
• Teams with an equal gender mix perform the same as teams with a majority of females. (Harvard Kennedy School, The Impact of Gender Diversity on the Performance of Business Teams)
• More female directors could be a result of business success rather than the cause of it if more successful, established companies can afford broader considerations like gender inequality. (The Atlantic, Let’s Not Oversell the Financial Benefits of Having Women on Corporate Boards)
• A Norwegian policy mandating 40% female board membership was followed by a decline in overall Norwegian company profits. (The Huffington Post, Gender Diversity on Boards: Good, Bad or Indifferent?)

Taking a broader view, however, the majority of recent data points in the other direction:

• An analysis of 20,000 venture-backed startups showed that successful tech startups have twice as many women in senior positions as unsuccessful startups. (Bloomberg, Women Help Startups Succeed. When Will VCs Notice?)
• Women-led private technology companies are more capital-efficient, achieving 35% higher ROI. (Bloomberg, Women Who Run Tech Companies are Catching Up)
• Large companies with more women in leadership performed significantly better financially with a 41% higher ROE and 56% better operating results. (McKinsey & Company, Women Matter)
• An analysis of 2,360 global companies in a variety of industries found that companies with women on their executive boards outperformed companies with all-male executive boards, being superior in ROE, debt/equity ratios, price/equity ratios, and average growth. (Credit Suisse Research Institute, Gender Diversity and Corporate Performance)
• In a study including 4,000 global companies, those with strong female leadership generated an ROE of 10.1% per year versus 7.4% for companies without. (MSCI, Women on Boards)
• Businesses that effectively support gender diversity perform better financially, enjoy exceptional team dynamics, and attain greater productivity. (NCWIT, What is the Impact of Gender Diversity on Technology Business Performance?)
• If every country narrowed its gender gap at the same historic rate as the fastest-improving country in its regional peer group, the world could add $12 trillion to annual gross domestic product by 2025. That’s about 11% higher than it would be under the business-as-usual scenario. (McKinsey & Company, How Advancing Women’s Equality Can Add $12 Trillion to Global Growth)
• Companies with more diverse teams had higher sales revenue, more customers, greater market share, and greater profits than did less-diverse companies. (NCWIT, What is the Impact of Gender Diversity on Technology Business Performance?)
• Companies without strong female leadership had a 24% increase in internal governance controversies such as bribery, fraud, and corruption. (Huffington Post, Study: Companies with Strong Female Leadership Perform Better. Now What?)
• Companies gain competitive strength through diversity, enhancing the capacity for innovation, attracting of top employees, lowering costs of attrition, and creating products that reflect the consumer base. (NCWIT, Women in IT: The Facts Infographic)
• When there is a conflict, female leaders exhibit more empathy and are better listeners. This quality fosters better relationships, creating and building better teams. (Lehigh University, When is Female Leadership an Advantage?)
• Typical female attributes, such as being empathic and understanding the impact your behavior has on others, has proven advantageous in sales, service industries, and even in debt collection. (The Guardian, Can Empathy Really Work in a Business World Dominated by Testosterone?)

So….do women increase the bottom line? I’ll let you come to your own conclusion. From my experience and all of this research, it is pretty easy for me to come to mine.