Workforce diversity, both in leadership and the rank-and-file, is one of those ideals to which companies aspire without needing a true “business” reason. For some, it’s “the right thing to do.” For others, it’s merely a way to preclude lawsuits. As such, diversity is often low on the human resources totem pole, and many companies do not make systematic efforts to boost diversity.
Now, a new study suggests that increasing gender diversity in the executive ranks can improve the bottom line. According to a report by the Peterson Institute for International Economics and EY, the audit firm formerly known as Ernst & Young, companies with at least 30 percent women in leadership roles may boost their net profit margins by about 15 percent compared with those without female leaders.
The study, which looked at 22,000 companies in 91 countries, found the biggest gains took place when women held senior positions, such as chief financial officer or chief operating officer. Companies run by a female CEO without other women in executive roles or on the board of directors did not perform particularly better or worse than male-run firms.
“Women in positions of leadership are associated with superior corporate performance,” says Marcus Noland, Peterson’s executive vice president and director of studies. “The most important finding of the study is the importance of having a pipeline” of women at the top, he says.
The research looked at 13,000 profitable companies, which had a median net profit margin of 6.4 percent, and found that the margin increased by more than 1 percentage point, or about 15 percent, when women filled at least 30 percent of leadership roles. This effect was even more striking when unprofitable companies were included in the analysis. All 22,000 companies had a median net profit margin of just over 3 percent, but those with 30 percent women in top roles posted profit margins as much as 6 percentage points more.
Despite the apparent economic benefits, many corporations lack gender diversity. Sixty percent of the companies reviewed had no female board members, and more than half had no female executives. Less than 5 percent had a female CEO.
The disparity is particularly acute in manufacturing. Women comprise 47 percent of the U.S. workforce, but only 24 percent of the personnel at durable-goods manufacturers. At a time when U.S. manufacturers are desperate to find the next generation of skilled workers, engineers and managers, women represent a vast pool of untapped talent. Women earn more than half of the associate’s, bachelor’s and master’s degrees in the U.S., and they hold more than half of all U.S. managerial and professional positions.
Recruiting and retaining women in manufacturing will be the focus of a panel discussion Thursday, Oct. 27, from 12:30 to 1:30 p.m. at The ASSEMBLY Show in Rosemont, IL. During this thought-provoking discussion, several prominent women in manufacturing will share their perspectives on how to support, promote and inspire women who are pursuing careers in manufacturing. We urge everyone to attend.