Research has shown that firms with more women in senior positions are more profitable, more socially responsible, and provide safer, higher-quality customer experiences — among many other benefits
S&P companies led by female CEOs had a 20% higher stock price on average – S&P Global, When Women Lead, Firms Win…
However, when it comes to explaining why having more female executives is associated with better business outcomes, and what specific mechanisms cause those positive changes, existing research is much more limited.
As per HBR, April’21, specifically, there are three distinct trends around shifts in firms’ strategic thinking following the appointment of female executives:
1. Organizations became Low risk-seeking and open to change
A linguistic analysis was conducted shows that the frequency of the terms in firm Communications indicated a propensity for risk-taking decreased by 14%, while the frequency of terms suggesting openness to change increased by 10% after women joined C-suite which indicated that that female executives don’t just offer specific new ideas to the team; their presence actually makes the TMT collectively more open to change and less comfortable with risk-taking. . In other words, these organizations increasingly embraced transformation while seeking to reduce the risks associated with it.
2. More Focus on R&D
When women were appointed to senior positions and firms began to exhibit higher levels of both openness to change and aversion to risk, firms reported an average 1.1% increase in R&D investments — and the average total R&D investment of the companies in our sample was $6,538 million, so a 1.1% increase is substantial. Hence there is a gradual shift from a knowledge-buying strategy focused on M&As — which could be described as a more traditionally masculine, proactive approach — towards a knowledge-building strategy focused on internal R&D, which could be described as a more traditionally feminine, collaborative approach.
3. Better integration of top women executives with the top executes team creates a great impact
Whether she’s the only woman or Whether she’s one of many new appointees, adding female executives to the top management team changed C-suite thinking when the new female executives were part of a smaller cohort of new appointees.
What Impact a Woman in the C-Suite creates for a firm?
- It makes Top Management Teams more focused on balancing innovation with risk mitigation as more women join their ranks
- Research suggests that female executives are likely to care less about tradition and are more open to challenging the status quo than their male counterparts
- Women executive joining in Top Management team is a direct result of increasing diversity in that team and Research suggests that having more diverse perspectives to weigh in on key decisions can make a group more open to change, and more likely to see change as feasible
Conclusion: It’s well known that firms with greater gender diversity among senior leadership perform better. The addition of female executives shifts companies’ strategic approach to innovation. After women join the top management team, firms become more open to change and less open to risk, and they tend to shift from an M&A-focused strategy to more investment into internal R&D. In other words, when women join the C-suite, they don’t just bring new perspectives — they actually shift how the C-suite thinks about innovation, ultimately enabling these firms to consider a wider variety of strategies for creating value
(Sources: https://www.managementstudyguide.com/women-and-leadership.htm; https://hbr.org/2020/04/7-leadership-lessons-men-can-learn-from-women; https://www.replicon.com/blog/17-reasons-women-make-great-leaders/;https://www.ddiworld.com/solutions/women-in-leadership; https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace; https://www.tutorialspoint.com/women_in_leadership/women_in_leadership_introduction.htm; https://hbr.org/2021/04/research-adding-women-to-the-c-suite-changes-how-companies-think; https://www.thebalancecareers.com/how-to-promote-women-in-leadership-roles-1918609; https://www.weforum.org/agenda/2020/03/more-women-in-leadership-shouldnt-matter-but-it-really-does/;https://www.catalyst.org/research/women-in-management/;https://www2.deloitte.com/us/en/insights/industry/financial-services/women-in-the-c-suite.html; https://www.diva-portal.org/smash/get/diva2:326289/FULLTEXT01.pdf> https://womendeliver.org/womensleadership/;https://www.naturalhr.com/2021/03/23/10-reasons-why-the-world-needs-more-women-in-leadership-roles/)