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More Women in Management Means Higher Profits

Topics: Data & Research
women in management
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Striving for workplace gender equality isn’t just the right thing to do, it’s also what’s best for business. Smart companies are making diversity and inclusion a top priority for good reason. Now, there is even more science to support what many already know.

The Peterson Institute for International Economics and EY analyzed data from 21,980 companies in 91 countries across industries and sectors. They found that having at least 30 percent of women in leadership positions added 6 percent to net profit margins. The findings of this report provide a tremendous amount of information about how women in leadership roles impact the bottom line.

“The evidence on women in the C-suite is robust,” said Marcus Noland, director of studies at the Peterson institute in an interview with Quartz. “No matter how we torture the data we get the same result: women in the C-suite are associated with higher profitability.”

Women Are Underrepresented in Leadership Roles, and It’s Bad for Business

These researchers found that having women in leadership roles improves the bottom line. But, they also found that many companies aren’t taking advantage of the opportunity. Women are terribly underrepresented in leadership roles more often than not.

  • Nearly a third of the companies have no women in C-suite positions or on their board.
  • Fewer than 5 percent have a female CEO.
  • 60 percent of the companies have no female board members.
  • 50 percent have zero female top executives.
  • Only 3.8 percent of board chairs are female.

Findings like these should inspire organizations to make adjustments. If profits increase by 6 percent when women occupy 30 percent of leadership positions, imagine what could happen if they filled these jobs at the same rate as men.

“The impact of having more women in senior leadership on net margin, when a third of companies studies do not, begs the question of what the global economic impact would be if more women rose in the ranks,” said Stephen R. Howe, Jr., EY’s US Chairman and Americas Managing Partner, in a statement. “The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”

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Paternity Leave Stood Out Among Variables

One factor that seemed to have a tremendous impact on female leadership was paternity leave. Countries that offered maternity leave didn’t have more women leaders. But, those that offer paternity leave did.

It stands to reason that sharing the burden of childcare equally is necessary if women are to advance to the highest levels in business. There are hidden costs when moms stay home to raise kids. Until men are equal at home, it’s very difficult for women to be equal at work. Now, thanks to this study, we have even more evidence to support the idea that businesses pay a price for this lack of equality, too.

For more insight into the opportunity and gender pay gap, see PayScale’s report.

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