For some 20 years, companies have been running women’s leadership development programs a lot like sensitivity seminars, to develop awareness in both women and men that business women are, well, “different” and to help women understand how best to integrate into the existing business culture.

The good news is that these efforts, combined with education and encouragement, have helped put women on 15% of the boards of the Fortune 500. More good news is that studies show that companies with about 30% gender diversity on their boards actually outperform those with no women by a wide margin measured through multiple metrics (e.g., an 84% return on sales).

The bad news is that 15% is paltry for the Fortune 500, and it looks like midcap firms’ leadership teams may be even less gender diverse. Worse news is that progress is slowing at exactly the time we need women’s strong leadership skills in upper management more than ever; and women — especially young, highly educated women — are bailing out of the system. They’re not all leaving the workforce to have babies either — many of the best and brightest are going to start entrepreneurial ventures.

This puts business leaders interested in recruiting and developing the next generation of leadership in quite a bind. On the one hand, we have an economy — in need of powerful up-and-comers — struggling to right itself into productivity, ethics, sustainability and profitability. On the other hand, we have an up-and-coming, educated, appropriately skilled resource in plentiful supply (representing over half the workforce) who is choosing to opt out of the system.

You see the danger ahead, don’t you? We’ve identified talent pool key to our economic success who’s not making it into leadership positions where they can deploy that positive impact, and thus our leadership class is becoming systematically weakened at the very time we most need to strengthen it.

This isn’t new news — the seminal research on this subject was published by McKinsey in 2007 — but discussion and action on this subject in the U.S. is far behind Europe and even developing nations. Are we asleep at the switch? As importantly, why are so many women taking the path of least resistance?

As many women entrepreneurs tell me, “Why should I put up with a culture that doesn’t meet my needs and let me shine? I know I’m good. I’ll go make money for myself.” And then — thanks to the Internet — they do, along with many creative-thinking, industrious young men. When I talk to women both in and outside corporations about why they have left, or are tempted to leave, corporate culture is most frequently cited as the barrier to bringing more women into leadership.

Corporate attempts to support “women’s leadership programs” are often seen as a burden — another job on top of the one they already have and the family they value. But as importantly, many women’s development programs are viewed as attempts to “fix them,” which leads many to conclude they’re just round pegs being stuffed into square holes and might as well leave, taking their talent and potential with them.

It’s easy for a corporation to throw up its (metaphorical) hands and say, “It’s our culture, we can’t change,” but I submit that there’s simply too much at stake now not to change. And this change isn’t only for social justice reasons – there are hard metrics to motivate it too. Change isn’t hard when you understand what you have to lose and what you have to gain. After all, what would your financials look like with an 84% increase in return on sales or a 46% increase in return on equity?

I believe, after scanning almost 100 research studies on the subject, that by bringing more women into leadership, their mere presence in balanced numbers (i.e., 30% or more), with men will strengthen the capabilities of any organization’s leadership culture. This phenomenon, The Woman Effect, has already been validated through the research above and has the power to revitalize our economic engines to spur yet another wave of phenomenal growth.

However, to activate The Woman Effect in our economy, we’ve got to do it in our companies; and to activate it in our companies, we’ve got to stop running sensitivity seminars to adapt the women to the existing culture. We’ve got to take on the challenge of systemically adapting our culture to bring out the strengths of both female and male leaders, working together. This is a core strategic investment in profitability and sustainability, even more strategic than implementing a new ERP system.

The good news is that many of the same change management practices we use to implement technology can help us adjust to gender-partnered leadership. My colleagues and I will be running some change management pilot programs to do this and I’ll report back here. Go ahead and get started. You won’t be alone!

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40 Responses to “The business case for gender-balanced leadership”

  1. Mary says:

    Great article, especially the part about "fixing us" vs. embracing the gifts we bring that are creating the profits. Why would you hire a woman and then form her to fit the business model that isn't working?

    • Dana Theus says:

      Hi Mary. Thanks for your comment. Honestly, I don't think that most cultures meant to "fix us"… it's just the natural way dominant cultures encounter subcultures. But once the subculture becomes well enough established it's time to adjust and learn to bring in the strengths of both. It's a natural evolution. But of course, it's high time we start evolving:)

  2. Kris says:

    Another sexest article about how women are better than men…put the shoe on the other foot and hear the hue and cry…

    • Christine says:

      We must have read completely different articles because I didn't read that women are better than men anywhere in this article. The article talks about how diverse leadership outperforms strictly male leadership. I would guess that diverse leadership would outperform strictly female leadership too (although since women make up such a small portion of leadership in our culture it's hard to know that for sure.) Diverse leadership breeds diverse ideas and points-of-views. In most cases, the customers of corporations aren't all old, white men so having a little diversity on your board, people who can understand and relate to your customers, is seldom a bad thing.

      • Dana Theus says:

        Thanks, Christine. You got my point exactly. Actually, I would like to research the alternative view, that organizations with men at 30-50% in leadership to a largely female executive group perform better than an all female board. I do think that this would "prove the hypothesis" even more soundly. Unfortunately, as you also point out there is not a large population of Fortune 500 companies (like, none I think) that would fit this description. I do think we could find this kind of segment in the entrepreneurial world and have it on my list to reach out to some of those organizations to see about doing this research. If I can find a research partner, I'll report back and let you know!

  3. Guest says:

    A little hypocritical I think. You talk about the number of women opting out of corporate culture to pursue their own business as an entrepreneur as if that were a bad thing yet you yourself are one of those entreprenuers.

    • Dana Theus says:

      Hi, Guest. Not hypocritical at all. I am not saying it's a bad thing for the women (quite the opposite in many cases). I would like more women to have more options as to whether they keep working to move up the ladder or move out into the brain drain. Many women go into the brain drain because they perceive that the price to staying on the ladder is to compromise who they are – to never "embrace their gifts" (as Mary said aptly above). I'd like more women to have the option to "embrace their gifts" inside and outside corporate structures. And to be honest, I think men suffer the same "Sophie's choice" and would also benefit from working in corporate cultures that provide them more options.

      In addition, many of my clients are corporations, and on their behalf I'm concerned about this systemic weakening of the leadership class. "Recruiting top talent" is one of the top concerns of CEOs in this country, and if it's made harder to recruit top talent because their business cultures incent top talent to go exercise their gifts elsewhere, I would like to point out that those CEOs have options perhaps they're not seeing.

  4. The key statement in this article is in the penultimate paragraph. I find it extraordinary that companies have not figured out they have to adapt their cultures to accommodate women at every level in order to ensure they benefit from the strengths of both men and women, and that they still think they can 'modify' women to fit into their existing ways of doing things.

    • Dana Theus says:

      Hi Peter. Thanks for your comment. I agree that this is a big "ah-ha!" and glad you read it that way. That said, I do believe that these programs have been very well meaning and have done a lot of good over the years. What's becoming clear, however, is that these programs have been nibbling around the edges of the real opportunity – which is still largely not well understood. Through articles like this, I'm working to help spread the word and help more people understand that since the true opportunity isn't that "women are better" (which is how many people are used to confronting this issue, because we think in either/or frameworks) – then of course the solution won't be in "women's programs" but in leadership programs that help both genders understand and appreciate the constructive and positive dynamic between them. Appreciate your participation in the dialog!

    • Shawn says:

      I would submit that not only do corporations need to adapt to accommodate both sexes, but also different races, ethnicities, cultures, world-views, languages….

  5. Hazel says:

    Hi Dana, I like this article, especially this paragraph……. to activate The Woman Effect in our economy, we’ve got to do it in our companies; and to activate it in our companies, we’ve got to stop running sensitivity seminars to adapt the women to the existing culture. We’ve got to take on the challenge of systemically adapting our culture to bring out the strengths of both female and male leaders, working together.

    I had a conversation with a female attorney recently and when discussed the importance of men and women adapting their style of communication with each other she became very upset about the whole learning to adapt. After more conversation with her what I learned was this………

    She feels that the women are taught to adapt to the male way of communicating, leading, and doing business and she has become very good at that, but her aggravation is this, even in her firm it is never the reverse. He does not attempt to adapt his communication to her style. Pointing to exactly what Peter said, teaching only her how to modify just leaves her frustrated because she never gets to be who she is in that environment. As with this young lady, women will continue to hit burn out and leave to do their own thing.

    • Dana Theus says:

      Hazel – Great anecdote to make the point. Women are given a "Sophie's Choice" at some point after they've learned to adapt, which is to "stay adapted" or to rediscover much of their authentic style. In cultures that are hostile to a woman's authentic style, the woman burns out and goes into the brain drain in order to self-actualize and become more powerful. On the other hand – though not frequently enough – when companies learn to value and welcome a woman's value, she and the the organization grow stronger and – the data says – become more profitable!

  6. Guest says:

    I think your whole comment is simply about growing up, as a person and as a society. The hard part for men is that we do not think like women (some excepotions of course) and we both try to change the other to think like us. It drives us both nuts some times. If the "relationship" becomes more clash than mesh it ends in divorce right? Same thing for a corporate environment. I think that for the man/women mix of management to really work there would either have to be a culture of patience and cooperation, or a stabilizing force (Such as a great CEO) keeping it all together. The answer is not as simple as just mixing men and women, it will only work better than a single gender management team if they both understand that they need to stop trying to change the other.

    • Dana Theus says:

      Hi Guest. I believe you're correct about there needing to be a stabilizing force, though I do think that "grown up" adult men and women can learn to work together just like not every marriage needs a therapist. In my consulting practice, I am working more concertedly to create leadership development approaches that ease this transition and give men and women leadership tools to help them appreciate a broader range of styles.. some of which are more natural to women and some to men. Much work here left to do!

  7. RGJ1 says:

    Just a few observations: “…business women are, well, different…” Sorry, times are well past to bother with that. The difference between male and female board members is a moot issue. Board members are board members. The small percentage is simply a matter of initiative. Women have been free to elevate themselves in the business world for years. Water should seek its own level in a laissez faire economy.
    “…studies show that companies with about 30% gender diversity on their boards actually outperform those with no women…” What Studies? By whom?
    “…many of the best and brightest [women] are going to start entrepreneurial ventures.” What’s the point? So are many of the opposite sex. We are all free to do that. What evidence is there that this puts development of “…the next generation of leadership in quite a bind”? Or that “…our leadership class is becoming systematically weakened”? I think there’s none.

    • Dana Theus says:

      Hi RGJ1 – Sorry but we agree to disagree. The research says that the gender balance does make a difference. The link in the article (http://www.inpowerwomen.com/research-says-women-on-boards-are-good-for-business/) is one study by Catalyst that makes this particularly clear but there are others. McKinsey has done the most comprehensive research on the subject (you'll find great summaries of their research across the US and Europe here on their site: http://www.mckinsey.com/Features/women_matter). If you take the link to the Research Index on my site you'll find over 65 studies that look at this issue from many angles. Not all are as definitive as the oned above, but collectively they make a clear case that women introduce diverse leadership styles into cultures and that this diversity pays off in creating more flexible cultures, better able to adapt to rapidly changing economic times. If high potential women in leadership offer a measurable and significant productivity increase and they are not making it into leadership in the corporate sector, this represents a missed opportunity that – in my opinion – is systemically, methodically and consistently weakening our leadership class. Thanks for your comment.

  8. Another guest says:

    The Women Effect seems fairly dubious to me. This article seems like a classic example of correlation without proven causality. (See The Halo Effect by Rosenzweig) Attributing outperformance to gender diversity makes a good story but is almost impossible to prove. There are dozens of explanations, many of them autocorrelated. Maybe strong leadership cultures hire more women, in which case it is the existing culture that drives performance and not diversity. Maybe successful companies can afford to spend more time and money on gender diversity than their peers. While I think women deserve every opportunity to succeed in business, to claim The Women Effect is an over-reach. Think of it this way: If you changed the Board of the business at which you work to 30% women, should you expect an 84% increase in return on sales? Or is improving return on sales more complicated than that?

    • Dana Theus says:

      Hi Another Guest – I happen to think you're probably correct that there is more going on in the cultures that promote women into leadership that makes them successful. A culture that can value a diversity of thought in leadership is probably going to do better than those who do not, regardless of the specific gender mix on their boards. However, because women and men do have different styles (a broad and stereotyping statement on both sides, but born out by decades of psychological research), and because gender is the one predictive element in much of this corollary research, I think it's reasonable to say that cultures with greater female representation at the top are better equipped to perform. Whether the chicken or egg is the women or the culture that values them, to me, is very very secondary. However, the predictability says that women's presence is a meaningful metric and that optimizing a culture for gender – partnered leadership is probably a more natural way of creating a diversity of leadership styles than psychologically profiling everyone and seeking diversity without regard to gender. Thanks for your input.

      • Another Guest says:

        I agree that diversity of thought is likely an advantage. But I do not know how to measure it or run an experiment to demonstrate its value. That is what makes these research studies problematic. They only show correlation and do not show causality.

        I disagree that gender diversity is a meaningful metric. Even if we could show that ALL gender-diverse companies performed better, it does not show causality. Because these studies show only correlation, gender diversity is not a predictive element. That is, we cannot say that becoming more gender-diverse will improve profits. (Height and weight are correlated too – but we would not recommend gaining weight in order to be taller.) I would caution against drawing any causal conclusions from studies of correlation. We just do not know.

        • Dana Theus says:

          Hi again, Another Guest. I certainly take your point about correlation not being causation, however I guess we'll have to agree to disagree about whether this correlation is meaningful. There is more research on this subject which I'll be blogging on in the future here and on my own blog, including this study that shows that women's presence in certain groups WAS the causation factor and the predictable factor: http://www.inpowerwomen.com/research-the-female-f…. There is still more research do to to understand why, I agree, and the "diversity of thought" theory is a good one but unproven down to the nth degree.

          That said, I've been in business long enough to know that while research is good for illuminating trends and potential causalities it's the early bird who gets the worm by jumping on the correlation if it's solid enough to get you business results. If you could achieve your goals by creating diversity of thought and gender partnerships at the same time – not knowing entirely what was the root cause of the improvement – would you really care which aspect it was helping you? If it were me, I'd take the positive outcomes and profit from it!

          • Another Guest says:

            I guess my point is that we in fact cannot conclude that we can achieve our business goals by creating diversity. The research does not show that. I looked at the study that you cited and it is about the performance of groups in brainstorming, visual puzzles and decision making. It was not related to business and business peformance.

            Interestingly, the same study found that performance was not related to group satisfaction, group cohesion, and group motivation. I would hesitate to conclude that these are unimportant in business but that is what the study showed.

            In an interview on the HBR website, one of the authors speculated that the results of the study may be attributable to increased social sensitivity in groups, not gender diversity. "So what is really important is to have people who are high in social sensitivity, whether they are men or women." So should I conclude that a better path is not to pursue gender diversity, but to invest in training to raise social skills across an organization?

          • Dana Theus says:

            Actually, yes. You should conclude that raising social skills across an organization will lead to greater productivity. And when you look at the research to see what employee base naturally has this social sensitivity (including emotional intelligence), you'll find once again that women score very highly. I agree that this area of inquiry is a tad fuzzy, but I think that's the nature of social science research to begin with. It's not as clear cut as biology and chemistry when it comes to understanding causation (though even in biology, there are things that cannot be explained). When it comes to business, especially, the science is only indicative. Business is a pragmatic effort and not really scientific at all. So for me, I don't get too caught up in the science of it – particularly looking for the definitive causation – because if we get stuck there we'll never be able to make a decision! At some point you've got to unhook from the science and go with the trends and indicators to make a decision, which is what leaders do. What do you think is the best way to raise social skills across an organization?

  9. caroldekkers says:

    When we have a culturally diverse workplace (globalization has helped with this) – we adapt the workplace to grow with the strengths of its members. I agree with Christine that this is what many of our workplaces have neglected to do when it comes to women – particularly some of the old bastions of traditionally male professions such as engineering.

    When profits soar for whatever reason (diversity, progressive thinking, innovation) – business will get behind whatever the solution – and if the solution to greater profits is a diverse leadership force (proven) things will slowly change. It's not a matter of women better than men or men better than women, it's what makes a business better period. (The same thing might be said about an age diverse workforce!) When the bottom line improves and profits soar, then businesses change.

    Great post.

    • Dana Theus says:

      Thanks, Carol. I agree, though I think there are some bastions of male profession that are adapting in surprising ways (NASA, for example, has a surprising number of women in leadership). Also, I am looking for a better understanding of the TYPE of diversity that matters most to business results. There much studied between the impact of cultural diversity vs "diversity of thought" and/or intelligence style. To the extend women represent a different kind of thought or intelligence style, this might suggest that thought diversity might be more important a factor than culture in a culturally cohesive environment. On a global scale, perhaps this might not hold up. I continue to explore the research to try to find indicators on these questions and others! Thanks for your comment.

      • caroldekkers says:

        Dana,

        Thanks for your comments. I don't know where I got the name Christine when I responded — I don't know any Christines and mean you in my comment. (Too much multi-tasking today!)

        "Diversity of thought" is a critical construct (in my opinion) and it really opens up the debate to whether diversity in our boardrooms and our workplaces really has anything to do with traditional concepts of "diversity" (based on age, gender, culture, race, religion, orientation, background) – or none of these things. We can have diversity of thought even within a single segment – and someday maybe the external demographic differences can be put aside so that we can really talk as equal human beings no matter who we are.

        It seems that whenever there is discussion concerning ANY of the minority types (or majorities) people get sensitive and cite superiority/inferiority even when such perspectives were never intended. Diversity of thought (and acceptance of such) is really what will create the leading corporations of the future, regardless of the demographic mix. I love your term.

        When we marginalize discussions by cultural dimension, tempers flare, people get defensive, and forward progress is stymied as egos and turfdom get in the way.

        Diversity of thought… I look forward to hearing more about your research, Dana..

        • Dana Theus says:

          Thanks, Carol. Yes, my fundamental hypothesis is "diversity of thought" but as yet I haven't found a replicable and meaningful definition of this – plus The Woman Effect seems to generate more attention, even if some of it is as you say, reactions to traditional debates about inferiority/superiority. Actually, I suspect that even if we could come up with the ultimate indexing and typifying instrument for diversity of thought, it would still express itself in a diversity of other kinds – culture, gender, age etc. The magic is in the mix, which is the whole point! Thanks for the great conversation.

  10. Ward Churchill says:

    My opinion is that we do a very poor job of identifying leadership ability and we need to do a better job of identifying leaders before we worry about their gender or ethnicity. There is nothing worse than having to deal with a poor leader who has been promoted because of gender or ethnicity to "get work". The base of your philosophy is that because we do a poor job identifying leaders, let's try different gender or ethnicity to see if we can do better and that is precisely backwards. Leadership is an ability and having diverse leaders is not a route to better leaders, just different bad leaders.

    • Dana Theus says:

      Hi Ward. I agree and disagree with your opinion. I agree that we do a bad job of identifying leaders. And there are many reasons for this, a big one being that "we" (which is a slightly fuzzy term at best) choose leaders who "look like us". This is a basic prejudice of the human race and there is lots of evidence for this outside the leadership field. (Just look at the growth of niche blogs as people naturally gravitate to news sources that "think like they do".) Because of this fact of human nature, we have to realize that in order to develop better approaches to leadership development, we have to counter this natural tendency. This is important for reasons other than social justice and gender. Being able to know and move beyond your own prejudices is a key skill for innovation, creativity and open-mindedness that can help leaders of any gender see new market opportunities and know when to let go of lousy business strategies too. As I said in a previous comment, whether a culture that welcomes diversity of thought, gender and culture is the cause of succes or whether the diversity of thought, culture and gender causes a more flexible culture is a chicken and egg question. To me the actual causation is less relevant than the effect that a diverse culture of leadership has on contributing to business results. It's hard to measure many aspects of a "diverse culture" but the gender balance is pretty straight forward metric and the correlation strong enough to be a predictor in some situations (such as group intelligence). That's why I focus on gender, but I do agree that if we could somehow take the human elements out of leadership development we might have a way to avoid having to look at gender. I'm not holding my breath, are you?

  11. Ward Churchill says:

    You have no business discussing intellectual diversity. I'll shoot you down intellectually by saying that leadership skills have nothing to do with gender, which is clearly correct. You can't accept that statement because your professional career is based on your belief that gender does indeed affect leadership skills, which is clearly false. Real life is about people first – truth first. You'll never see that, so have a great life.

  12. Olga Kovshanova, MBA, MA says:

    Great article–Thanks!

    Olga Kovshanova, MBA, MA
    Hotel Professional Extraordinaire
    Sales/Marketing/Management
    Email: olinka@olinka.info
    Professional Website: http://www.olinka.info/
    Skype name: olinkaru
    M: 230-717-5790 evenings
    LinkedIn Profile: http://www.linkedin.com/in/kovshanovaolga
    Leader LinkedIn Group: http://www.linkedin.com/groups/Hotel-Professional

  13. Gerry says:

    All very interesting, isn't it?

    Exactly why it's cool and the focus of our thoughts! At the root of this blog discourse is a belief that for someone to advance someone else has to retreat.

    In fact, the reality is that advancement and the introduction of diverse thought benefits everyone (I.e., 1+1 = 3).

    Also note that diversity is broader than gender, including whole cohorts of men who are excluded in many realms (e.g., not Type A). It is clear from research that this diversity leads to higher performance and returns and therefore the outcome and rationale is far from soft and fuzzy. By the way, it also "feels" good in an organization that gets it,

    The challenge? Addressing embedded bias like the comments in the blog.

    • Dana Theus says:

      Hi Gerry. Thanks for the comment. I love the 1+1=3 analogy. That's why I call women "catalysts". It's not that women are better than men, it's that they introduce a destabilizing element into an environment that can benefit from such destabilization if it wants too. This is a core strategy in any kind of innovation. You're right about organizations that "get it" also. Those are usually run by people (men and women) who get it too! Thanks for your insights!

    • Champaka says:

      I for the first time have seen a very holistic thought process..here..Gerry…Thank You for summarizing so well…

  14. Any biology student can tell you when you diversify the gene pool, you get stronger offspring. The same can be said for leadership and business. The more ideas and view points you bring to the table the more likely you are to find exceptional, innovative ones. Advancing women in the workplace, marketplace and community are central goals of the Women's Empowerment Principles. Gender equality is not only a basic human right, but as business, economic and development experts now agree, empowering women fuels economies and social progress. Opening avenues for business to engage in women's empowerment is a top priority of UN Women and UN Global Compact. BPW Canada in partnership with BPW International, UN Women and UN Global Compact are launching nationwide the Women's Empowerment Initiative. For more information visit http://bpwcanada.com/wep.html

    • Dana Theus says:

      Hi L. Love the biology analogy. Very apropos. Pursuant to my comment to Gerry above, a new mix of talent can be destabilizing, but I would argue that the economy is going to destabilize us anyway, so why not invite in "destabilizing forces" that are committed to your success? Introducing women, non Type-A men and others who think differently is a recipe for developing a natural culture of innovation. BTW-your link above didn't work, so I am posting the correct one. Thanks! http://bpwcanada.com/

  15. Patricia says:

    Women have the capabilities and desire to achieve. The employers must fully accept this premise and look at the evidence. At our recent Women Leaders conference with national women leaders as speakers and in attendance, the power of talent was palpable.

  16. [...] have been honored with a regular writing gig at the Smartblog on Leadership – an extention of the Smartbrief empire. This was my first post as a contributing author and [...]