Putting aside a number of theoretical explanations for the positive correlation between gender diversity and better business outputs, there is now a significant amount of research which points to the positive effect of financial performance which is described as ‘highly significant’ when three or more females are appointed to a board or senior team.
On the basis that over 72% of female directors of FTSE100 companies hold a degree or PhD, it is somewhat surprising it has taken some organisations this amount of time to recognise the positive contribution women can make to performance and profitability.
Why might gender diversity lead to better returns for investors?
Generally speaking women tend to be more intuitive and intuition plays a very important part in financial decision making, recruitment and better interaction and communication in the workplace. Whilst logic plays an equally important part in almost every process, this ‘left brain’ approach needs to be balanced with the ‘right brain’ (or emotive) perspective. Consequently, organisations where there is greater diversity tend to be much more operationally balanced.
New research on economic decision-making, led by an international team of scientists, concludes that men are more likely to make extreme choices and decisions than women. In addition, men tend to operate at the extremities of the behavioural spectrum, either acting selfishly or altruistically, trusting or distrusting, fair or unfair, and so on. By contrast, women tend to act more balanced. Further research has demonstrated women make more disadvantageous risk decisions than men, but these differences have not been examined in a workplace where there is a gender balance and where two different perspectives are at play.
There is a good deal of data to support the fact that gender diverse companies are 21% more likely to experience above average profitability. It therefore follows that a business with greater financial resources will have more flexibility in respect of some of the investment decisions it needs to make in order to produce better results.
Attracting new customers
There are many aspects that can influence a customer’s decision-making behaviour. Men and women approach decisions in respect of a product or supplier with different motives, perspectives, rationales and considerations. There is further evidence which shows men are very much outcome driven, whereas women tend to embark on a journey. This can manifest itself in a greater awareness of a customer’s needs in relation to security, longevity and service.
‘Parental Investment’ is an evolutionary theory suggesting that men have to deviate from the average to stand out in order to be attractive to a potential partner. Conversely, women were able to attract partners without needing to deviate from the average. There also remains the norms and expectations of acceptable gendered behaviour and men’s extreme behaviours are mainly socially constructed.
Improved staff retention
Taking this one stage further, inclusivity bias displayed by women is supported by a natural empathy and their ability to communicate openly and thus effectively. Women are also more likely to pick up subliminal signs of discontent in a staff member and are therefore more likely to be able to deal with issues before they lead to bigger problems. As men tend to end a conversation once they connect with a good idea or solution, women are more inclined to be inquisitive, wanting to hear everyone’s views and opinions before reaching a conclusion – and this undoubtedly lends itself well to inclusion in the workplace and thus greater staff retention.
Sandro Forte, FCII, FPFS is one of the UK’s most qualified and experienced financial advisers. He and his company – Forte Financial – have won over 40 awards in the last 30 years and Sandro has lectured all over the world, helping others to achieve greater financial success. His book, Dare To Be Different, is an international best seller.