The question is simple: Do Fortune 500 companies perform better with diverse teams?
The hypothesis was two-fold. The optimist in me is hoping to see slightly improved performance. The pessimist expects to see flat performance or varied, uninterpretable information. What was discovered was both insightful, wowing, and a bit of a surprise.
The experimental design needed to be simple and measurable. Diversity comes with varied attributes, but in this paper, we focused on gender as a simplified approach. The focus was on leaders in companies since they have the greatest impact; their information is also readily available on most company websites.
The best leaders build great teams and in turn have great collective performance. So the focus was on the Executive Leadership Teams, to examine gender diversity, and the financial impact of gender diverse teams.
The first area of focus is baselining the percent of women on Executive Leadership Teams for the Fortune 500. As expected, and not a surprise, it’s a low percentage. The intent is not to rehash the low amount of gender diversity, just to baseline the numbers. Females and Males on Executive Leadership Teams in the Fortune 500 have:
There is significant diversity emerging amongst historically male-dominated sectors such as Automotive, Finance, Defense, and Energy that are led by Female CEOs. In these changing times and companies focusing on Diversity and Inclusion, Boards will still focus on the most qualified candidates for the CEO and key Executive Team positions to lead their organizations.
The study also examined the impact of gender diversity at the C-suite, in particular with the gender of the CEO. Do companies with Male or Females CEOs have more men or women on their Executive Teams? Companies run by men and women CEOs all have similar ratios of Males to Females on their Executive Teams.
One might have expected a greater difference and more diversity with Female-led organization. With Female CEOs, it was expected that their networks would include men and women, but would have a greater percentage of women. This would lead to more women on Executive Teams led by Female CEOs, but this was not the case.
Men and women equally comprise 50% of the entire workforce
Men-led and women-led organizations demonstrate nearly equal ratios of men and women on their Executive Teams: ~80% Men and ~20% Women
Let’s examine how companies perform starting with companies led by Male or Female CEOs. Though there are only 30 Female CEOs, it’s remarkable to see their financial performance:
Among the perspectives shared on these data, one noted:
“I saw the clear, better performance of Female CEO-led companies… these women belong to a self-selected group. What I mean is these leaders had to be extremely good at what they do, more than their male counterparts. So one could argue that the ones who actually made it did so because they are better than an average CEO and therefore, the company gets better than average results.”
Profiles of leaders at the top global companies:
Beyond the CEO, the entire Executive Team has a greater impact on the “realization” of the company’s vision. The data and analysis examines the impact of the ratio of men and women, and the impact that ratio has on financial performance.
Revenues: Greater than 4X difference between least and most gender diverse companies
Even though there are no trends observed in the data below, the data says that there is a greater percentage of Female executives at larger, more profitable business.
Market Value and Profits: General upward trend with more diverse teams.
Comparing and contrasting the least diverse with the more diverse teams, Female executives drive greater Revenues per Employee and they have greater Assets resulting in stronger balance sheets.
The results are pretty remarkable, and do demonstrate that there is a correlation between business performance and diversity. It demonstrates that Executive Committees with gender diversity do outperform companies that are less diverse. Female CEOs outperformed their Male counterparts significantly higher across all categories.
What was a complete surprise result as that Female-led CEO teams have similar, almost identical ratios of males to females as Men-led CEO teams. This was a surprise and baffling result just based on an individual’s network. This is the only analysis where I will speculate saying I would have expected Female CEOs to have more gender diverse teams simply based on their own networks, but that was not the case.
People may be quick to conclude that Diversity results in higher Business Performance. That may be true, but the corollary may also be true. Higher Business Performance creates Diversity. It’s a subtle yet important distinction and allows for balance in the conclusions. Higher performance leads to growth of businesses and creates additional career opportunities. Those opportunities could go to men or women, and in the modern era, those opportunities go to both genders – the most qualified candidate. One cannot conclude one way or another, but perhaps there is some truth to both statements being correct.
If having diversity leads to better performance or if better performance leads to diversity, I’m an advocate for gender diversity – as focused on in this publication – as well as all types of diversity. The best leaders build great teams and in turn have great collective performance.
Amit Bhatia practices operational strategy management consulting in the areas of post-merger integration, strategic workforce planning, and early & late stage development. He focuses on strategy, performance management, and team dynamics.
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity
Modality Diversity, Target Selection, and Portfolio Strategy Creating a Perfect Storm of Complexity