Could gender diversity be the key to improved performance?

The drive to increase the number of women in senior leadership positions in business today is growing at pace. Setting targets such as the Hampton Alexander Review 2016-2020, which set out to increase female representation on Boards, helps to make this a reality. The percentage of women serving on FTSE 100 Boards increased from 27.7% in 2017 to 36.2% in 2020 and FTSE 250 Boards increased from 22.8% in 2017 to 33.2% in 2020.

Where gender diversity is now...

We are moving forward but progress is very slow. Figures still show very poor performance by leading companies in improving the gender balance at the senior end. In 2022 women still only made up 7% of CEOs in FTSE 350 companies and 19% of CFOs, while half of these companies have no women in P&L roles at all (Women Count 2022, The Pipeline). This is despite the fact that studies consistently show a strong link between the number of women in leadership and organisational performance. As shown in the figure below, the profit margin and proportion of women in executive roles appear to correlate positively.

Of course, there will be other variables involved, but the relationship between women in senior leadership and performance does appear to be quite strong. So, what might be some of the reasons why gender diversity improves performance?

Why is gender diversity important?

First, let’s look at the link between diversity and creativity.

Gender diversity = creativity

Diversity in the workforce has long been recognised to have a valuable impact on how organisations work. One of the benefits of diversity in the workforce is that it obviously leads to a diversity of thinking. This feeds innovation and creativity and the development of new ideas. Innovation and idea generation are essential for the development of new products, services, or solutions.

Gender diversity = better problem solving

A diverse workforce looks at problems through a different lens and is better at problem-solving and forward-thinking. Homogeneity of thinking leads to ‘group think’ that can often become biased through the lack of critique or alternative perspectives. Allowing diversity of opinions leads to a greater challenge to ‘group think’ and exposes bias. Diversity also means that businesses are better able to identify with the markets and customers they serve. This encourages stakeholders to want to engage with an organisation be they customers, investors, suppliers, or partners.

Gender diversity = internal cultural change

Second, diversity changes the internal organisational culture which can make the organisation more attractive as a place to work. Women in senior positions can influence the values and behaviours of the organisation and encourage collaborative, diverse, people focused cultures. Organisations can attract and retain people with talent and skills who respond positively to such a culture. If we take the broadest view of diversity (beyond only gender) it makes the organisation more appealing and less rigid as a workplace because it encompasses a variety of characteristics, values, and beliefs. Millennial and Gen Z workers find this particularly appealing. In an age of increasing pressure for skilled labour, attracting and retaining the best talent is essential.

Gender diversity = welcoming work environment

And finally, organisations that achieve gender diversity at a senior level demonstrate to women that they are welcome and able to achieve. Senior female leaders can provide essential role models to younger talented women and set an expectation that achievement and progression are possible. Being able to see others being successful that ‘look like me’ is essential if organisations want to retain younger women.

Gender diversity has benefits for all!

So diversity in all its forms in senior leadership leads to many benefits: effective recruitment and retention of talented young people; innovative and creative thinking; and the development of organisational cultures that deliver strong performing teams.

But what do you think? Do you work in an organisation where you feel included and heard? Or perhaps you are working to improve the culture within your own business and working towards creating a more inclusive environment? I'd love to hear from you!