Companies that have diverse leadership perform better--but why? And how do women in leadership positions change the dynamic? Authors Corinne Poste, Boris Lokshin and Christophe Boone share new research, years in the making, in this HBR article that points to how adding more women to leadership roles creates positive outcomes.
Research has shown that firms with more women in senior positions are more profitable, more socially responsible and provide safer, higher-quality customer experiences — among many other benefits. And of course, there is a clear moral argument for increasing diversity among top management teams (TMTs). But when it comes to explaining why having more female executives is associated with better business outcomes, and what specific mechanisms cause those positive changes, existing research is much more limited.
We tracked appointments of male and female executives and analyzed R&D expenses, merger and acquisition (M&A) rates, and the content of letters to shareholders for 163 multinational companies over 13 years to determine how these firms’ long-term strategies shifted after women joined their TMTs.
Firms became more open to change and less open to risk. First, we found that after women joined the C-suite, firms became both more open to change and less risk-seeking. In other words, these organizations increasingly embraced transformation while seeking to reduce the risks associated with it.
Firms shifted focus from M&A to R&D. Specifically, we observed that when TMTs added female executives, they gradually shifted from a knowledge-buying strategy focused on M&As — which could be described as a more traditionally masculine, proactive approach — towards a knowledge-building strategy focused on internal R&D, which could be described as a more traditionally feminine, collaborative approach.