The business case for gender diversity

Gender diversity

Despite 40 years of focusing on equal opportunity and diversity initiatives, most organisations continue to have very low levels of representation of women in senior leadership positions. Neither equal opportunity legislation nor significant gender diversity investment by organisations have created the changes sought.

Small steps are being taken towards a higher representation of women in top management. In October 2014, the percentage of women that held positions on ASX200 boards was 18.8%, up from 8.3% in June 2008 (Australian Institute of Company Directors). The figures have never been higher but most experts agree there is a long way to go.

The business case for gender diversity in the workplace is strong. Many different studies demonstrate the link between greater gender diversity and an increase in an organisation’s productivity, performance and profitability. Ultimately, these organisations are also likely to be better places to work.

Organisations with a higher representation of women at the top outperform those with one or no women. A 2004 Catalyst study showed US Fortune 500 companies with the highest representation of women on top management teams (20% compared to 2%) achieved a 35% higher return on equity and a 34% higher total return to shareholder.

Companies with three or more women in management ranked higher on nine key criteria than those with no women, with the highest scoring organisations having operating margins and market capitalisation twice as high as those of lower-ranked companies (Desvaux, Devillard-Hoellinger & Meaney 2008).

An Australian study of ASX500 organisations found that companies with women directors (7.1%) delivered over a five year period an average return on equity 11.1% higher than those without women (Reilby Institute 2010).

Clear communication of the benefits of improved gender diversity is necessary, firstly and most simply to ensure employees understand what the advantages might be for them. Clear communication is also required so that senior managers as well as employees are prepared for potential fall-out from change. Staying committed to the objectives of diversity initiatives and constantly reinforcing the benefits is a must for leaders.

A working paper by Karen Morley, co-founder of Insync’s specialist gender diversity division, Gender Worx, discusses more evidence demonstrating the link between gender diversity and organisational performance.

Download the paper below.