An interesting article has been published in Strategic Management Journal, one of the leading US academic publications. It presents a study into whether female representation in top management improves firm performance. The study provides an additional perspective on a key finding by the Davies report on Women on Boards published in February 2011, namely that greater board diversity may have helped to avoid some of the catastrophic company failures in the recent economic recession. As stated in the Davies report women ask awkward questions and are less likely to be affected by groupthink. A study in 2009 by Wilson and Altanlar identified a negative association between female directors and insolvency risk. Gender balance reduces risk since women generally have less appetite for risk.
The data source for the Strategic Management Journal article was the S&P 1,500 firms, an index of US public companies reflecting the US equity market, covering a period of 15 years. The conclusions of the study were that female representation in top management improves firm performance, but only to the extent that company strategy focuses on innovation. Importantly, the research finds no evidence that the presence of women on boards impairs performance. However, the greater the focus on innovation in the company, the greater the effect of board gender diversity on performance.
Since innovation, whether in product, service, or systems, is critical for firm success and survival, the message to Bradford businesses must be – nurture your female talent and ensure strong female representation on your management team. Not only is this likely to have a positive impact on your firm performance, but also it will also be highly motivational for women middle managers, ensuring that there is pipeline of talent.
The latest update on the Davies report, published in March 2012, highlights significant progress towards the target of 25% women on FTSE 100 boards by 2015 – for the FTSE 100 the proportion of women on boards increased from 12.5% to 15.6% from 2010 to end February 2012, and for the FTSE 250 from 7.8% to 9.6%. The local Yorkshire-based company, Inspirational Journey, has no doubt contributed significantly to this increase by raising the profile of gender balance in business.