How Gender Diversity Leads to a Bigger Bottom Line
Despite making up half of the population and 47% of the labor force, women remain highly underrepresented in the top echelons of business.
- 5% of the richest billionaires are women
- 6% of S&P 500 companies have women CEOs
- 20% of Fortune 500 board members are women
There are many arguments that can be made for closing this gender gap, but the most compelling one is very simple: there’s a growing body of research that shows that gender diverse companies make more money.
Women and Profit
Today’s infographic comes to us from Evolve ETFs, a company that has launched an ETF focused on gender diversity, and it shows that companies with more women in senior roles are making better decisions and ultimately higher profits.
Better Decisions
The more diverse a team is, the more likely it is to make the best business decision. Logically, this makes sense, since multiple perspectives are considered this way – and groupthink can be avoided.
There have been various studies on decision-making that show this, but one compelling example highlighted by Forbes covers 600 business decisions made by 200 different teams over a two year span. This research found that more diverse and inclusive teams made better decisions up to 87% of the time, took less time to make the decision, and delivered 60% better results.
Better Bottom Line
Not surprisingly, making better business decisions leads to bigger returns, as well. Credit Suisse, for example, found that boards with more women had a 36% higher return on equity.
Meanwhile, research from Morgan Stanley found that the top-third of companies (that hire the most women) had 2% higher equity returns than average.
A final study worth noting is from The Peterson Institute for International Economics, a Washington, D.C. think tank, which shows that companies with at least 30% female leaders end up raking in 6% higher net margins.
Future Growth
On the company level, gender diversity means more profit and better decisions – but what could this mean in aggregate?
Global management consultancy firm McKinsey & Company offers up a rosy picture: they figure that if the gender gap is closed in their “full potential” scenario, up to $28 trillion extra could be added to global GDP growth by 2025.
