Here’s the good news about building a diverse talent pipeline
A recent S&P Global study reports that firms with women CEOs and CFOs showed increased profitability in the two years after their appointments—but not for the reasons you might think.
In tracking the performance of 5,825 new executive appointments 24 months after appointment, S&P Global’s Market Intelligence Quantamental Research team found that firms with female CEOs saw a 20% increase in stock-price momentum. Those with female CFOs saw a 6% increase in profitability 8% larger stock returns.
Daniel Sandberg, senior director of the research team, says that, by using natural language processing to analyze the bios of CEOs and CFOs of both genders, researchers found “a common set of characteristics driving success for both male and female executives,” demonstrating that women had experience consistent with the most successful male executives. The report, entitled When Women Lead, Firms Win, refuted ideas from previous studies that said women’s leadership behavior was different than men’s, and that’s why they succeeded.
However, women still remain underrepresented in the C-suite, according to the study. By year-end 2018, the male-to-female ratio for CEOs was 19:1, and it was 6.5:1 for CFOs, which the researchers called a “persisting underrepresentation of females in key executive positions, despite recent advancements.”
The takeaway for HR is that creating a pipeline of top-achieving women leaders in the overall talent pool will reap financial benefits—a strong business case for firms struggling to achieve gender diversity. In fact, the 435 firms with female CFOs were more profitable than others, generating excess profits of $1.8 trillion.
Tagged to a campaign called #ChangePays, the report’s data has been promoted as part of S&P Global’s “Vital Statistics” Corporate Responsibility initiative. Launched in January 2019, the campaign’s goal is to provide hard stats on the benefits of women in the workforce to help global communities thrive.
Dimitra Manis, chief people officer for S&P Global, says the #ChangePays theme came out of the data itself. “We found that adding more women in the workplace would actually add about $5.87 trillion to the global market [capitalization],” she says.
“I don’t think in this day and age that we should be having to convince anybody. It’s a no-brainer. [Adding women to the workplace is] financially beneficial for the company and … is a good business practice,” Manis says.
Supporting gender diversity—as well as diversity across the board—is a matter of getting leadership on board and tying the issue to key performance indicators. Manis notes that the topic is included in the company’s quarterly balanced scorecard to promote accountability and performance. A diverse workforce is also supported in day-to-day operations—through programs and policies around workplace flexibility, increased investment in career development, mentoring, initiatives to broaden talent-acquisition practices, talent-succession and pipeline programs, and more.
“It’s up to us as leaders to emphasize [the data] and utilize it to the benefit of the company and for the benefit of the market and shareholders,” Manis says.
“We have a role to play in elevating the message of gender parity in the workplace,” she adds. “We believe that we can really showcase these insights to increase awareness.”