McKinsey’s been studying the impact of women in leadership roles for more than a decade and recently released the findings of its first African survey. The Women Matter Africa report is based on the financial performance of 210 publicly traded companies across 14 African stock exchanges. It includes an analysis of women’s Cabinet appointments from 2000 to 2015, as well as an organisational analysis of gender diversity in 55 African companies.
It shows that organisations with a greater number of women directors on their boards had higher operating margins, returns on equity and total returns to shareholders. In particular, it proves that the earnings before tax and interest margin of companies with at least 30% of female board directors were at least one-fifth higher than industry averages.
“Companies with a greater number of women in leadership positions tend to manage risk better – they’re less likely to overpay when they make acquisitions, for example. And women leaders help companies relate to their customers better, as a company with greater gender diversity is better positioned to understand the needs of its female customers,” states the report.
According to the report, how do women enhance decision making?
- They offer openness to new perspectives. Research shows that male board members rely more on normative reasoning – ie, they prefer making decisions based on rules, regulations and traditional ways of doing business. Women are more likely to ‘rock the boat’. They can be more open to new ideas and a broader set of solutions.
- They collaborate and are inclusive. Women are more likely to co-operate, collaborate, build consensus and take into account the interests of multiple stakeholders.
- They present strength in ethics and fairness. On average, women score more highly than men do on complex moral reasoning tests, suggesting they’re more likely to make consistently fair decisions when competing interests are at stake.
STATS AT A GLANCE
- In Africa, 5% of CEOs are women. This figure is 4% in Asia, 3% in Europe, 2% in Latin America and 5% in the USA.
- Women occupy 14% of director positions in Africa, 10% in Asia, 18% in Europe, 6% in Latin America and 17% in the USA.
- 29% of senior managers in Africa are women.
- 36% of promotions in Africa go to women.
The report identifies a number of obstacles to the advancement of women. The “performance evaluation bias” shows that men are generally evaluated more on their future potential, while women are measured by what they’ve achieved to date. Women are also given less credit for career successes and are criticised more for failures. “The resulting lack of confidence means women are less likely to put themselves up for promotion. There’s also a maternal bias: motherhood triggers assumptions that women are less committed to their careers. As a result, they tend to be held to higher standards and offered fewer leadership opportunities.”
The report offers three ways to drive gender diversity:
- Set targets and key performance indicators (KPIs) for women’s representation in leadership and the broader workforce and review these targets regularly. Experience elsewhere shows that companies with formal gender diversity commitments increase female representation in the corporate pipeline fastest, while those with no formal commitments actually lose ground over time.
- Establish a culture of accountability. Each target should be assigned an “owner”, ideally a senior executive who reports directly to the CEO and is seen as a credible proxy in terms of intention and authority. The targets could be incorporated into the KPIs of each senior executive and reinforced by performance incentives.
- Lead communications on the gender diversity strategy. It’s the CEO’s role to communicate to employees the strategy to increase women’s representation and inspire them to help bring about change. Face-to-face communication – town halls or networking events, for example – create a real dialogue and assure employees that leadership commitment is strong.
ABOUT ADAMS ON AFRICA | ISSUE 1
This article is part of a new quarterly digital publication, Adams on Africa. The publication aims to provide you with the necessary information and updates on developments in business and the law in Africa. We welcome your feedback. Articles in this issue: