More Diversity = More Profit
My friend recently interviewed for a job at a large economic firm in New York. While researching the company, he turns to me and says, “The CEO is a woman. Isn’t that weird?”
Rare? Perhaps. Weird? Absolutely not.
In fact, studies have shown that having more women in senior positions isn’t simply “fair,” it is more profitable. According to studies conducted by Ernst & Young, Columbia University, McKinsey & Co, Goldman Sachs, and Pepperdine University, companies with more female senior members yield higher profits. In fact, Pepperdine University found that Fortune 500 firms with women in charge profited 18 to 69 percent more than other companies. In examining the top European companies, McKinsey found that more gender diversity led to higher stock performance. Similarly, “Catalyst, a research firm focused on women and business, found that Fortune 500 companies with three or more women in senior management positions score higher on top measures of organizational excellence. In addition, companies with three or more women on their boards outperformed the competition on all measures by at least 40 percent.”
Still not convinced? Let us put the numbers aside and be a little politically incorrect. Research has also found that women tend to be more cautious and collaborative while men are more likely to take risks. In a 30 year study conducted by the National Council for Research on Women, female investors had more consistent results than male investors. In being riskier, men’s results varied more. After all, winning big can also mean losing big.
You probably don’t need me to tell you that diversity is a good thing. Economists, however, can prove the benefits of variety. Scott Page, economist of the University of Michigan, used mathematical models to show how a more diverse group can solve business problems more effectively than one that is homogeneous.
Basically, a bunch of white, Ivy League males may not necessarily be the solution to our problems. Hiring people of diverse backgrounds isn’t simply “nice.” It’s just smart.
