More Female Executives Equal More Profits

Question: Are women better leaders?

Alice Eagly:  Better, there is an argument for that.  In particular, the style that I talked about as transformational is known to be effective.  There is a large research literature on transformational style that shows that it is correlated with effectiveness. And furthermore when we talked about the positive and the negative, using the positive to encourage what the people are doing right rather than trying to get rid of the negative.  The positive is more effective in general than the negative.  So if you look at the data on what styles work in a modern organization, what work better, you could say women have got it right in that they tend to be systematically somewhat more than men in general doing what we know works. So that is advantageous.

You say well then women are better managers, and that would be a little simplistic because you forget about the other part, the prejudice part. And so women kind of have to prove that they’re good and their leadership is not as readily accepted, particularly in high positions.  It’s accepted somewhat less by men than by women.  So you have to factor in the prejudicial factor, but if you look just behaviorally, insofar as we can tell, women in fact have a more ideal style slightly more than men in terms of what epitomizes what we know is effective. So I think that many people... there is a little bit of evidence, you know they’re kind of skeptical: "I don’t want a woman boss." And then they get in this situation and they find that she is good to work with in various ways, so there is that. 

Then there is some research on the Fortune 500 and Fortune 1,000 and now in European companies that suggests that women may be doing well in terms of helping companies be profitable because there are studies that look at the relationship between the percentage of women in the leadership group in boards of directors and executive groups and then you can relate that easily to the bottom line, the profitability of the company by various indicators that we have; business indicators like profitability in various senses.  And so, several studies—including a European study now by the McKinsey organization—has shown that there is a positive relationship: more women, more profit.  You know it’s not a huge correlation, but it’s there.  It’s there in the modern studies.  If you look back 20 or 25 years it wasn’t there.  There really wasn’t a relationship. But now it tends to be there. And so people say "See? More women, more profit." And of course as a social scientist I have to say "Wait a minute didn’t we learn something in school about correlations not causation?"

And so we don’t really know why that relationship is present and we have to consider the opposite causation of course that perhaps the more profitable companies are able to have the staff to worry about diversity, to seek out the really great women and attract them away from the other companies. And so the causation could go from profitability to enabling the hiring of excellent women.

So we don’t know the causation, but anyway, it’s a good point.  If anybody says "We can’t add a bunch of women to leadership because you know our profit will fall," you say: "Well actually the correlation goes the other way." And there are arguments of course in favor of diversity in organizations broadly that make sense that if you bring people together, run an organization, are making decisions and they all think alike that’s not good, right?  They are not considering alternatives and so people’s social background has a lot to do with how they think, the kinds of life experiences. So if we bring people together who have had different life experiences they are potentially more creative and there are some studies that have shown that. And so one of the great dimensions of differentiation of course is male/female, but it’s also racial and ethnic, religion, age. So at least potentially if you bring people who think together they’re going to think they have more ideas to build on.  They’re not just all coming to the same conclusion easily. 

Question: Are women better suited to the new economy?

Alice Eagly: In a simpler world a person could sit at the top of an organization perhaps and tell people what to do.  I don’t know if I should use Henry Ford as my best example, but hey, built that car, right? And it was black and everybody bought it and he was immensely successful. But the automobile industry then compared to the automobile industry now... it's a very different world.  You know could a person sit at the top of General Motors or Ford Corporation now and just sort of know what to do, what kind of car to build and build it and everybody will buy it?  Uh-uh. 

You need all kinds of expertise and smart people, engineers and designers and you need to be linked up in a worldwide basis because you’re going to manufacture your car here and there and there are all those competitors.  So think of how complicated the job is, so leadership has changed in part because of this great interdependence and the fact that you can’t rely just on your own expertise by any means.  Nobody has that much expertise, so you have to be good at getting the organization going, encouraging the people, being a bit more of a coach to keep those parts going, to get the best out of people who are in your organization. But you have to be kind of good to them to get the best out of them, right? And so it’s a job of much more complexity that of course takes on more of the soft skills or social skills. So the fact that the nature of management has so profoundly changed in order to be successful for a company it also moves it away from masculinity that is sort of an old fashioned top-down type of leadership to something that is more, by the way, happens to be more culturally favorable to women than the old kind of management.

Question: Should women run the auto industry?

Alice Eagly:  Should women run the auto industry?  That might work better.  You know there is this example of banking.  You know about the financial crisis.  We all are all too aware of it.  In Iceland they had a particularly massive downturn, collapse I guess it was.  You know there is one bank that did quite well, run entirely by women.  What did they do differently?  Well they didn’t take all the risk that the other banks were taking.

So it may be if we could generalize from that—of course that would extremely risky—but taking more of a long-term perspective, perhaps taking a little less short term risk.  We do know as psychologists in terms of risk taking there is at least a small sex difference where men tend to move more quickly into the risky domain and classically we thought "Great! That is what we need in business," right, great entrepreneurs.  You got to take risks.  We do have to take some risks sometimes, but there is such a thing of course as too much risk, so that is just one aspect of psychology that might be relevant, but so it might be indeed that if women were running the automobile industry it might be better.

John Richard Cookson
September 17, 2010

Women tend to be systematically better at doing what works in leadership positions. The data indicates that women are better managers and better for the economy.

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