Mar 28, 2019

Gender Diversity Improves Productivity

As more women enter the workforce and start their own businesses, there has been a multitude of studies looking for links between increased gender diversity and revenue. On a higher level, much of the research appears to point to how societal values and business culture can deeply shape how more gender diversity improves productivity.

Societal values at play in the workforce

The prevailing 20th-century assumption of American entrepreneurs was that they were chiefly white and male. Although that belief is being chipped away, this vision has continued well into the days of Silicon Valley.

The reality is changing worldwide, however. Some 40% of new entrepreneurs are now women, according to Entrepreneur.com, and worldwide female entrepreneurship is currently outpacing male entrepreneurship.

The question still lingers about the dollar-and-cents impact that gender diversity has on productivity. A recent Harvard Business Review study found that the relationship between increased gender diversity and increased productivity seems to be linked to values far larger than what can be seen in one specific workplace.   

“Beliefs about gender diversity create a self-fulfilling cycle,” the authors wrote. “Countries and industries that view gender diversity as important capture benefits from it. Those that don’t, don’t.”

The researchers looked at about 1,000 leading companies across 35 nations and 24 industries. They found that gender diversity was positively linked to productivity only when this diversity was culturally accepted on a wider basis.

The researchers called this “normative” acceptance of gender diversity, defined as a “widespread cultural belief” that such diversity is important. As examples, they noted that the telecommunications industry in Western Europe now has a normative acceptance of gender diversity, while the energy industry in some Middle Eastern nations does not.

The study points to increased gender diversity leading to greater performance in the Western European nations’ telecommunications companies, and the opposite appears to be true in the Middle Eastern energy companies.

Cultural versus legal expectations have important impacts

The researchers contrasted normative acceptance of gender diversity with “regulatory acceptance,” which is where the government has created a legal framework aimed at improving gender diversity. Though the 2 concepts are related, they remain separate.

The study uses Japan as an example to illustrate the difference. The East Asian country has progressive laws on the books for gender-inclusive causes like parental leave. Still, their workplace culture remains very patriarchal. The researchers believe, then, that Japan does not reap the productivity benefits of having more women in the workplace compared to other countries.    

While one workplace is unable to change the entire culture, the highlights of the study can give American small business owners plenty to consider. Instead of following the letter of anti-discriminatory laws, there are many reasons to foster a spirit of diversity at your business. Not only is it the right thing to do, but it may improve the productivity of your workforce.

Gender diversity and increased revenue

In certain ways, the conclusions of the HBR researchers appear to be mirrored in other studies.

The HBR researchers mentioned an earlier study of about 170 corporate boardrooms in Indonesia that found increased gender diversity appeared to hurt productivity.

“This study finds that both accounting and market performance have significant negative associations with gender diversity,” that study said.

While Indonesia is not a terrible place for female workers (it had its first female head of state in the 1980s), the country has some of the lowest participation rates for women in the workforce in Asia. Though there are strong attempts for regulatory acceptance, the case could be made that the country has not yet reached optimal normative acceptance of gender diversity.

Worldwide, regulatory acceptance might be transforming into normative acceptance. A 2018 Boston Consulting Group review of 1,700 in 8 major economies found that increased gender diversity of management correlated with increased revenue. Even more interesting, increased gender diversity appeared to lead to newer, more profitable innovations in the short term.

“Nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years,” the researchers said in a report. “In an increasingly dynamic business environment, that kind of turbocharged innovation means that these companies are better able to quickly adapt to changes in customer demand.”

Gender diversity and attracting top talent

Gender diversity seems to impact how potential hires view your business.

A 2014 survey by employment platform Glassdoor found that 67% of people both actively and passively seeking employment believe a diverse workforce is important when considering job offers.

Some 72% of female job seekers see diversity as a major factor when considering potential employers along with 62% of male job seekers.

“That means that whether or not your company is interested in increasing its diversity, chances are that candidates are evaluating diversity when they research your company and during the interview process,” the company said in a release.

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About the author

Barry Eitel
Barry Eitel
Barry Eitel has written about business and technology for eight years, including working as a staff writer for Intuit's Small Business Center and as the Business Editor for the Piedmont Post, a weekly newspaper covering the city of Piedmont, California.

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