Gender diversity on top management teams improves company performance in times of adverse firm conditions, but matters less in favourable conditions, says a new study led at Cambridge Judge Business School in advance of International Women’s Day.
There has long been a confusing debate around gender
diversity in executive teams. While some reports have shown that having more
women on corporate boards improves company performance including sales, profits
and firm value, academic research has found little or no effect on a range of
A new study led by the Wo+Men’s Leadership Centre at University of Cambridge Judge Business School – unveiled in advance of International Women’s Day (Friday 8 March) – addresses this inconsistency by looking at gender balance in top management teams (TMTs) in small and medium sized enterprises (SMEs) in China.
The White Paper concludes that the impact of
TMT gender balance is greater when firm conditions are adverse (past
performance has been consistently low), but matters little in favourable
conditions (when past performance is consistently strong).
“The findings hold important practical implications for organisations, and helps resolve some of the prior research inconsistency in this area,” says Sucheta Nadkarni, Director of the Wo+Men’s Leadership Centre and Sinyi Professor of Chinese Management at Cambridge Judge. “The White Paper finds that gender diversity in TMTs can act as a built-in safeguard in combating adversity.”
Consistently low past performance harms firms
both internally and externally, and can threaten firm credibility, the study
“Getting firms out of this performance
adversity and back on the upward performance trajectory is a difficult
challenge for the executive team and requires strong vision and innovative,
out-of-box thinking. We expect that gender diversity will provide the diversity
of perspectives and effective processes essential to achieve such performance
turnaround,” the study says.
The study focused on TMT gender diversity in high-tech
enterprises in China, because the number of Chinese women in science,
technology, and entrepreneurship has risen sharply in recent years – with many
holding executive positions in SMEs.
The White Paper was based on responses from 122
Chinese hi-tech SMEs with 387 TMT members; the firms were at least six years
old and had 10 to 500 employees.
Performance data was collected in two time
periods, which allowed researchers to separate time frames for performance in
computing adverse and favorable conditions – with turnaround performance based
on profitability, return on equity and return on assets. In all three
performance categories, a high percentage of women in TMTs had a strong
positive impact in adverse firm conditions but such a high percentage of women
had no significant difference in favourable firm conditions.
These results matter because organisations may
not see the day-to-day benefits of gender diversity in senior leadership, and
therefore choose to invest less in fostering it. Yet they may be missing big opportunities
in reaping the benefits of TMT gender diversity when it matters the most: during