Susan Perkins and Katherine W. Phillips* say that besides being the right thing to do, advancing women can also have tangible financial benefits.
We know what a world dominated by men looks like.
Consider for a moment what the world might look like if female leaders were the norm.
Research from McKinsey has found that firms that outpace their peers on the number of women in top management see a financial performance benefit of up to 15 per cent.
Might a similar benefit be true on the world stage?
Research has shown that racial biases, discrimination, and conflicts between ethnic groups, when left unmitigated, can stunt economic growth.
We had a hunch that this is exactly where female leadership would be most helpful.
To test this idea, we studied data from 188 countries.
Our research examined leaders in modern history (1950–2004) to find out whether economic outcomes differed for female and male leaders depending on the racial/ethnic composition of the country.
There are many factors that matter, but we considered macroeconomic factors and focused on the behavioural relationships between country diversity, gender of the leader, and economic performance outcomes.
To date, there have been 136 female heads of state (we excluded queens/governors, as they are mostly symbolic).
Consistent with our hunch, our most striking finding was about the times when women led very diverse countries rather than men.
In these contexts, female leaders were significantly more likely than male leaders to have fast-growing economies.
In particular, the countries in the highest quartile of racial/ethnic diversity benefited the most.
When led by a woman, they had an average of 5.4 per cent GDP growth in the subsequent year, compared with their male counterparts’ 1.1 per cent.
Our analysis suggests it is possible for economies to benefit from diversity instead of suffering from its challenges.
Let us be clear: This strong correlation does not guarantee women will always be successful and our research does not establish a causal relationship.
Some might argue that our results are due to special circumstances in diverse countries that made it possible for women leaders to emerge or that women leaders are simply benefiting from economies that were bound to rebound.
However, there is reason to believe that these female heads of state actually led their diverse countries differently than their male counterparts.
Both explanations could be at play.
The important point is that female leaders are associated with economic outcomes that suggest they may be better able to unlock the benefits of diversity than their male counterparts.
We saw patterns of inclusive leadership among the female heads of state that illustrate this point.
For example, when Ellen Johnson Sirleaf (pictured) was President of Liberia, which is one of the most diverse countries in the world and has a history of ethnic conflict, her vision was to unlock and leverage the benefits of diversity.
She worked to create an inclusive and tolerant government, focused on reconciliation, making sure each ethnic group was included in proportion to its size.
This was quite a feat, given that Liberia has more than a dozen prominent ethnic groups with no single group in the majority.
She also set a goal of gender parity within her Cabinet, doubling the number of female Ministers in her first year of office.
At the beginning of her second term, President Johnson Sirleaf reconstituted her Cabinet further to reflect the age, gender, religion, and ethnicity ranges in the country.
These strategies based on representative diversity were associated with an average annual 4 per cent GDP growth rate in her first five years in office (2006–10), compared with the 1 per cent growth of her predecessor, Charles Taylor, in his last five years (1999–2003).
Her agenda differed from her male predecessors’, particularly that of Samuel Doe (1986–90), who was known for favouring his ethnic group, which ultimately sparked a rebellion against him.
Her male counterparts’ agendas were about grabbing resources for their favoured group.
Similarly, Taiwan’s current and first female President, Tsai Ing-wen started her regime with an inclusive strategy.
She wanted to enfranchise underrepresented minority groups and sought to remove stigmas and biases that reinforced government policies that historically favoured the majority ethnic group.
For example, before 1996, many ethnic groups were not recognised by the Constitution.
As a result, there were inequalities in property rights and civic participation, as well as language and cultural exclusions.
On the first day of her term, in 2016, President Tsai publicly apologised to aboriginal peoples for centuries of “pain and mistreatment” and called for policy changes to incentivise a shared prosperity across diverse groups.
Given what our research has found, and the research on how having women in leadership roles benefits the bottom line, it is clear that organisations and countries should make it a priority to identify and promote talented women.
Besides being the right thing to do for equality of opportunity and equity in pay, advancing women can also, as we’ve found, have tangible financial benefits.
Leaders must focus on better economic outcomes for everyone, not just gains for some groups over others.
One lesson we learned is that when the downsides of diversity — festering biases, discrimination, and racial/ethnic conflicts — are left unmanaged, they are associated with stunted economic growth.
No organisation can afford to be a competitive laggard when it comes to developing all their employees, just as a country cannot maximise its growth if large parts of its populace are left out of the economy.
Leveraging the diversity in your organisation requires inclusive leadership that aligns strategy, culture, hiring and promotion practices, and more.
It’s time to stop imagining what could be and to do the work required for an inclusive future that can benefit us all.
* Susan Perkins is an Associate Professor of Strategic Management at the Liautaud Graduate School of Business at the University of Illinois — Chicago. Katherine W. Phillips is the Paul Calello Professor of Leadership and Ethics and Senior Vice-Dean at the Columbia Business School.
This article first appeared at hbr.org.
