HI6008 | Business | Impact of gender Diversity on Firm Performance

Introduction:

Diversity in the gender has been a relevant topic in current times, for various reasons. It has been in the limelight for various kinds of reasons, specifically, when the importance of gender diversity in the workplace was called into question. Gender diversity in the work place is often the most discussed and researched topics in recent times. For ensuring a fair and equal representation of men and women, gender diversity is needed. The fair and equitable distribution and depiction of the females and men in the work places is the very essence of gender diversity. In the work place environment, gender diversity refers not only to the fair and equitable representation of the men and women in the work place but it also consists of ensuring that the men and women are borrowed at the same rate, paid correspondingly for the same kind of work, and even promoted in the same rate, with complete transparency in the process. Although, we have a come long way, since the primitive times, where women were looked down upon by men and their participation was limited towards their duties back at home, still the problems of gender diversity have remained intact. Often times, the relation of gender diversity with the performance and results of a company is looked into in detail, for judging the effectiveness of the policies of gender diversity (Boubaker, Dang & Nguyen, 2014). In this research literature, the different aspects of the past researches of the effect of gender diversity and its implementation has been looked into in detail.

Discussion:

Impact of Gender Performance on business teams:

According to the research conducted by Hoogendoorn and other researchers in the year 2013, with regards to the impact of women in business teams on their performances, had led some important observations made. In the research conducted by them, some important observations were made. This research was constructed using the survey data and laboratory trials. It was one of the first field experiment to be conducted on this topic. There were some important findings from the research. The primary focus was to find out the business teams that had similarity in the gender mixture. They had better performance than those teams which had more males regarding the overall sales and gains of the business organisation (Noland, Moran & Kotschwar, 2016). Another observation of the experiment which was conducted with the different business teams, indicated that the teams which had gender equality mix had performed no worse than women centric teams.

Gender Diversity in the boardroom and impact on firm performance:

The under illustration of women in the boards of various companies is a heavily discussed topic. The board of directors of any company occupies the most significant position in the company.  The board contains all the powers with regards to the functioning of the business organisation. As a result of which equal and fair representation of women has been called for in recent times. In the research conducted on this topic, by Joecks, Pull and Vetter, in the year 2013, delves deep into the topic and its likely influence on the operation of the firm. The research was conducted with the help of the data collected from 151 listed firms from Germany across the period of 2000-2005. Some important observations were made with regards to gender diversity and performance of the firm. The managerial implications of the study indicated that a more variety of gender as per board composition would help in enhancing the performance of the business organisation and only for those board which have females with a women population of more than 30%, would perform better than a male dominated board.

Gender Diversity in superior positions and performance of the firm in Europe:

This research paper helps in presenting new evidences which helps in linking gender diversity in top position of European organizations. A sample of around 2 million companies across a span of 34 countries located in Europe was conducted in the year 2013. It was found that there was the presence of a strong and positive relationship among the share of women in superior positions in the businesses and firms and the Return on Assets of these businesses and firms. This positive relationship was found in the two different sectors. One sector which meaningfully employed more women in its labour force and the other one being those industries with much superior demand for the developed imagination and critical thinking that variety in general might bring, primarily high-tech and knowledge intensive sectors. The findings of this research concluded that increased female representation in the different senior positions of the business, might play a significant role in enhancing the potential output of various businesses of Europe (Terjesen, Couto & Francisco, 2016). It was seen that involvement of women in senior positions helps in improve firm profitability, corporate investment, productivity. It also helps in mitigating the slowdown of the growth of the business. It was concluded through this report that, if the playing field is levelled down , by promoting and facilitating the full time involvement of women in the business would lead to the opening up of the pipeline of women for senior corporate positions.

Gender diversity and financial impact:

As per the research undertaken by Chapple and Humphrey, in the year 2013, on the possible relative between gender diversity and its financial impact, some important observations were seen. It was seen in the report that there is a controlling pressure on the firms, worldwide for addressing the issues of low number of women in the higher positions of management. In this research, after careful investigation some recommendations were made (Khan& Vieito, 2013). Through the aggregate market level approach, taken in this research, some important observations have been made. Here a comparison of the performance of the different portfolios of the firms, with a larger and more diverse gender diversity with those, which do not have much of gender diversity in their boards (Chapple & Humphrey, 2014).  Along with this, an investigation was also conducted of having multiple women on the board has any link with the performance of the business entity and if there is a within-industry effect. In terms of the conclusion, many important observations were made, some of them included that no concrete evidence were found association or link between diversity and performance. Along with this, it was also seen that there existed some inadequate evidences of a negative association between having several women on the boards of the company with the performance of the company.

Firm performance along with Board gender diversity: The impact on evidence situation

Previous reports on the topic of board functioning when women directors were a part of the boards, their importance on the performance of the firms have not been researched upon. Thus their impact has remained unclear. Right from social activists, government departments, all of them have been demanding more participation from women in the organisation framework (Forbes.com, 2018). The present report by Puthenpurackal and Upadhyay, has delved into a detailed analysis of the association between the genders variations in board of various companies with the achievement of the firms. It was seen that presence of women directors is significantly related with a better firm performance for firms with low opacity (Lückerath-Rovers, 2013). It was also seen that the impact on the performance because of the existence of the female directors became less favourable as and when it was seen when the firm’s information opacity used to increase (Terjesen, Couto & Francisco, 2016). It was also indicated that external female directors with senior commercial involvement appear more useful and valuable to the company than outside women who have no zero corporate level experience. Some evidences were also found with regards to the information environment. This shows existence of female directors is significantly related with a better firm performance for low opaque firms.

In association with these reports, which were conducted on the relation and the effect of greater gender diversification and the performance of the firms (Lenard, 2014). Some other researches were conducted by various experts in the field, which had found many different aspects of conclusive evidence, which would have helped in linking the performance with greater gender diversity. Some of these researches have been provided below:

Female contribution to the board and financial performance:

Two very recent meta-analysis have been performed on the same topic.  The research conducted by Post and Byron (2015) had successfully synthesised the results from 140 different researches in relation to diversity in board gender composition, with an aggregate illustration consisting of 90,000 firms from at least 30 countries.  It was seen from the results of these studies that companies having a greater ratio of female directors are generally found to be having higher accounting returns which consisted of ROA, ROE, when compared to the firms which had a lesser number of women or woman directors. It was seen that the importance of the relationship was far more, if seen form a statistical point of view. This was pretty evident as it wasn’t an outcome of any kind of chance, although it was small in size. It was found through the research that the average correlation between the diversity in board in terms of gender and firm performance was 0.47. This result tells about diversity in gender across the boards of the various business organisations tells about 2/10ths of the 1% of the difference in corporation’s performance (Post & Byron, 2015).  It was seen that the average association between diversity in boards in terms of gender and performances of firms was even smaller and was not satisfactorily significant. It was also found out from the research conducted by Pletzer and his associates (2015) that the average association amongst the total amount of women employees in the board and the performance of the firms was very trivial (.01) and was not important from a statistical point of view.

Here a very important thing is to be noted, that although if the meta-analysis had shown a sturdier association between diversity of genders in the company boards and company performance, it cannot be stated that board gender diversity caused performance of the firm, be it lower or higher (Joecks,  Pull & Vetter, 2013). However, commentators have often suggested that the board of directors of the various corporates which include female directors would take superior decisions compared to those board of directors which majorly contain merely men. The basic reasoning behind this result is the fact that females are generally seen to vary from men in terms of their understanding, experiences, morals and way of working, which brings in a certain kind of novelty in the in terms of information and perspectives into the board of the company (Boulouta, 2013). The involvement of women increases the ‘cognitive variety’ of the board. It has been seen and proved by various experts that the higher is the board’s cognitive variety, there is more likely of it considering more the options it is probable to observe and the chances of debating over these options, in order to move towards a more conclusive position about the option takes place. There is another derivation from the various meta-analysis of the topic of the impact of gender diversification on the production of the firm. Here it was proved that improved and increased diversity in terms of genders across business boards is not significantly positively related to the performance. In spite of having widespread beliefs and accounts of the press, those teams with higher percentage of gender diversity perform better than those which have larger numbers of men, in number or women in numbers. Rigorous research on this topic does not concludes this popular argument (Gregory?Smith, Main & O'Reilly III, 2014). Meta-analysis linking team gender diversification to the production of the teams, reach the same conclusion as that of meta-analysis connecting board diversity to the production of the firm, which in other words explains that the association between team gender diversity and the production of the team is very small and tiny.

Similarities:

The key finding from the study conducted by Noland, Moran & Kotschwar, (2016) was that the business teams which have identical gender mixture perform better than those teams which had more males in terms of businesses profits and revenues. Similarly, the study conducted by Joecks, Pull and Vetter, (2013) that a more gender diverse board composition board which have females with a women population of more than 30%, would perform better than a male dominated board. Similarly, it was seen that firms having slightly more female directors have greater amount of monetary as well as accounting returns, which primarily comprised of return on assets, return on equity, when associated to the firms which had few female directors. Similarly, some other reports which were presented in this report had the identical results, where the influence of improved gender diversification had great impact on the performance of the firm. The present report by Puthenpurackal and Upadhyay, some data related to the S&P 1500 firms had been taken from 1996 to 2005 were taken for conducting the research. It has also been seen that the influence on the performance because of the attendance of the women directors leads to a better influence on the firm performance as well as the overall information systems.

Dissimilarities:

As there are similarities in case of results related to the different research reports, some of the dissimilarities related to effect of gender diversity on production of the firm have been mentioned here. The report of Chapple and Humphrey, in the year 2013 had some stark differences when compared with the reports of Noland, Moran & Kotschwar, (2016), Joecks, Pull and Vetter, (2013) and the one conducted by Puthenpurackal and Upadhyay. The primary difference remained in the form of no clear connection existing between the impacts of gender diversity on the production of firms. It has been seen that no concrete evidence was found in the connection between gender diversity and performance of the firms. In addition to this, major differences were also seen in the case of major evidences which could have any kind of connection between firm performance and improved gender diversity. There existed some frail evidences of a negative association between the cases of having several female members on the boards of the different business organizations with the performance of the business organisations. Here no clear indications or impact could be found between the two.

Literature Gap:

The primary gap, which exists, which could be addressed by the present research proposal is the test of the areas, where the differences between male and female board of directors have on the monetary and overall output of the firm. It has been seen and proved that women have a different way of performing their tasks and differ in the way of working from that of men. There remains the absence of measuring the exact ways women board of directors differ from their male counterparts. In which specific activities, do they differ with their working styles, which has an effect on performance of the firms. Through this research, those areas would be analysed where the women and male directors differ and what kind of impact it has on the overall impact of the business’s performance. Moreover, is there any effect on the performance of the firm, whether it is negative or positive due to the feminine qualities of the females, would also be a part of the literature gap, which needs to be explored.

For this purpose, some interviews would be conducted with the male as well as women directors and those working in senior management positions. Specific questions would be asked with the objective of knowing the intricacies of the working styles of both the genders in respect of different aspects of running a business. The questions would be open ended questions, where the focus would be on delving into the possible ways both these genders react, in performing their functions and responsibilities. Close inspection and analysis of the workings of both male as well as female board members specially the CEOs of various business entities would be done, by analysing their statements, declarations would be done. The analysis of these kinds of information and the information gained from the different sets of open ended interview questions would go a long way in establishing the real influence of higher diversification of gender on the performances of the firms, across the globe.

Conclusion:

Gender diversity has been at the helm of affairs for a comparatively lengthier period of time. Many different research areas, which have a close relation with the topic of impact of gender diversity on organisations, had been discussed in this literature review. In case of the effect pertaining to gender diversity on business teams, it was seen that business teams having similar gender mixture performed better than those having only male members. In case of the gender diversity in the senior positions in Europe, it was seen that higher gender diversity would lead to better productivity and profitability (Christiansen, 2016). The financial impact because of the increase in gender diversity was also seen to be negligible. Consequence of gender diversity on the performance of the firm in the case of the information environment was also looked into. There was no conclusive evidence in the relation of information environment and the higher gender variation. The research of women on boards and the performance of the firm divulged that it improved the cognitive variety of the boards where higher gender diversity was increased. Thus, on the aggregate picture, it was seen that there was a mixed result of the consequence of gender diversification on the performance of the firm.

References:

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