- Valerie Plame via HUFFPOST
Why Women-Led Businesses Outperform Their Peers
Over the years, from serving in the CIA to sitting on non-profit boards, I have observed first-hand what the addition of even one woman to a meeting or to a decision-making body can do. Put simply, in very many instances, group dynamics improve markedly. Competition gives way to cooperation. A set of individuals, each vying for attention and dominance, becomes a genuinely collaborative team with shared objectives and mutual trust. And that trust powers the better performance of the group.
Why? Because, as has been well documented, women typically work differently than men in how they problem-solve and build relationships.
While I admire Sheryl Sandberg, I’m not convinced that “leaning in” such that women behave more like men is the best answer, either for individuals or for organizations. Nor do I believe that companies should open more leadership positions to women simply because it’s argued to be politically, socially, or morally necessary.
Rather, it should be recognized that, by increasing the number of women in leadership roles — and the improved trust-dynamics that they frequently inspire — companies may expect to see improved decision-making, team building, and operational efficiency.
I first learned the power of trust in the CIA. There is no question that when I joined the Agency as a covert operations officer it was still run along the “old boys’ network” model. The Agency, as it had since its inception in 1949, primarily recruited white men, largely from Ivy League schools, to fill the elite ops officer roles. Few women served at the top in senior management roles. Indeed, most were found in the more traditional support jobs: secretary, analyst, reports officer.
The determined ones who had broken through were mostly single, often embittered to a certain extent, and tough-as-nails from overcoming the institutional bias they faced daily. There were few role models to show a young woman how she could retain her femininity, perhaps have a family, and yet still be respected in the demanding ops world.
It was discouraging, to be sure, but I assumed that the obvious gender biases would fade away, eventually, and so I soldiered on. Sadly, as any professional woman can tell you today, changes have come at an agonizingly slower pace than expected.
Once I gained a little experience at the CIA and figured out the admittedly strange landscape of a covert career, it suddenly dawned on me that being a woman in ops was actually to my advantage. Women are generally deemed to be less threatening, better listeners, and engender greater trust more quickly than do most males. Moreover, in many parts of the world, women are viewed as little more than wallpaper, and are therefore not very threatening.
Men often have a harder time in this regard. One of the reasons I succeeded at my job with the CIA was that, early on, I recognized the value of trust and that my gender helped to enhance that quality. While the CIA is clearly a unique organization, I believe this to be true in other fields and organizations as well. And research increasingly supports my own anecdotal observations.
That research clearly shows that businesses with greater numbers of women in positions of leadership outperform their peers. One of the earliest such studies, conducted by Catalyst, examined companies on the Fortune 500 list over a four-year period. Researchers found that the group of companies with the highest representation of women on their senior management teams had a 35-percent higher return on equity and a 34-percent higher total return to shareholders than did companies with the lowest women’s representation.
More recently, Quantopian, a Boston-based trading platform, looked at 80 Fortune 1000 companies that had women CEOs between 2002 and 2014. They found that those companies produced equity returns 226-percent better than the S&P 500 during that same 12-year period.
Meanwhile, McKinsey & Co. has produced reams of research about the positive impact of women. Their study, “Women as a Valuable Asset,” concluded that “companies where governing positions are held both by men and by women have higher operating margin and market capitalization in the respective industry.”
Research also shows that businesses with internal dynamics characterized by a high degree of trust outperform their peers. These high-trust organizations have greater productivity, more knowledge sharing, and more innovation, as well as lower turnover, lower costs, and less fraud and malfeasance.
For instance, researchers at Cornell University’s School of Hotel Administration, in a study of 6,500 employees at 76 U.S. and Canadian Holiday Inn hotels, found a stunning correlation between trust and profit. Hotels where employees strongly believed their managers kept promises and practiced the values they preached were more profitable than those where managers were deemed to be less trustworthy. In fact, a one-eighth-point improvement in a hotel’s trust score (on a five-point scale) could be expected to increase that hotel’s profitability by 2.5% of revenues.
In a 2015 study, entitled “Trust and Consequences: A Survey of Berkshire Hathaway Operating Managers,” researchers at Stanford found that the backbone of Warren Buffet’s highly successful holding company is trust. While recognizing that, “You’re never going to have perfect behavior,” Berkshire Hathaway vice-chairman Charlie Munger argues that it is more important to try and “operate in a seamless web of deserved trust” than it is to emphasize systems of control.
The secret is, perhaps, partly explained by the way in which trust drives employee engagement. Nan S. Russell, author of Trust, Inc: How to Create a Business Culture That Ignites Passion, Engagement, and Innovation, writes in Psychology Today, “leaders operating with trust enjoy higher engagement levels,” and that “engagement is tied not only to profitability and productivity, but to innovation, customer satisfaction, and even lower health care costs.”
And who is generally better at building trust relationships and is more inclined to do so at work? Says the research: women.
Indeed, a comprehensive review of academic papers concerning gender differences in trust and reciprocity concluded, however starkly, that men “are less trustworthy than women.” This may be an unpalatable conclusion, but the data seems to support it. Consider: data gathered from thousands of managers from across all industry sectors operating across 40 countries shows that men are “consistently more arrogant, manipulative and risk-prone than women.”
By contrast, another study of 82 teams in 29 organizations, published last year by the Journal of Organizational Behavior, found that teams led by women report more cohesion, cooperative learning, and participative communication, especially on larger, geographically dispersed teams.
The inescapable conclusion is that women-led businesses outperform others, and that this is at least in part because women are better at engendering trust, the business value of which has only recently been recognized.
So great is that business value that a new breed of technology has emerged for tracking the trust dynamics that drive behavior within organizations. Powerful pattern recognition software can analyze the wealth of internal data and communications that organizations generate daily. Data analytics technologies such as “machine learning” make it possible to identify those employees whom others trust and to track the always-evolving trust networks within an organization.
These technologies, combining data science, network science, and behavioral science, uncover where trust working to boost performance, and where it is lacking and resulting in operational drag. This allows management to take corrective action before opportunity is lost or dysfunction spreads, with obvious consequence for performance and profitability.
I asked Stephen Scott, Founder of Starling Trust Sciences, if technologies of this sort might one day tell us something about gender and trust. (Full disclosure: I am on the company’s advisory board.)
He said, “We see very clear gender-related trends in the data from our customers. I can’t say that men or women are more or less trustworthy, per se, but they do seem to trust differently, and women in particular seem to value trust and to be especially harsh in punishing breaches. This seems to result in an informal ‘policing mechanism’ of sorts which may be far more effective than formal systems of compliance — and far less costly.”
Why would women value trust more and punish breaches more harshly? I suspect the answer lies somewhere in the many complex conditions of dependency, caregiving, and vulnerability that women have been subject to over the centuries. With deeper study and more data, we may one day get a definitive answer. But in the meantime, we do know this: more women in leadership roles often means better performance. As more organizations come to understand that, we can hope that they will increasingly put women in those roles. It’s simply good intelligence.