There is a business case to have women in leadership. According to the McKinsey & Company Women Matter Africa report, released recently, there is a link between companies which perform better financially and that have gender diversity.
The report shows that in the past 10 years Africa has made progress in terms of gender diversity in leadership. However, only 5% of CEOs in the private sector in Africa are women, compared to 4% globally. This indicates that achieving gender equality is still an issue, according to Lohini Moodley, partner at McKinsey.
“In terms of gender diversity, one of the key findings is that we [Africa] are doing well compared to the rest of the world and we have made progress but we are not making the most of the opportunity,” explained Moodley. Organisations with a greater share of women on their boards tend to have higher operating margins, return on equity, and total return to shareholders.
The report also found that Earnings Before Interest and Taxes (EBIT) for companies with at least a quarter share of women on boards was on average 20% higher than the industry average.
However it is important to note that the proportion of women in senior positions and financial performance does not imply causation, cautioned Moodley. “Women bring a different dimension to organisations … they bring different considerations. More diversity allows for robust decision making,” she said. Research shows that benefits of diversity influence risk management, decision making and board dynamics which all impact financial performance.
“When more women are involved in decision making, the dynamics of how a decision is reached are different,” added Tania Holt, partner at McKinsey. Research shows that 70% to 80% of global consumption is influenced by women. Having more women in the decision making process can help organisations relate to customers better.
Findings also show that female representation also varies by industry. Representation of women in industries traditionally dominated by men are lower. “Historically, few women studied in these areas… the pipeline of women is smaller than men than in other areas,” explained Moodley.
Other key findings show that in Africa 44% of women hold line roles. These are roles which are critical for business activity to function, including operations and finance. “There is a higher likelihood for CEOs to be selected from line functions than support functions,” said Moodley.