Health Crisis: The Correlation Between Gender Diversity and Business Performance

The virtuous cycle of diversity and performance

A group’s social performance (quality of life at work, cooperation, diversity, and inclusion, among other factors) helps improve its economic performance, which in turn provides the means to further improve its social performance: this is a coherent virtuous cycle that is regularly cited as a compelling argument in advocacy for greater diversity and gender balance in the workplace.

Over the past twenty years or so, numerous indicators have been developed to validate the hypothesis of this virtuous relationship between social performance (measured by diversity criteria) and economic performance ( measured by stock market and financial indices):

• For example, the “Diversity Matters” analysis published by McKinsey in 2015 highlighted a statistically significant correlation between a diverse leadership team and better financial performance, with companies in the top quartile in terms of gender diversity being 15% more likely to have financial returns above the national median for their industry.
• A global study by the Peterson Institute for International Economics, which analyzed 21,980 companies from 91 countries in 2016, shows similar results: while there is a correlation between corporate performance and the proportion of women on the board of directors, it remains relatively weak. In contrast, the correlation between the presence of women in executive positions and a company’s economic performance is particularly strong.

Has the experience of the health crisis in France confirmed this positive correlation?

Yes! That is the finding of a study by SKEMA Business School and La Banque Postale Asset Management published in July 2017.

Unlike the studies mentioned above, the study by Skema Business School/Banque Postale AM did not limit itself to examining the presence of women at the “top of the hierarchy,” but also took care to examine gender diversity rates in management positions.

The results speak for themselves: Between January 1 and June 30, 2020, the 10 most gender-diverse companies in the CAC 40 ( with an average of 54.3% women in management) outperformed the CAC 40 by 1.5 points; whereas the 10 “low-performing” companies ” (an average of 16.8% women in management) underperformed the CAC 40 by 8.8 points!

More specifically, while the CAC 40 saw its benchmark index fall by 16.2% overall, the decline was limited to 14.7% for the “Diversity” portfolio, whereas it plunged to -25% for the “Less Feminized” portfolio ” portfolio. Michel Ferrary, director of the SKEMA Observatory on Gender Diversity in Business, concludes: “Clearly, gender parity acts as a hedge against risk.”

A Correlation Under Scrutiny

Can we therefore conclude from these studies that the greater the gender diversity within companies, the better their financial performance? No.

• On the one hand, because these studies highlight a correlation coefficient. This coefficient indicates the presence or absence of a linear relationship between two continuous quantitative variables, but it says nothing about a cause-and-effect relationship. Does gender diversity improve financial performance, or does financial performance enable the company to innovate socially by increasing the proportion of women in its workforce? Or are social and financial performance driven by a third, unmeasured variable?
• This last question highlights the second limitation of the reasoning in these studies: it is a bit too hasty to claim that the presence of women in executive and managerial positions automatically leads to strong financial performance, given that such performance is highly multifaceted.

So was Christine Lagarde wrong to say in 2018, “If Lehman Brothers had been called Lehman Sisters, the situation for banks in 2008 would have been very different”? Yes and no. Let’s say the most accurate way to put it would be: “If Lehman Brothers had been called Lehman Brothers & Sisters, the situation for banks in 2008 would have been quite different.”

In fact, it is not the presence of women in and of itself that impacts performance, but rather gender diversity. A 2018 study by Sodexo found that gender-diverse management teams (with a female-to-male ratio of 40% to 60%) achieve optimal results compared to teams where one gender predominates. We can logically conclude that it is indeed diversity—when harmoniously integrated—that drives economic performance!

Link to the article