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“Lean In” The Sequel: Are Women More Profitable than Men?

Many wise words have been penned about women in leadership. Most of them focus on the work-life balance, the glass ceiling and the leadership characteristics of women as distinct from men.

But what about women’s profitability performance versus men? Why wouldn’t we be interested in that? Ever heard of a women investment manager? Yeah, I know, there’s a few, but not too many. How do they perform relative to men? What about women CEOs as against men CEOs? Or senior executives?

I don’t have to be a sexist to ask the question. I am sure legions of investors and stockholders would love to know. Ginni Rometty of IBM hasn’t performed too well so far, but then, not so many men do either. How about Mary Barra’s chances amid the ignition storm? How about the general issue as to whether there’s a difference?

There’s very little if not any research on this issue. Maybe with behavioral economics and finance starting to be become cool subjects of study, someone somewhere will start to zero in on this issue. We have studied it too and I am going to tell you about our results shortly.

I am reminded of all this because of the recent book by Sheryl Sandberg “Lean In”. It’s hot right now, and why not? It tells women not to make excuses for their gender and their family, but to just go and do it. I heartily agree. That’s why the subject of gender differences in financial behaviors interest me and my company so much in addition to the broader gender-neutral ones.

But if you are into “Lean In”, isn’t the subject of financial performance also of keen interest if not concern? Shouldn’t we all be interested in this particular angle as well as the general leadership qualities of women?

After all, if a woman is a leader or CEO, isn’t her financial performance going to be tightly scrutinized, just like a man’s is? If women leaders are going to be judged according to the same criteria as men leaders, isn’t the issue of financial performance right up there too?

Before we delve into our results, how about a recap of the common stereotypes? I guess the most popular one is that women aren’t as good at men as handling money.

That seems pretty specious to me. Traditionally many women haven’t been afforded the opportunity. In many Asian countries, like China, it’s usually the women in the family who handle the moola and they don’t seem to be doing such a bad job, even if China’s GDP growth rate has sunk to the recent abysmal lows of 7.8% (versus our developed country rate of 2% or so if we are lucky).

And there has been some recent research that examines the differences in risk-taking between men and women. One study shows that traders who have high levels of testosterone in the morning make more than average profits.

Hmm, so why don’t all CEOs have testosterone with their Frappuccinos? What about testosterone in women in the morning? Why didn’t they study that one huh?

Now that subject is not the same as profitability differences between the sexes but I can’t find anything else. In that domain the conclusions have been that men take more risks than women and it’s all due to our over-abundance of testosterone. What a surprise! Who would have thunk it?

In other words, there’s not much if any real data on offer, so our own data, however humble, might be of some interest. In the Perth Leadership Institute our research has been focused on the behavioral drivers of financial behavior and financial outcomes. We never set out specifically to look at the impact of gender but we have enough data from our psychometric assessments to be able to spot some interesting trends.

Before I get into that, just a little information about our approach to financial behavior. To make things easy, we talk about measuring business acumen and how it impacts financial outcomes, which we usually get from income statements of companies.

We distinguish between two particular factors. The first we call Financial Signature®. We define this as your behavioral propensity to create capital. In other words, the extent to which your behavior leads you to make money. Financial Signature® is innate and can’t be changed.

However you can change the way you express this behavior and this is called your Financial Mission™. We can measure both of these using our proprietary psychometric assessments. These are based on a behavioral finance paradigm.

If you want to know more about the gory details of how these are concepts are used for practical purposes, you can go here. Basically these programs show you how to increase your financial impact using behavioral, not financial means.

Ok so much for the boring theoretical details. What does our research actually say about gender differences in profitability impact and business acumen?

Well let’s take Financial Signature® at first. What our assessments say is that within males, there is greater variation in behavior and outcome. Men are more likely to have very high business acumen – and also more likely to have very low business acumen. Women on the other hand are more likely is cluster around the average. Not so many high-fliers, not so many losers. Maybe all that isn’t so surprising. You pays your money, you takes your choice.

But it’s when we get to Financial Mission™ that things get interesting. Financial Mission™ is how you express financial behavior and it often differs from your innate behaviors.

People change their financial behavior for a variety of reasons. Usually it’s because of the influence of peers and colleagues, organizational encouragement or pressure or from personal experience. In some ways it’s a rough measure of behavioral agility, especially if your Financial Mission™ differs markedly from your Financial Signature®.

So what’s the difference between the Financial Mission™ of men and women? Well here it’s the women who look better. They tend to change their level of business acumen and financial impact so that on average it’s higher than men.

Men on the other hand tend to shift from innate Financial Signatures® having high dispersion across both profitable and unprofitable behaviors (but on average being unprofitable) to expressing more unprofitable behaviors than women on average. These are not as profitable (the actual term is value-centric if you felt the need to ask) as are women’s behaviors.

So if this was a competition, on Financial Signature®, we would have a tie (albeit with men having more wins and losses than women) but on Financial Mission™ the women would win. Go figure.

Of course there’s lots of qualifications and limitations but I am in business, not in an ivory tower so I will leave that one to the academicians. Just another data point, but one that hasn’t figured in the literature thus far.

And as you can see, another perspective from which to view Sheryl Sandberg’s now-iconic “lean in” message. You might say it represents a stockholder’s or investor’s view of how leadership should be judged, as distinct from an employee’s or a customer’s. Investors and stockholders have rights too.

Personally, forgetting for the moment the financial angle, I think women in general make better managers and leaders than men. Where do I get that from? Just the personal experience of yours truly, over a career that spans many more years than I would like to publicize here.

I also note that in most countries of the world these days women students outnumber their male counterparts in universities. That is true even in a place like Saudi Arabia where women don’t get much of a chance. In China, most universities have limits on the numbers of women they accept because if they didn’t, the number of men would be intolerably low.

It’s looking increasingly like women have won the global educational race decisively and that soon we will need to give men special help so they don’t fall too far behind women educationally.

Sure, there are still glass ceilings, women still get lower pay on average and if they are too assertive, the men give them a hard time (like Jill Abramson of the New York Times editor who recently got fired for reportedly being too assertive). So there’s some way before social reality catches up with educational achievement. Maybe there’s a 20 year gap.

Then we men have gotta look out. I think we are all starting to look like the amiable dolt, Kristoff, in the movie “Frozen”. At movie’s end it looks like he is set up to become the favored squeeze for the cute, savvy (and rich) Princess Anna, in what is obviously a case of dating down for her. But if he can bag a beautiful, smart and rich girl who can bring home the bacon for her guy, why not?

Maybe the title for Ms. Sandberg’s next book should be “Beans In”?

 

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Monday, 20 November 2017

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