It’s no surprise that there is a serious lack of women working in finance. A walk down Wall Street will confirm that when it comes to finance, men dominate the industry. After the recession in 2008, top researchers wanted to understand what happened and how best to stop another crisis from happening. The answer is simple – hire more women.
Finance and investing is based on risk and reward. It’s a delicate balance. It’s important to maximize reward all while keeping risk tolerable. In 2008, researchers from Cambridge came out with a study by Coates and Herbert. In this study, it was determined that traders reported high levels of testosterone when they were making favorable trades. These levels at first assist traders in making winning trades. However, after a point, the high levels of testosterone contributes to becoming overly confident and reckless. Further research revealed that men on average traded 45% more frequently than women and that hyperactive trading reduced their net returns by 2.65 percentage points a year, compared to 1.72 percentage points for women. In other words, women were better traders than men. There are a few characteristics that favor women when it comes to trading:
- They are quicker to admit ignorance
- They are more likely to seek help and advice from others
- They are better at specific goal-setting
- They do more research
- They are generally more cautious about risk
Trading is just one area where women are scarce. According to a study by PWC, women only hold 19% of senior level positions, 14% of board seats and 2% of CEO positions even though globally women control $12 trillion of consumer discretionary income. It’s clear women are capable and even successful in handling finances and running companies; however, there is a serious lack of progression of women in the business world – specifically finance. With more and more women graduating college, the time is now to succession plan our women to keep up with the needs of the economy.
Firms and companies need to understand how to not only keep women in their companies but also how to successfully succession plan them to take key leadership roles. With women holding 65% of the global spending power, it only makes sense to have women in roles to influence the majority of the consumer base.
Many companies are taking the research and changing economic conditions seriously and changing their company culture to be more women friendly. Diversity Women recently published the top 100 companies for women’s development. The top 5 companies all had something in common – they listened to what women wanted and adopted their corporate culture to support their women. Below is a list of some of the most noteworthy accomplishments:
- A.T Kearney implemented flex working options that allow less days in the office without taking away promotion opportunities.
- Wyndham Hotels and Resorts adopted meaningful mentoring programs that help with career planning.
- Kaiser Permanente puts emphasis on creating a multicultural and diverse work force. The company is over three-quarters female!
- Texas Instruments has four women board members which vastly beats the current statistics of gender diversity on boards.
- Principal Financial Group had half of their promotions go to women in 2014. Furthermore, one-third of the firm’s top executives are now women.
Gender equality in finance and business at large is much more than a diversity initiative for company human resource departments. It pays in profits to have women take leadership positions. The time is now for companies to invest in their women.
For more tips on succession planning, check out our white paper.