How managerial gender diversity translates into firm performance?

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School of Business | Bachelor's thesis
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This thesis explores how and why organizations with gender diverse top management often appear to perform differently than the conventional male-dominated organizations. More precisely, various reports have pointed out that firms led by women show improved financial performance and outperform the firms lacking the managerial gender diversity. However, the conclusive causal relations behind the differential performance have remained elusive and are difficult to identify. Furthermore, the observed performance premium, on average, appears to be rather small, context-dependent, and debatable. This suggests that the personal characteristics and skills of the female managers, and the situation-dependent broader social context of their organizations may significantly mediate the potential and observed financial success, which also challenges the popular rule-of-thumb stating that gender diversity invariably would equal increased profits. Regardless of the steadily growing number of female directors globally, various obstacles, such as harmful social norms and cognitive barriers, still remain that hinder and prevent the passage of women towards the top management. Therefore, female managers arguably and potentially differ from men, for example, through their backgrounds, experiences, skill sets, and cognitive patterns. Women and their abilities are also perceived and evaluated often more critically by the surrounding people. Consequently, their preferred style of management, and the potential achievable and expected success of their organizations are likely also different. Hence, the performance premium may emerge in suitable conditions. In this work, a range of special features of female managers – driving the potentially differential success of their organizations – are identified. The characteristics can be classified into three categories: 1) inherent special features and skills of the female managers that directly affect the organization’s internal operations and performance, 2) indirect outward-bound effects that are reflected to the organizational performance via the altered expectations and perceptions of the external stakeholders and investors, and 3) the omnipresent broader institutional context that sets the frame for the appreciation, possibilities and overall success of the female managers. Nonetheless, it is impossible to identify general rules or a single dominating feature of the gender diverse management that would guarantee success in all conditions. On the contrary, it is likely that varying sets of the identified drivers affect simultaneously and synergistically depending on the particular case, managers, organization, and the surrounding context. Furthermore, it is questionable whether gender itself is a meaningful or even a suitable measure in determining the diversity when aiming for optimized financial performance. While gender equality is a socially valuable goal in itself, considering only gender as the source of organizational success fails to capture important details and neglects personal variation within the genders, which makes the analysis inefficient, and prone to artifacts and biased analysis.
Thesis advisor
Yli-Kauhaluoma, Sari
managerial diversity, gender parity, performance, female managers, top management
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