Want to save your business money? Pick engaging female leaders

The case for gender diversity in leadership roles is stronger than ever. Having women in leadership positions is not just the right thing to do, it is also good for a company’s bottom line. 

Several studies have shown that women-led organizations are likely to perform better than those led by men. According to a report by Credit Suisse, “Companies with more female executives in decision-making positions continue to generate stronger market returns and superior profits.” 

Another study by Nordea, Scandinavia’s biggest bank, revealed that “firms with a woman running the show perform far better than the market.” 

Data compiled by global consulting firm Potential Project showed that “employee disengagement translates into significant organizational expense (due to absenteeism and lower productivity).” That said, female leaders tend to be better at engaging employees, and this may save their firms as much as $1.43 million per every 1,000 employees. 

This begs the question: What’s the secret to women’s leadership that can drive such a positive impact for shareholders? 

Potential Project found that “women are most likely to embody… “compassionate wisdom,” which is the leadership style most likely to drive engaged, happy, and productive teams, reducing the negative human capital costs companies fear today.” 

Jacqueline Carter, partner at Potential Project, explains compassionate wisdom as “having the ability to do the hard things required of leadership in a way that is human.” She says, women in leadership are frequently faced with more of these tough situations than their male counterparts. 

Carter adds, “Women in general have also been found to be more willing to embrace the vulnerability and compassion that help them approach difficult decision-making with a human-first approach.” 

Research shows that given the opportunity to lead through crises, female leaders perform extremely well. This was seen during the COVID-19 pandemic, where nations run by women had the fastest and most effective public health responses. Essentially, women in leadership positions have a proven track record of tackling the hard things. 

Compassion and vulnerability: The secret to women’s leadership

Carter also quotes research that explains “how when others are vulnerable with us, we are more likely to be vulnerable in turn.” Hence, when it comes to a workplace setting, leaders who are not afraid to publicly demonstrate traits like compassion and vulnerability create cultures where compassion and vulnerability are celebrated. 

She writes, even though humans are biologically hardwired to feel empathy for others, empathizing with team members is different from leading from a place of compassion. Therefore, leaders need to be trained to be more than a shoulder to cry on and instead to tackle understanding with solutions. For instance, if an employee shares that they are feeling overwhelmed balancing work and childcare, a compassionate leader can not only understand that challenge, but is also able to take concrete action by offering a flexible schedule to help ease the situation.

Similarly, compassionate wisdom is about having the courage to take the suitable action, even if it may not be the most popular one.

Finally, in business, compassionate wisdom is best expressed through transparency. Leaders are more effective when they are able to not only make decisive policy decisions, but are also able to communicate those decisions in a way that identifies and appreciates the impact such a change can have on each employee’s life. By offering clarity around how policies are created and what the intention of those policies are, workers are more likely to be heard.

It is only leaders who can manage to do hard things in a human way who are making a serious impact in building a thriving company culture.