Defining an organization’s culture as a “Family” culture reflects tolerance to subpar performance. Rather focus on those characteristics of a “family” culture that you want.
At the end of last year, there was a male-to-female ratio of 19:1 for CEOs and 6.5:1 for CFOs, which exposes a persisting underrepresentation of females in key executive positions. Within my Vistage groups, I am pleased to say that the male-to-female ratio is 11:3 for CEOs. However, that aside, some recent articles have shown the superior performance of companies that have women in C-Suite positions that are typically not reserved for females.
According to a study by S&P Global Market Intelligence, if you are looking for better returns, hire a female CFO! Companies that hired female CFOs saw, on average, a 6% increase in profits and an 8% better stock returns compared with the performance under male predecessors. The 6% increase in profits accounted for an additional $1.8 trillion in additional cumulative profits across 6,000 companies.
Thus, female CEOs drove more value appreciation, improved stock price momentum, better-defended profitability moats, and delivered excess risk-adjusted returns for their firms.
However, a new study by HEC Paris Business School and MVision Private Equity Advisers found that investment committees of private equity fund managers comprising both males and females have experienced comparatively higher returns compared to their male-only peers. Therefore, if PE firms want to outperform their peers, they should appoint more women to their investment committees. The diverse investment committees well outperformed their male-only counterparts! Professor Oliver Gottschalg found that on average, companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform their peers, and 27% more likely to exhibit substantial value creation. Specifically, his research found that gender-diverse investment committees outperformed all-male committees in alpha, TVPI, and IRR by 7%, 0.52%, and 12%, respectively. The level outperformance is due to a broader base of perspectives and the subsequent avoidance of more blind spots!
So what is of interest is that while women’s participation in Investment Committees results in outperformance, Private Equity never received the memo. As can be seen from the chart below, women are very under-represented in the major Private Equity Groups
Not only that, Bloomberg has found that startups with all-male teams raise less money than those with a woman. Therefore, you would think all startups would be looking for female teammates. Unfortunately, many are run by men who “know best.”
Thus, while I am the first to say that correlation does not necessarily mean causality, there undoubtedly enough data to say, “If you want to realize above-average performance, put women in your C-Suite!”
This has to be one of the easiest things to improve your performance and make better decisions. If you say, “We just can’t find them,” you are not looking in the right place.
Copyright (c) 2019, Marc A. Borrelli
Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”
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As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.
“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.
You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.
If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.
Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.