Researchers from St. Edward’s University, the University of Mississippi and the University of Texas at Austin have published a new Marketing Review study that examines the relationship between female leadership and customer orientation and the resulting effect on a company’s financial performance.
The study, to be published in the marketing magazine, is entitled “Customer orientation and financial performance: women in management teams matter!” and is written by Chandra Srivastava, Saim Kashmiri and Vijay Mahajan.
When Mary Barra was named General Motors’ first female CEO in 2014, the company had recently declared bankruptcy, was under fire for an ignition switch product recall that killed customers and saw a slowdown sales in the United States due to changing consumer preferences. Investors, employees and analysts debated whether (and how) Barra could change GM’s strategic approach. One of Barra’s first steps was to hire a group of female leaders and focus her team on “embedding the voice of the customer in everything we do.” GM codified customer focus in its vision statement and made customer-centric decisions, such as establishing a foundation to compensate customers who experienced ignition switch issues and launching a massive shift in the US from sedans to more popular sport utility vehicles.
Barra’s strategic vision, and subsequent change in the company’s strategic and financial trajectory, raises an important question: how do women executives influence the company’s strategic direction? Barra admitted that she has benefited from the support and expertise of women such as Alicia Boler-Davis (EVP) and Dhivya Suryadevara (CFO) and that it is essential to explore the collective influence of these women on business decisions. This topic is particularly relevant in the current social context where there is greater pressure for gender equality and laws requiring companies to have women on the board.
In this new study, researchers examine 389 Fortune 500 companies over six years and find that female executives are likely to focus more on customer relations than their male counterparts and thus encourage more customer-focused discussions in the suite C. As a result, the team as a whole is more likely to make strategic choices that reflect an increasing focus on customers, which in turn explains more than half of the positive link between female influence in the C suite and long-term financial performance.
However, the results are not uniform across all companies. The relationship between female leadership and customer focus is reduced by 17% in industries characterized by unpredictable customer preferences, rapid technological change, and strong competitive forces, and is reduced by 25% in strongly family-owned businesses founder. The effect of female leadership on customer orientation is increased by 137% in industries where management has a high degree of control over corporate strategy, is increased by 80% for companies with high female representation on the board of directors, and is increased by 89%. % for companies whose board includes directors with marketing experience.
As Srivastava explains, “Indeed, companies that operate in relatively stable environments, are not family owned, have female members and marketing experience, and whose leaders have more latitude to decide on the strategy of the companies are best suited to unlocking the benefits of female leadership.The relatively unregulated nature of their industries provides strategic and tactical freedom.Thus, the inclusion of female executives can provide a “turnaround” strategy for these companies, helping to instill and benefit from greater customer focus.”
Previous studies posit that female executives take less risk in various business settings, leading to the perception that female executives are conservative and risk-averse in all areas. Kashmiri says that “managers should reject this stereotype and consider that customer orientation may actually cause female managers to pursue riskier strategies in certain situations in order to satisfy customers.”
“CEOs and boards should consider whether their organizations could benefit from a better gender balance in the C-suite to facilitate customer centricity, thereby leading to greater shareholder value. Even if it doesn’t If there are only a few female executives on the leadership team, companies can strengthen the relationship between these female executives and customer focus by adding marketing-experienced directors and board members to support customer-centric strategies. the customer,” says Mahajan. If senior management team members are predominantly male, they can make conscious efforts to counter the tendency to undervalue customers.
A word of caution: Hiring more female executives won’t always translate to superior financial returns. An all-female leadership team suffers from the same issues of gender imbalance (more homogeneous perspectives and groupthink) as an all-male leadership team. CEOs need to find the gender balance in their leadership teams that facilitates appropriate strategic direction for their companies.
Full article and author contact details available at: https://doi.org/10.1177/00222429221120419
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The title of the article
Customer orientation and financial performance: women in management teams matter!
Publication date of articles
August 3, 2022
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