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What do Latin American leaders need? More women.

April 4th, 2013
Susan Clancy

04/04/2013. By Prof. Susan Clancy. While women represent half of the labor force in Latin America, corporate leadership positions remain dominated overwhelmingly by men, and it is unlikely that this situation will change.

To break structural and cultural barriers within organizations that hinder the advancement of women requires a firm commitment from senior commanders.

Over two thousand managers of local, regional and multinational firms in three industrial sectors were surveyed by the INCAE Center for Women's Leadership, of which less than 25% worked for companies whose policies encourage the rise of women to leadership positions. Furthermore, only 12% believe it is necessary that the organization promote gender diversity in leadership.

A clear explanation emerges from the data obtained: the main goal of most companies is to make money, and Latin America, men in power do not associate women with that goal. Less than 8% felt that there was a link between gender diversity in leadership and financial performance of a firm.

Numerous studies over the last decade that were led by academic institutions, development banks and consulting firms like McKinsey and BCG, support the relationship between corporate financial performance and gender diversity in leadership.

Companies that show high numbers in terms of female representation on top management teams show better financial performance than those which are very low.

The finding is in both measures analyzed: Return on equity, ROE, was 35% higher, and total rate of return for shareholders, TROR, was 34% higher.

Why does the presence of women in the ranks of command impact the final balance?

First, because the rates of women in education and participation in the labor force in Latin America skyrocketed in the last 30 years. Globally, women control about US $20 billion of expenditures on consumer goods, and in 2016 it is expected to rise to US $ 38 billion.

Despite that, a recent BCG study indicates that women in developed markets and in developing channels express a feeling of disadvantage.

The firms that leverage women’s arrival to decision boards can better market products and services, and develop others that cater to this new market.

The second reason is that half of the signature talent is feminine. So why are 95% of the leaders extracted from the 50% that males represent? This is an absurd waste, and even more with a looming war for talent due to the reduction in fertility rates.

The third reason is related to the strategic decision-making. Most agree that diverse groups always make better decisions, provided that all members are equally capable, but economists are developing mathematical models that indicate, under certain circumstances, the diverse outperforms homogeneous, even when the latter are found to be more individually capable.

What are these circumstances?

When the task the group must complete is complex, ambiguous and has many possible correct answers (for example, designing a new product).

I think the popular language translation is: "In today's world, if the decision board in an organization is composed of men over 50, we're in trouble."

Bringing more women into leadership positions is a question of strategy. In the 21st century diversity in leadership will be crucial for organizational competitiveness.

Susan Clancy
Ph.D. – Experimental Psychology, Harvard University