University of Texas at Austin: Women in the C-Suite Strengthen Customer Focus, Financials

Women in executive-level management are more likely than men to focus on customer relationships, leading some companies to greater long-term financial performance, according to a new study from researchers at The University of Texas at Austin.

The study of 389 Fortune 500 organizations over six years found female leaders are especially valuable to customer strategy in companies that operate in relatively stable environments. These companies are where the C-suite has a high degree of control, and where women and marketers are well represented on boards of directors.

“CEOs and boards should consider if their organizations could benefit from a greater gender balance in the C-suite to facilitate customer orientation, thus leading to greater shareholder value,” said Vijay Mahajan, study co-author and professor of marketing at the McCombs School of Business.

The study is forthcoming in the Journal of Marketing.

Mahajan joined Chandra Srivastava, a St. Edward’s University assistant professor and McCombs marketing lecturer, and Saim Kashmiri of the University of Mississippi to determine which corporate settings stand to gain the most from female leadership, and why.

“In less regulated industries, where there is more strategic and tactical freedom, the inclusion of female executives may provide a ‘turnaround’ strategy for these companies, helping them instill and benefit from a greater customer orientation,” Srivastava said.

Earlier studies posit that female executives take fewer risks across a variety of business contexts, creating the impression that female executives are conservative and risk-averse in all areas. But this research shows that their customer orientation may cause female executives to pursue riskier strategies when they’re necessary to satisfy customers.

However, the researchers note that hiring more female executives will not always lead to superior financial returns. An entirely female top management team suffers from the same issues of gender imbalance – more homogenous perspectives and groupthink – as an entirely male top management team. CEOs must find the gender balance in their top management teams that facilitates an appropriate strategic orientation for their companies.

“Even if there are only a few female executives on the top management team, companies can strengthen the relationship between these female executives and customer orientation by adding female directors and marketing-experienced board members to support customer-centric strategies,” said Mahajan. And if members of the top management team are predominantly male, they can make conscious efforts to counteract the tendency to undervalue customers.