It has been said that women perform better as executives because they take less risk than men. More recently, however, this premise has been questioned based upon the findings of a new research study. But, do those new findings really negate the premise that women executives are better risk takers than their male counterparts?
The research study was discussed in the January-February 2023 issue of Harvard Business Review in the Idea Watch section article “How Women in the C-Suite Boost Financial Performance”. According to the Harvard Business Review article, the “study finds that female executives focus on customer relationships more than their male counterparts do—and that bolsters long–term business results.” The Harvard article quotes the research study and says, “Many studies…suggest that female executives engage in reduced risk taking, but customer orientation may actually result in female executives pursuing riskier strategies.” The article points out that the research study noted the example of GM CEO Mary Barra’s “abandoning several models of sedans, in favor of increasingly popular SUVs, thus fundamentally changing the firm’s strategic direction.”
I’ll point out, as someone who led sessions on risk for association and university alumni groups, and as someone who has been researching business success and failure patterns for 25+ years, that changing the company’s strategic direction is not necessarily high risk, although it often can be. The degree of risk involved in a strategy change can vary immensely depending upon the nature of that strategy change.
Furthermore, with business strategy, high risk does not lead to high reward, despite the fact that risk is often glorified. Prudent risks that have a good chance of turning out well are what brings great success. And, although women execs may take more customer oriented risks than men, this does not negate the premise that women executives are better risk takers than their male counterparts. This may be because women’s customer oriented risks may still be relatively prudent compared to many of the risks male executives take.
While men generally take bigger risks than women, women are more likely to take bigger risks entailing a social component, like moving to a distant city where they know no one. But, since women tend to have stronger social skills than men, when women take bigger socially related risks, they may still be taking relatively prudent risks, where the chance for success is good. The same may apply when women execs take customer oriented risks. What may seem like higher risk may still be relatively prudent risk since women’s stronger social skills may increase the chance for successful outcome.
So, despite the recent research study, the case can still be made that better risk taking by women is a reason for their superior performance. This appears to be true even though the Harvard Business Review article says, ”Overall, the findings challenge prior thinking” that women executives are more successful because women take fewer risks. According to my research, success depends on taking the right risks. Apparently, women are more likely to do that. Women are less likely to make the high risk moves that men are more prone to make. And, it’s the right risks, not high risk, that bring great success as the high reward.
