I recently made a small scale study for my about equality in law firms and how that effects the results a law firm makes. The findings were, to much of my surprise, incredible: more women partners = better results.
This is an English reproduction of my earlier Finnish blog post, published simultaneously here and in Linkedin.
It all started from recent working paper by PIIE which seemed to conclude that the amount of women in leadership will enhance the financial results of a company. I also stumbled upon a research where it was concluded that startups that had women as founders greatly overperformed against companies where founders where only men.
One of the main points in these studies was, by the way, that it is also vital that women leaders work at the “business” and not only at supporting functions, such as HR.
All this got me very curious. Could this be applied to the legal world? After all, it is not that uncommon to have women partners in law firms and partner is, to me at least, a “business unit director” i.e. responsible for a practice which can be considered as “business”.
My approach was simple: look at the bottom line of 18 of biggest attorney firms in Finland and calculate how many women work as partners. Can you see any correlation? I chose to use two simple parameters: the percentage of women as partners and percentage of profit against turnover. I used the latest numbers available, from 2013 and 2014 and calculated an average profit margin.
This is what it looked like:
The orange bar represents the profit margin of a company. The green line is the percentage of women as partners in the respective company.
My maths and statistics abilities are very basic. But working with Excel, I could find some very interesting stats. First of all, all of the big law firms I looked at did have women as partners. That is already a good start! The profit margin average was between 11,9-44,7 per cent and the percentage of women as partners between 6,7%-50,0%, average being 19,4 %.
The biggest wins gained on average (44,7 %) was made by a company that had a close to average of 18 % of women partners. On the other hand, another attorney firm had 33% women partners and made a profit margin of also incredible 41,6 %. When looking at the individual company level, I was still struggling to see any correlation between amount of women and better results.
However, when you look at it from one level higher and group the companies together, you can distinguish that if company has more than 17% of female partners, it has an average profit margin of 28,3 %. Companies that have less than 17% women in the partnership perform less well: their average profit margin is only 20,7 %. So a more diverse partnership means an average of 7,6 % gain.
All of the above is not a scientific research but to me it is a very interesting mind-bending exercise. It is impossible to even guess where this very significant 7,6 % gain comes from.
If you ask me, I don’t believe that these gains have actually anything to do with gender of the persons working at the director positions.
Instead, I think it is more like an index that shows that after a certain threshold, the company’s culture embraces highly abilities, skills and experience over gender when it comes to leadership positions. Thus a company is more prone to select the best person to the job instead of choosing the best man for the job. Because of this, the company gets the best, nothing more.