Should your next CFO be female? Examining behavioural differences between male and female CFOs

February 3rd, 2022

Should your next CFO be female? Examining behavioural differences between male and female CFOs

Just 11% of private equity CFOs are female. Would a better gender balance make a difference to business performance? Our DEI series continues, and in this instalment, we look at some subtle but surprising data from Drax’s research partner PACE™  

At Drax, we have been studying the behaviours of successful private equity leaderships teams for decades, and recently we conducted the largest behavioural study of PE leaders ever undertaken. 

When we look at successful leadership teams – teams generating above market returns for investors – the leaders involved typically conform to certain patterns of behaviour or ‘archetypes.’ 

In an article last year I reviewed the archetype of a successful, upper quartile exit and its clear that balance and diversity (both cognitive and behavioural) in the senior leadership team is crucial. At Drax we call this ‘complementarity.’ 

My personal area of interest, given my background, is the CFO. Alongside the chair and CEO, the CFO forms part of the ‘holy trinity’ of leaders on the board of an asset. We have explored the archetype of a successful CFO in another article, but given that most people equate board diversity to a male/female split, and that only 11% of private equity CFOs are female, I thought it would be interesting to explore how successful exiting female CFOs differ from their male counterparts. 

It can be controversial even to raise these differences, but they do exist, insists Sue Conder. The occupational business psychologist and member at SHe2 Leadership has spent decades advising businesses and coaching leaders. While warning against generalisations, Conder urges businesses to understand and embrace gender differences. “Being equal does not mean being the same,” she declares. 

Her position is supported by Drax’s PACE™ analysis – our tool for measuring which behaviours link to higher performance in a private equity environment. 

When applied to individuals in PE CFO roles, with a proportional level of female participants, PACE found male and female CFOs to be behaviourally very aligned, broadly speaking. Both favour a predominantly pragmatic approach, with an equal emphasis on agility and execution. Drilling down to the detail, however, reveals some fascinating nuances. 

Strong self-belief 

 Most strikingly, PACE found female CFOs tend to have a higher ‘internal locus of control’ – linked to the perception that events are determined by one’s own behaviour. In other words, they may be more likely to believe that they can drive change and influence outcomes. 

By contrast, their male counterparts may tilt towards an external locus of control – the perception that other people or outside forces determine outcomes. This potentially makes them more likely to think external circumstances are to blame when things go wrong. 

At the same time, women are more likely than men to adopt a more collegiate, less challenging approach, and a more collaborative influencing style, compared with the ‘command and control’ approach more often favoured by men. 

This contradicts the natural assumption that individuals with high internal control would also have a highly competitive and challenging style. One possible explanation is that because women have greater self-belief, they can afford to act in a more collegiate way. 

Another key gender distinction detected by PACE was in approaches to problem-solving. Female CFOs are more likely than males to favour convergent thinking – a linear approach to finding the best solution. While men have a higher tolerance for ambiguity, women tend to seek certainty. Reluctant to make assumptions, they set out to clarify details in order to make fully-informed decisions. 

Informed decisions 

The latter characteristic strikes a chord with Becci Roberts, currently CFO at PE-backed tech firm Mindera. “I’m more of a thinker. I like to take my time with a decision,” she reflects. “I like to have all the facts. I’m not a rash decision-maker.” 

Sue Conder agrees that this approach can be characteristic of female leaders. She points to Harvard research suggesting that women on boards often prevent CEOs from making very risky decisions. 

While this style often allows for gathering of critical data, it can also work against women, Conder says: “In some corporate cultures that I’ve worked in, women have been given negative feedback that they’re not making decisions quickly enough or they’re not taking a view.” Conder coaches female leaders to recognise and label their behaviour, demonstrating the reasons for their rigorous ‘horizon scanning’ approach. 

Of course, in a fast-moving business, swift decisions are sometimes essential. Conder says this illustrates the need for businesses to recruit leaders less on the basis of cultural fit, and more with a view to gathering complementary skills. That way, those comfortable with ambiguity and those who pursue certainty can provide a dynamic balance: “The reality is, we need both, but often we don’t see that we need both.” 

 Empathetic style 

Conder recognises women’s tendency towards a more collegiate style of leadership. She believes, however, that this is more likely to derive from societal factors, rather than being a result of stronger self-belief. 

She sees a collaborative mindset as a particular strength for leaders in a transformation business environment: “Any woman that’s made it to CFO will have very strong thinking capability. How powerful is that then, to also be able to take people along the journey with you?” 

Becci Roberts recalls the experience of working for her first female CEO, which made her realise that an aggressive leadership style was unnecessary: “You can be equally respected as an empathetic, caring CEO.” It was a lesson she brought to her role as the sole senior finance leader in a different firm, keeping people motivated during a lengthy run-up to mass redundancies: “I do think being more of a nurturing person helps on that side of things, massively.” 

Alongside her varied business experience, motherhood is credited by Roberts as a key influence on her leadership style – and not just by enhancing her nurturing skills. “It has also helped me make decisions much quicker, and not to sweat the small stuff as much,” she says. “As a mum, my time management and organisation are on point because I’m juggling about 300 things, and not much fazes me.” 

Blend of approaches 

While emphasising again that not all men and women display the leadership characteristics linked to their gender, Conder says the overall patterns are undeniable and backed up by research as well as many people’s experiences. To create the best team, she says, businesses must aim for a blend of approaches, which means overcoming the bias to recruiting similar people. “Of course, it’s harder to work with people who are different than we are – that’s the point,” she says. 

This ‘blend of approaches’ that Conder urges for is why top-performing businesses use PACE™ to help achieve balance and diversity within their leadership groups. 

Complementarity at this senior level is crucial. It adds to the bottom line, enriches the wider company culture, and helps break up existing assumptions and beliefs. It improves communication throughout. 

As PACE™’s Samuel Robberts notes: “Diversity is therefore both a pro-active advantage seeker, but also a deliberate risk mitigation strategy.” 

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