Gender Diversity with Focus on Gender Diversity in Leadership and Management Positions

Introduction

There has been many literatures and researches done on the importance of diversity within an organization, with numerous research suggesting that diversity could improve an organization’s performance. This research paper would look at gender diversity, with focus on gender diversity in leadership and management positions of the organization.

Both Lorenzo et al (2018) and IMF’s working paper (2016) indicate that diversity improves an organization’s performance. Lorenzo et al (2018) also suggests that increasing the diversity of leadership teams leads to better innovation and improved financial performance.

This is substantiated by IMF’s working paper (2016) which concluded that firms with a larger share of women in senior positions have significantly higher return on assets, and higher involvement by women in senior positions improves organization profitability. Companies are now progressively aware that they can gain greater competitive advantage and improve profits by having more women as employees, entrepreneurs, consumers, and business leaders. However, the problem is that there is a lack of women labor participation globally, and even lesser women in leadership and management positions. International Finance Corporation’s (IFC) Gender Business report (2018) shows that on average, women occupy only 19% of corporate board seats and 14% of senior executive positions in the top 600 largest companies in Europe, and within the G20 countries, women accounted for only 17% of corporate board members and 12% of executive committee members of the top 50 listed companies.

Various literatures, including Kiser (2015), and Glass and Cook (2017), have identified reasons and provided recommendations to ease this gender disparity, but they have yet to look at whether these recommendations would solve the issue or backfire.

The growing awareness of both the under-representation of women in leadership and the evidence of their contributions to business has led to increased efforts to improve gender balance in senior management, with regulations, targets and quotas being established. It is so important that legislation was passed in Europe of requirements to improve corporate governance of financial institutions. With the gender legislation or quota implemented, this incited some debates as to whether it would lead to selection of unqualified women to the position, based on gender rather than qualifications. Some critics have said that quotas lead to women being promoted prematurely, or the same few women have been recruited to different organizations, and they have even been labelled as the ‘golden skirts’. One study from the University of Michigan showed that company performance fell after quotas were imposed, because new members lacked the experience (Staley, 2016)

This leads to the question, How does modern strategy such as regulatory reforms help to achieve greater gender leadership balance which benefit the organization?

Using the following research objectives, I seek to answer this question.

• To determine the importance of gender diversity in leadership and management positions.
• To discuss the gap in gender diversity in leadership and management positions.
• To explore the regulations and quotas implemented to improve gender diversity
• To establish if regulatory reforms eventually benefit or hinder organization

Diversity and Inclusion – Importance of Gender Diversity

Diversity is defined as the variety of relevant human characteristics in an organization by Tsusaka et al (2017), which includes but not limited to gender, race, religion, and sexual orientation. There is growing evidence indicating that diversity and inclusion are critical factors of organizational commitment and job performance. This report would look at the importance of one of those factors – Gender.

Firstly, why is it important for women to be included on the workforce? Simply because it would help boast economic growth. International Finance Corporation (IFC), a member of the World Bank Group reported that gender equality is not only a social and moral imperative, but also an economic necessity. Across the world, countries are losing $160 trillion in wealth because of differences in lifetime earnings between women and men, according to a recent World Bank Group study (IFC, 2018). Access to good quality jobs and access to assets are key levers of change for women, their communities, and economies. It is also the fundamental drivers of economic growth, poverty reduction, and shared prosperity. If the gap in the labor participation rate between women and men were to be reduced globally by 25% by 2025, it could add $5.8 trillion to the global economy and boost tax revenue by $1.5 trillion, according to a 2017 report from ILO. However, even though women represents more than 50% of the population worldwide, only 39% are in the global labor force (McKinsey, 2017).

In addition to the lower global labor force, women are often underrepresented in leadership roles and overrepresented in part-time, low-skilled and informal roles. The lack of significant proportions of women in leadership and senior management positions in almost every organization, irrespective of whether it is in the commercial, industrial, military or public sector, appears to be a worldwide phenomenon (Heslop, 1994).

Adler (1993) states:

About the single most uncontroversial, incontrovertible statement to make about women in management is that there are very few of them.

This lower percentage of women in leadership positions is supported by Mckinsey’s (2017) report, which shows that women make up less than 40% of the global labour force, and only 25% of management positions globally. Numerous reasons have been suggested to explain this lack of women in leadership positions, which have included social, educational, gender sterotypes, perceptions and work-life balance factors (Kiser, 2015).

In Asia, the percentage of board seats held by women is quite different in various countries. In Japan and South Korea, the representation of women on boards barely reaches 4%, and China being the largest economy in the region, with a relatively high percentage of 74% female labor participation rate, but less than 10% on board seats (McKinsey, 2017).

Furthermore, citing a statement made by a International Finance Corporation Resident representative, research showed that US Fortune 500 companies which had the highest percentage of women directors reported, on average, 53 percent higher return on equity. It has also added that taking steps to have more women on boards is not only good for promoting gender diversity, it also makes smart business sense. (Vula, 2018)

In short, it is important to expand and strengthen women’s workforce participation and leadership.

Causes of the Gender Gaps

In a research done by McKinsey (2013) surveying 1400 managers, including 350 executive committee members, from companies across the globe, revealed that women’s ambitions are just as high as men’s. Women are as ambitious as men but less confident that they can succeed, therefore they need a supportive environment to feel that they can succeed as much as men. Many literatures have identified points such as women’s welfare, balancing work and family commitment, inequality in legal protection and physical security as reasons for gender gaps. In general, unconscious bias makes it harder for women to reach management positions. However, I would like to point out three mains reasons which causes the gender gaps – Glass ceiling and Glass floor, perceptions and selection criteria.

Glass Ceiling and Glass Floor

The U.S. Department of Labor’s 1991 definition of glass ceiling is “”those artificial barriers based on attitudinal or organizational bias that prevent qualified individuals from advancing upward in their organization into management-level positions.”” (Lewis, 2019) It is called glass ceiling because it is not a visible barrier, and a woman may not be aware of its existence until they “”hits”” the barrier. In other words, it is not an explicit practice of discriminating against women, although practices, and attitudes may exist that produce this barrier without intention to discriminate.

In her book, Sheryl Sandberg (chief operating officer of Facebook) argues that women face invisible, even subconscious, barriers in the workplace, and not just from bosses. In her view, women are also sabotaging themselves. Women hold themselves back by lacking self-confidence, by not raising their hands, and by pulling back when they should be leaning in, and the result is that “men still run the world.” (Jodi, 2013)

In addition, a research by McKinsey (2013) suggests that it is not only an issue of glass ceiling but a pipeline towards the top that is leaking women at every level. For example in Asia, talent is loss most dramatically and apparently seen at middle and senior management levels due to lack of positive family support measures in place in the corporations.

MSCI’s Women on Board Research (2015) hypotheses that the appointment of a female CEO might break an institutional barrier against women ascending to the top ranks of leadership. Once this barrier has been breached, it may become easier for other women to fill leadership positions. The presence of a female CEO may indicate that a company’s culture is more amenable to female leadership in general, more likely to appoint female leaders.

Perceptions

Gender perceptions are important to evaluate issues that may persist and contribute to gender inequality in the workplace. A research by Kiser (2015) provides insight into factors that might affect how men and women think differently and helps in providing a clearer understanding of why the inequality remains. The research findings shows that there was significant differences between males and females perceptions. When jobs are scarce, men feel more strongly that they have more rights to a job than women. Men also feel more strongly that when a mother works for pay, the children suffer, men make better political leaders and men make better business executives. Kiser’s (2015) findings are also in line with the social role theory, gender schema theory and social dominance theory.

Women’s own perception plays an important role too. Kay and Shipman (2014) suggest that a woman’s perception of her own abilities, leads to lack of confidence, which eventually leads to men getting promoted faster and being paid more, and therefore lesser women on management. Lack of confidence has been holding women back, and this is due to their perceptions that they do not have the capabilities as men.

Social Role Theory

The root of this perspective in this theory, posits that women and men are encouraged and rewarded for different types of behaviors. For example, gender socialization encourages cooperative and relationship-building behaviors in girls and autonomous, individual-oriented and competitive behaviors in boys. These subsequently leads to differences in educational attainment, career trajectory, and value orientation. As a result of these gender differences in social roles and expectations, women leaders will differ from men in terms of their leadership style and organizational priorities. (Glass and Cook, 2017)

Sheaffer et al (2011) found that men were more likely to possess the characteristics associated with managerial success. Indeed, most descriptors of male managers portrayed them as being assertive, self-reliant, competitive, objective, forceful, ambitious, emotionally stable and self-confident (Paris et al., 2009). The many important characteristics for managerial success. These stereotypes then leads to management roles being occupied by men. Therefore, the most important obstacle for women in management, is the persistent stereotype that associates management qualities with male characteristics. Evidence suggests that a male executive with the above traits is perceived as behaving properly and exhibiting leadership qualities, whereas a female who behaves likewise is regarded as inappropriately forceful (Ryan and Haslam, 2007). This serves as a barrier for women, as they would be seen as not behaving appropriately as women when their behavior concur with leadership qualities, which are masculine gender stereotype.

In addition, corporation’s perceptions about female leadership are critical barriers to women’s advancement. More than 40% of women believe that their leadership styles don’t fit for the company’s top management. Even though most men and women say that they believe women are as good leaders as men, however, the men’s degree of conviction about this isn’t as strong. Less than 45% of men in middle management and senior management say they have a “”strong conviction”” about women as leaders McKinsey (2017).

There is also maternal perception, whereby organizations assume that women are less committed to their careers due to their child-care commitments. As a result, they are offered fewer leadership opportunities.

Selection criteria

A UK study (Sparrow and Rigg, 1993) and a study by Metcalfe (2010) provided evidence that different genders perceived leadership qualities differently. One of the concerns for lack of women in leadership and management positions is the identification of these leadership criteria, and from whom are the criteria for senior management positions elicited. If assessment for selection and promotion in management is done by panel of senior managers who are mostly males, there would still be an outcome of gender bias (Metcalfe, 2010).

Murrell and James (2001) confer that the most well-known illustrations of discrimination in the workplace are captured by the concept of the glass ceiling, which defines the invisible barrier that prevents many women and minorities from advancing into senior and executive management positions within organizations. One such barrier example is performance evaluation bias, whereby men tend to be evaluated more on their future potential, and women more on what they have achieved to date. Women also tend to be given less credit for their success than men, and to be criticized more for any failure.

Kiser (2015) revealed that if men hold the majority of business leadership positions, and they are the ones deciding on whom to hire and promote, it stands to reason that they are more likely to hire and promote other men given that they perceive men to be better business executives, and perceptions about women put them in a negative light, most likely affecting their opportunities for advancement. From Metcalfe’s (2010) research, it concludes that the if the selection criteria for leadership positions from groups of senior managers, all or most of whom are male, may well lead to gender-biased promotion process. And the findings provide evidence that including a significant or equal proportion of women in the selection criteria might lead to very different outcome. Which could then help in having more women in the leadership positions.

It emphasizes that diversity ensures that a board is able to perform its oversight function effectively, and in particular to avoid “groupthink,” which arises where directors all have similar backgrounds and experience and results in a lack of robust challenge in the decision-making process.

Implementation of Regulatory and Quotas

Many governments in Europe have put in place mandatory quotas for women on corporate

boards backed by legal sanctions. For example, Norway has in place quota requiring 40% women on boards. Others, like Australia, have taken a softer voluntary approach by recommending that companies set targets and/or disclose policy on gender diversity. Staley (2016) opine that the quota regulatory imposed on some European countries are working, while others like Merchant (2011) argues that quotas does not encourage meritocratic selection of qualified candidate, but propagate gender-oriented approach which is doing disservice to the ultimate goal of achieving better performance.

With the gender quota implemented for certain countries, this has incited some heated debates, as common misconception is that gender quotas lead to the selection of unqualified women or to selection based purely on gender, rather than qualifications. A study from the University of Michigan showed that company performance fell after quotas were imposed, in part because new board members lacked experience Merchant (2011).

To better understand the implications of quotas, Wiersema and Mors (2016) interviewed over 60 male and female directors in both the U.S. and Europe who had served on a total of over 300 publicly traded company boards, and their findings indicate that both men and women directors express fears that quotas will lead to less qualified directors. Some of their interviewee’s response were inclined towards the quotas being dumb, destructive and demeaning to people who are only on the board because they are in a specific category.

However, A study by Harvard University found that the imposition of quotas has resulted not only in greater gender diversity, but also in a more professional and formal approach to the selection of board members. In Norway, for instance, after the introduction of gender quotas, the entire process of recruiting board directors became more rigorous and professional. The nomination requirements were clarified, the responsibility of the board nomination committee was acknowledged and the focus on the composition of boards was improved. (AIIB Gender Diversity)

But, Dobbin et al (2015) argue that the effects of bureaucratic reforms vary depending on how they influence managerial motivation and whether they create labour market transparency. Reforms that engage managers in recruiting and training women and minorities for management posts promotes diversity, while those designed to control managerial bias lead to resistance and tend to backfire. The goal should not be just “more female board members,” but more female board members who are capable and credible. Based on the these two arguments, it is interesting to explore whether voluntary self-regulation approach at the corporate level may be as effective in the long run as the legislated quotas for female in management.

Because the implementation of regulatory and quotas is one of the solutions to help resolve the issue of having less women on management, and there are two sides of argument which is for and against this implementation. I would like to explore in this research, though implementing quotas does improve the diversity of females in management, but whether this solution is benefiting the organization.

Conclusion & Research Gap

This comprehensive review of a wide range of literatures has outlined the importance of gender diversity, and the lack of women in top management level. There is high consensus that lack of diversity in top management level is causing organizations loss in measurable and non-measurable metrics. But the consensus is clear, more diversity is required and it is beneficial to the organization. Factors that are causing this phenomena is also discussed in detail.

This literature review further explores into one solution that is implemented to resolve the diversity in top management issue, and found that there are two sides of debates for this solution. This forms the research gap that I would like to explore further to support that regulatory reforms are not truly solving the issue. In order to better counter diversity in the organization, this has to be done and practiced all through the organization, starting from bottom to mid-management. It is not to simply hire a women and put them in management just to meet the regulatory and quotas. As a U.S. female director described it in Wiersema and Mors (2016) article, the lack of board diversity is part of a general lack of rigor in succession planning – If you really give it some thought, then you would have a plan and gender diversity would be part of that plan.

Thus, there is a gap in the literature and it begs the question ‘How does modern strategy such as regulatory reforms help to achieve greater gender leadership balance which benefit the organization?’.

Proposed Research Method

Most studies done in this area, including one previously by Kiser (2015) on Gender in Management mainly used quantitative research method. Quantitative research gathers data in numerical form which can be used to construct tables of raw data. For example, a rating scale on a questionnaire would generate quantitative data as these produce either numerical data that can be put into categories. This limit the possible ways in which a research participant can react to a question. Findings are therefore likely to be context-bound and simply a reflection of the assumptions which the researcher brings to the investigation (McLeod, 2017)

This research study would undertake the qualitative research method, to answer our research question of whether modern strategy such as regulatory reforms help to achieve greater gender leadership balance which benefit the organization?

Qualitative Research is primarily exploratory research, and used to gain an understanding of underlying reasons, opinions, and motivations. Qualitative research will be used because it provides us with details about human behavior, emotion, and personality characteristics that quantitative studies cannot match (Madrigal and McClain, 2012). Some common methods include focus groups and individual interviews. The sample size is typically small, and respondents are selected to fulfil a given quota.

The purpose of a research interview is to explore the views and experiences of individuals on specific matters. Qualitative methods, such as interviews, are believed to provide a ‘deeper’ understanding of social phenomena than what could be obtained from quantitative methods. Interviews are most appropriate where detailed insights are required from individual participants. They are also particularly appropriate for exploring sensitive topics, where participants may not want to talk about such issues in a group environment (Gill et al, 2008)

Thus, for the purpose of this research study, I would be using qualitative research approach. A sample size of three female mid-management managers, and two male top management working adults will used as sample of study. The proposed data collection method will be through interview. The interview would be conducted face-to-face, through a set of questions – the General interview guide approach. This approach is intended to ensure that the same general areas of information are collected from each interviewee and to be focused, but still allows a degree of freedom and adaptability in getting the information from the interviewee.

The reason for using interview method is because through interviews, it can help better understand the interviewee’s opinion, and because interview questions would be open-ended, more in-depth information can be collected.”

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