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Inclusion at the top

Magazine

Greater inclusion at the top strengthens company performance

Published 16 June 2022 in Magazine • 14 min read

Research shows that appointing women and people of color to senior positions leads to greater innovation, higher profits and better governance. 

For more than a decade, we have examined the impact of representation among senior leaders — on the board and in the C-suite — on organizational performance. How does appointing white women as well as men and women of color to senior leadership roles change how organizations do business?  

We define performance expansively to include a range of outcomes that stakeholders care about: innovation, product strength, community relations, equity and diversity records, environmental sustainability and governance. 

Our findings are clear: more inclusive organizations are more innovative, more profitable, more equitable, more sustainable, better governed and enjoy stronger relationships with their communities and suppliers 

By contrast, firms that fail to prioritize inclusion and equity pay a high cost. They suffer from lower job satisfaction and worker engagement, along with higher rates of absenteeism and turnover. Not surprisingly, these firms also face higher risks of discrimination and harassment lawsuits. 

Representation matters in other ways, too. Our work shows that women’s presence on boards of directors increases leadership opportunities for other women. When women serve on the board, other women are more likely to be appointed CEO and enjoy longer tenures compared with female CEOs in companies without representation on the board.  

Our work on the glass cliff – the tendency to appoint women and people of color to leadership positions in organizations in crisis or at risk to fail – yields further evidence that representation matters.  

I do feel like I have to be better than everybody else. I have to look great, dress great. Some of these guys, my god. I have to look fabulous. That's part of looking a certain way, that's a pressure on women, not on men.

Our research finds that underrepresented CEOs are more likely than white men to experience the glass cliff. But women’s presence on the board shields female CEOs from these risks. When women serve on the board, female CEOs are more likely to be appointed to lead healthy firms and are given more time to demonstrate their leadership potential. 

For example, Carol M. Meyrowitz was appointed as CEO of TJX in January of 2007. When she was appointed, the firm had a board comprised of eleven members with four being women. She was appointed CEO to a solidly performing firm both in accounting and market measures (ROA, ROE, and shareholder return). During her tenure of nine years, she and TJX enjoyed great success.  

On the other hand, Carol Bartz was appointed CEO of Yahoo in 2009 (after being a very successful CEO of Autodesk). She was tasked with turning around the fledgling internet company. The board did not have a critical mass of women, and Ms Bartz did not enjoy the support of the board. She had proposed a strategic plan that would come to fruition in 2012. Abruptly, in September of 2011, the Chair of the Board fired her over the telephone. This was only 32 months into her tenure as CEO and well short of the realization of her strategic plan. 

Representation fosters more equitable and inclusive work environments, and enables companies to recruit, retain and promote talented leaders irrespective of gender, race or ethnicity.  

Carol Bartz was appointed CEO of Yahoo in 2009. She received a telephone call to tell her she was fired
Carol Bartz was appointed CEO of Yahoo in 2009. She received a telephone call to tell her she was fired

In a recent study, we analyzed the impact of women’s leadership on boards on the gender wage gap among senior executives. We examined the impact on the wage gap in companies where women served on the board, on the compensation committee and when women chaired the compensation committee. We wanted to understand where representation could have the most impact.  

Women’s presence on the board and on the compensation committee had little effect on the wage gap. But when women chaired the compensation committee – that is, when their influence over compensation decisions was greatest – the gender wage gap in executive compensation disappeared.  

Issues of representation is not limited to women. Our work on racial and ethnic diversity on corporate boards finds that firms with non-white directors are more competitive and better governed. And representation of racial and ethnic minority directors also enhances a company’s commitment to equity. Companies with influential minority directors are more likely than other companies to have better work-life policies and stronger supports for LGBTQ+ employees. These companies also do a better job recruiting a diverse workforce and supplier base.  

Of course, you still needed to know your job, but people need to be comfortable with you. When you are 6ft 8in living in a 5ft 9in world, it was important that I knew how to speak with people. It was important to make sure my tone was a certain way. I would make sure I sat down or be at their level. Little things that I adjusted to, because I am no longer the average height as in [my sport], you don’t want to intimidate these guys.

Why so few still? 

A recent survey of business leaders found that most believed that progress on inclusion would happen inevitably over time, without effort and intentionality. Furthermore, even when CEOs pledge to focus on diversity, it seems their intentions fall short of action. Despite the overwhelming advantages of prioritizing representation, progress on advancing women and people of color remains uneven and stalled.  

Why, despite billions invested annually in “diversity” trainings and consulting, have most large companies made minimal progress on representation among senior leadership? Why is the diversity business booming, but diversity is not?  

Our research on CEOs and other senior corporate leaders provides a few answers. We spent four years interviewing white women, and men and women of color, who have attained the highest, most visible leadership roles in their companies across a range of sectors and industries. Interviews explored their career trajectories, the challenges they faced and the support they received along the way.  

The interviews revealed a range of strategies – what we term performative contortions that these leaders used to navigate inclusion in their organizations.  

First, leaders described the impression management strategies that they used to minimize the scrutiny they received as outsiders. From strict attention to their hair, body, dress and language, white women along with men and women of color described the pressures they faced to assimilate with their white male colleagues. They felt the need to take steps to reduce the scrutiny, negative stereotyping and performance pressures they experienced as the only, or one of the only, members of their group at work. 

For example, one woman executive described the perfection she felt she needed to achieve in her appearance: “I do feel like I have to be better than everybody else. I have to look great, dress great. Some of these guys, my god. I have to look fabulous. That’s part of looking a certain way, that’s a pressure on women, not on men.” 

A former Black professional athlete recognized that his physical size might trigger the stereotype of Black male aggression for his largely white executive suite. In response, he would arrive early to all meetings so his interactions with others would be while he was seated. 

Basketball inclusion

"Of course, you still needed to know your job, but people need to be comfortable with you,” he said.

“When you are 6ft 8in (2.03 meters) living in a 5ft 9in (1.75m) world, it was important that I knew how to speak with people. It was important to make sure my tone was a certain way. I would make sure I sat down or be at their level. Little things that I adjusted to, because I am no longer the average height as in [my sport], you don’t want to intimidate these guys."

Respondents recognized that missteps could reinforce negative stereotypes about their intelligence or capability. One Black woman executive described herself as fanatical about typos because mistakes could reinforce assumptions that “she isn’t smart”. A first-generation Latina CEO described her tendency to proofread her speeches to remove particular words that emphasize her accent.  

“Certain words I won’t use because that’s going to come out really Spanish,” she said. “It’s always at the top of my head with regard to public speaking, corresponding in writing, something I need to pay close attention to. If you sound different, you’re less intelligent, educated.” 

Second, senior leaders described cultural strategies aimed at adapting to and assimilating with dominant cultural practices, from elite cultural practices (such as the opera) to leisure activities (for example, golf). Each respondent described ongoing efforts – despite their seniority – to minimize and mask cultural differences to overcome bias. One Black woman executive, decades into a hugely successful career, noted, “I am still learning how to navigate things.” 

Many respondents chose silence as a form of cultural assimilation, choosing to remain silent about themselves and their identities to avoid backlash and exclusion. Respondents described remaining silent in the face of racist and sexist comments and jokes, staying silent about leisure activities that didn’t conform to elite tastes or avoiding being “out” at work.  

Finally, respondents described their meticulous attention to navigating interactions at work with the goal of achieving insider status in a career where they were marked by difference. Many avoided public engagement with identity-based affinity groups, despite the potential of these groups to provide needed support and solidarity.  

Others described ongoing efforts to achieve legitimacy by proxy – nurturing relationships with high status white men to cultivate insider status. One white woman executive even went so far as to give her white male boss credit for her work in order to foster a relationship of trust and support that could advance her career.  

“I was fine with him being the front person,” she said. "It became clear [over time] that I was whispering in his ear. And it became clear I was doing a lot of what saved the project.”

Even decades into a successful career, respondents still described enormous effort – conscious, deliberate, intentional work – to obtain and sustain their membership in their organizations. These pressures increased rather than decreased with their career success and mobility. The higher they climbed, the bigger the spotlight became, the more pressure they faced to contort themselves in ways that minimized their difference from the majority.  

These cultural performances were not the only cost they had to pay in order to achieve membership in their careers. Many of these respondents had experienced glass cliff appointments: promoted to leadership roles following a scandal, or in the midst of bankruptcy or following a major recall. They were hired to signal that their companies were heading in a bold new direction or to clean up the mess their predecessor had left behind.  

They were clearly well-prepared to lead through crisis because they had been doing so almost from the start of their careers. These leaders told us that from early on, they recognized that they were highly visible due to their gender or race/ethnicity. As tokens and outsiders, they carried a heavy burden of doubt with regard to their competence, work commitment and leadership potential and they recognized this burden could prevent them from attaining senior leadership positions. 

In order to overcome this bias, these future leaders had to strategically negotiate their careers in ways that minimized their visibility as outsiders and emphasized their competence as leaders. In other words, they had to be exceptional. And they had to take on the most high-risk jobs in order to prove their competence as leaders. 

Our respondents described long careers characterized by risk: volunteering for high-risk jobs nobody wanted, moving laterally to clean up a scandal, moving into a leadership role in a branch of the company that was at risk of failing. They described these assignments as “a mess”, “a powder keg”, a “hideous environment”, a job “other people would have run from”. 

The strategic pursuit of risk – what we term a “risk tax” – came with a heavy price. Respondents understood that a single misstep could derail their careers by reinforcing negative stereotypes about their competence and ability. One Black woman executive called this the “one mistake rule”, describing her view that a single mistake could erase years of competent leadership in the minds of her peers and colleagues.  

Another male Black CEO described this perilous path like this: “You have to have a flawless run. The African Americans who make it have had many opportunities to derail. They did not derail. [Otherwise] that person has the opportunity to decide between you and the other person, [and] they’ll take the other person.” 

Despite these risks, these leaders accepted the price of conditional acceptance and built reputations around crisis management. They weren’t just good leaders; they were leaders who could lead their companies through crisis, and this skill set created opportunities for them that would not otherwise have been available.  

This risk burden is only one of many challenges women leaders and leaders of color must overcome. Previous research found that these CEOs received less support, had shorter tenures, were more likely to be forced out and more likely to be targeted by activist investors. Perhaps not surprisingly, these leaders had lower job satisfaction, higher rates of depression and were at higher risk of underperformance and disengagement.  

These findings, combined with our research on the career trajectories of CEOs, suggest that bias in organizations leads to a significant loss of highly successful leadership capital. Those who survive this high-risk path to attain top leadership roles do so at great personal cost and professional risk. Though they have a prized skill set that sets them apart from their peers, they are often dissatisfied and discouraged that they are fighting the same battles today that they were fighting a decade or more ago.  

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Carol M. Meyrowitz enjoyed great success during her tenure as CEO of the retailer TJX
Carol M. Meyrowitz enjoyed great success during her tenure as CEO of the retailer TJX

What makes change possible? 

Inclusive practices improve firm performance because they reduce the barriers for talented individuals to rise up the corporate ladder. Without an intentional focus on removing these barriers, talented people fall out of the recruitment, retention and advancement pipelines.  

Unfortunately, most diversity efforts fail. At best, many common diversity practices benefit a handful of mostly white women and leave a lot of talented individuals behind. The problem with many conventional approaches to diversity is that they assume the problem of bias can be addressed by “fixing” individuals. There are two common versions of this approach.  

One version is what we call the “bad apple” version of diversity management. If we can only train the bias out of a few bad apples in our organization, we can solve the problem. Yet mandatory diversity training – particularly when punitive or remedial – often reinforces the same biases they aim to fix.  

The second common approach to diversity management is even more pernicious and damaging. This approach aims to fix women themselves. The “Lean In” approach assumes that if only women were more (or less) assertive, competitive, nice, warm, aggressive, then the bias they experienced would disappear. This approach blames individuals for the bias they experience and places the hard work of fixing bias on the shoulders of the targets of bias themselves. 

Bias in organizations is not about individuals, it is about practices and priorities. What is needed is a system-focused, not an individual, approach to removing bias and advancing inclusion and equity.  

The first step in implementing organizational change is leader endorsement. Leaders must communicate clearly and repeatedly that reducing bias is a strategic imperative and leaders’ words must be backed up with action. As a recent study suggests, CEOs “talk the talk” on inclusivity, yet many do not “walk the walk”. Steve Reinemund, CEO of PepsiCo from 2001-2006, aligned actions with words to support diversity and inclusion by changing the culture within PepsiCo. To show the importance he placed on diversity within his organization, he refused a performance bonus because the company had not met its diversity targets. Once he turned down the money from the board, all employees knew his DEI goals were a top priority. 

Effective leaders must be transparent about their goals and establish clear timelines for achieving outcomes. They must hold organizational stakeholders — across the organizational structure — accountable for making progress toward those goals. Good leaders evaluate progress and endorse ongoing efforts. 

Second, there is good evidence that bias taskforces that include stakeholders from across the organization help companies to make progress. The purpose of the taskforce is to evaluate policies and practices – as well as to measure their outcomes and impacts – and make recommendations for change. This process must be data-driven and focused on representation in recruitment, retention and advancement over time.  

Finally, companies need to be willing to implement best practices throughout the organization. This includes opening lines of communication and collaboration across units to discuss progress, challenges, successes and failures. Collective evaluation of progress toward goals – in a way that is transparent but not punitive – can encourage collaboration and the spreading of good ideas. Collaboration and accountability across units can limit segregating diversity efforts in low status, low visibility areas.  

If inclusion is a strategic imperative, then it cannot be treated like a side hustle. Competing in today’s rapidly changing and increasingly global markets requires effective leadership. If there is not yet urgency around equity and inclusion in your company, there should be. Inclusion is synonymous with talent, dynamism, innovation, and performance. Representation is a business imperative; companies should treat it that way. 

4 ways to increase representation

Moving beyond token representation — “one and done” and “twokenism” — is vital. Tokenism increases performance pressures, scrutiny and surveillance, and the burden of doubt. Individuals in highly visible token leadership roles cannot do their best work – and we need their best work to solve the challenges of today’s organizations. 

Transparency is a powerful tool for disrupting bias. Without it, evaluators tend to apply variable criteria to candidates. Be transparent about the criteria for hiring, compensation and promotion and apply the same criteria to every candidate. 

All individuals responsible for evaluating others must be accountable for the methods and criteria they use. Anyone conducting evaluations for hiring, performance, work assignments, and promotions must have clear, transparent, objective criteria and must rely on those and only those – criteria for making decisions. 

Limit evaluations to objective, standardized and formalized processes and practices. Only objective indicators of talent, skill and experience should be considered when making recommendations for hiring, compensation, advancement, and job assignment. 

Authors

Christy Glass

Professor of Sociology at Utah State University

Christy Glass is Professor of Sociology at Utah State University. Her research focuses on workplace justice and the ways gender and race shape access to and mobility in work organizations.

Alicia Ingersoll

Assistant Professor of Supply Chain Management at the Goddard School of Business & Economics and Weber State University

Alicia Ingersoll is Assistant Professor of Supply Chain Management at the Goddard School of Business & Economics and Weber State University. Her research examines the links between organizational performance, corporate practice, leader attributes, and sustainability initiatives.

Alison Cook

Professor of Management at the Jon M. Huntsman School of Business at Utah State University

Alison Cook is Professor of Management at the Jon M. Huntsman School of Business at Utah State University. Her research examines diversity in the workplace, focusing on factors that facilitate or hinder promotion opportunities for women and racial/ethnic minorities.

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