Research looks at gender diversity and company performance


16-09-2020
Women and men working together

A study co-authored at Cambridge Judge Business School says men and women working together on top management teams – not “the-more-(women)-the-better” – boosts firm performance.

Why does gender diversity on top management teams (TMTs) improve company performance?

A new study co-authored at Cambridge Judge Business School rejects “the-more-(women)-the-better” approach to conclude instead that the complementary social roles played by men and women boost psychological safety and foster more balanced strategic decisions.

“We offer an alternative account to the prevalent female-focused theorisation of the positive strategic implications of TMT gender diversity,” says the study published in the Academy of Management Journal.

The study was co-authored by Professor Sucheta Nadkarni of Cambridge Judge Business School, who died in October 2019, and the author team said it “publishes this article in Sucheta’s memory.”

The study challenges the implicit assumption of prior research that the benefits of TMT gender diversity mostly reflect different cognitive perspectives in decision-making by men and women. It instead focuses on “the more pertinent, gender-specific differences in interpersonal proclivities between men and women” that boost strategic performance through psychological safety.

Specifically, the authors say that women’s proclivity toward “social sensitivity” helps TMT debate to occur in a more trusting and supportive environment, while men’s greater “voice-raising tendency” encourages team members to challenge each other.

“In sum, the equal infusion of men’s and women’s social-role proclivities in TMTs, enabled by gender diversity, will foster TMT psychological safety that characterises both mutual trust and support, and interpersonal risk-taking to openly speak up,” the study says. “Especially when women observe men voicing authentic and controversial thoughts without getting socially punished, they are more likely to feel comfortable raising their own voices in the TMT team.”

Such psychological safety, in turn, fosters beneficial strategic outcomes that reflect firms’ simultaneous push for both exploration and exploitation, or what is termed “ambidextrous strategic orientation”.

“This more balanced view of both genders departs from the premise of prior studies that the benefits of TMT gender diversity mainly result from women (‘the-more-(women)-the-better’).”

The study concludes further that the benefits from TMT gender diversity is further enhanced when companies have little slack in their use of uncommitted resources, which often occurs in challenging times.

“When gender-diverse TMTs confront the slack resource adversity, men tend to infuse greater voice-raising tendencies to facilitate members in more openly expressing their opinions, even provocative ones, to change the status quo,” the study says. “Similarly, trusting and supportive relations become more critical for TMT members to cope with adversity and crises together.”

The study is based on a survey of 373 members of 120 TMTs at small- and medium-sized high-tech enterprises in four Chinese cities – Beijing in the north, Guangzhou in the south, Shanghai in the east and Chengdu in the west. The firms involved in the survey had fewer than 500 employees and are more than six years old.

TMT psychological safety was measured on a seven-point scale based on whether and how strongly survey respondents agreed with such statements as “team members are able to bring up problems and tough issues” and “it is safe to take a risk on this team”.

The Academy of Management Journal study is entitled “Balancing the yin and yang: TMT gender diversity, psychological safety, and firm ambidextrous strategic orientation in Chinese high-tech SMEs”.

The study was co-authored by Shi Tang, a PhD student at Cambridge Judge Business School; the late Professor Sucheta Nadkarni of Cambridge Judge, who was Director of the School’s Wo+Men’s Leadership Centre; Liqun Wei of Hong Kong Baptist University; and Stephen X. Zhang of the University of Adelaide in Australia.

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Cambridge Judge Business School, University of Cambridge