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Women Board Members + Strong Shareholder Protections = Higher Financial Performance

Kris Byron

The relationship between women on corporate Boards of Directors and company positive financial results is mixed, according to Syracuse University’s Kris Byron and Corinne Post of Lehigh University.

Corinne Post

They conducted a meta-analysis of 140 existing studies and found that women on corporate boards was related to positive financial outcomes in countries with stronger shareholder protections.

Richard Gentry

Companies with women on Boards and subject to rigorous shareholder protections reported higher accounting returns or firm profitability, noted University of Mississippi’s Richard Gentry and Wei Shen of Arizona State University.

Wei Shen

Women on Boards of Directors provide “diversity of thought and experience” and tolerate less financial risk.
As a result, they made stronger efforts to monitor the firms and to ensure strategy execution, leading to superior financial results,according to Byron and Post.

Kathleen Eisenhardt

The team drew on Agency Theory, proposed by Stanford’s Kathleen Eisenhardt, suggesting that Boards of Directors are “information systems” used by key stakeholders to verify organizational behavior.

Amy Hillman

Directors’ individual cognitive frames, derived from their diverse values and experiences, influence these systems, according to Arizona State’s Amy Hillman and Thomas Dalziel of University of Cincinnati.

However, diverse cognitive frames yield more favorable organizational outcomes only when teams “engage in mutual and collective interaction [and] share information, resources, and decisions.”

This means that women Board members affect group decision-making and financial performance when other Board members are willing to consider their diverse perspectives and experiences.

Thomas Dalziel

Strong shareholder protections provide “an information-processing stimulus that motivates (Boards) to leverage the decision-making resources (i.e., knowledge, experience and values) that women bring,” asserted Byron and Post.
They concluded that strong financial outcomes occur in companies with women on their Boards of Directors in countries with strong shareholder protections.

Byron and Post’s analysis illustrates that diverse perspectives provide benefit only when they are solicited and considered in a context of regulatory oversight.

-*When have you observed diverse perspectives associated with increased profitability and performance?

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Ethnic Diversity Reduces “Groupthink,” Economic “Bubbles”

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Despite progress in raising awareness about implicit bias and stereotypes, most people are less likely to trust recommendations and evaluations from people of different ethnic groups.

Sheen Levine

However, this bias may reduce the “herd mentality” that characterized price “bubbles” in U.S. housing and global financial markets, reported Columbia’s Sheen S. Levine, Evan P. Apfelbaum of MIT, Goethe University’s Mark Bernard, Texas A&M’s Valerie L. Bartelt, Edward J. Zajac of Northwestern, and University of Warwick’s David Stark.
They concluded that, “Diversity facilitates friction that enhances deliberation and upends conformity.”

Economic “bubbles” occur when the majority of traders, probably influenced by a type of “groupthink,” set inaccurate prices.
This leads to a mismatch between market prices and true asset values.

Irving Janis

Groupthink can occur when three conditions interact, according to Yale’s Irving Janis:

Group Cohesiveness
- “Deindividuation,” when group cohesiveness becomes more important than individual dissenting views,
Group Structure
- Homogeneity of group’s social backgrounds and ideology,
- Group insulation from feedback,
- Lack of impartial leadership,
- Lack of norms requiring systematic analysis and decision procedures,
Context
- Stressful external threats,
- Recent failures,
- Decision-making difficulties,
- Moral dilemmas.
  Scott E. Page

A wider range of viewpoints leads to less groupthink and more balanced decisions in a mathematical model developed by University of Michigan’s Scott E. Page and Lu Hong of Loyola University.

Diverse groups ran into fewer “dead ends” when they worked to develop solutions than homogenous groups comprised of individuals who tended to think similarly.

David A. Thomas

Likewise, additional experimental evidence by Georgetown’s David A Thomas and Robin J. Ely of Harvard confirmed that identity-diverse groups can outperform homogeneous groups.
Group errors depended on group member ability and member diversity, expressed in the formula:

Collective Accuracy = Average Accuracy + Diversity.

To test the impact of group diversity on market “bubbles,” Levine’s group constructed experimental markets in Singapore and Texas, USA, in which participants traded stocks to earn money.

Evan Apfelbaum

More than 175 volunteers with backgrounds in business or finance were randomly-assigned to groups of six ethnically-homogeneous or ethnically- diverse participants.

Traders knew the ethnic composition of their groups, but they couldn’t communicate with each other.
In addition, their “trades” of dividend-paying stock during 10 rounds were anonymous.

Homogeneous groups set inflated selling prices, yet traders in those groups still bought the stock, resulting in increasing stock prices.

Mark Bernard

In contrast, traders in diverse groups refused inflated selling prices, so the stock price fell to approximately the price in an “ideal” market with “rational” traders.

When traders and other decision-makers come from similar ethnic, social, and attitudinal backgrounds, they tend to place undue confidence in others’ opinions, and tend not to subject them to rigorous analysis.

Valerie Bartelt

As a result, they may be more likely to accept prices and deals that deviate from actual underlying values.
Levine’s group concluded that “homogeneity…imbues people with false confidence in the judgment of coethnics, discouraging them from scrutinizing behavior.”

How do you mitigate “groupthink” in organizational decision-making?

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Perceived Diversity = “Like Me”

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Christopher Bauman

Judgments of “diversity” are rarely completely objective:
People tend to rate a group as “diverse” when it includes members of the evaluator’s race, found University of California, Irvine’s Christopher W. Bauman, Sophie Trawalter of University of Virginia and UCLA’s Miguel M. Unzueta.

Sophie Trawalter

Almost 1900 volunteers from diverse racial groups rated headshots of a fictional company’s six-person management team for its “ethnically diversity”:

“Caucasian team” included six white headshots (100% white),
“Asian team” showed four white and two Asian people (mirroring the 66% majority of white people in the U.S.),
“Black team” featured four white and two black people (66% white),
“Asian + Black” team had four white, one black, and one Asian person (66% white).

Miguel Unzueta

Members of racial minority groups rated leadership groups as “more diverse” when they included members of their own racial group rather than members of other racial minority groups.

Participants rated groups as it “less racially diverse” when they did not include at least one member of their own racial group.
This “in-group representation effect” was stronger for African Americans than for Asian Americans.

In another study, more than 1,000 volunteers read news articles about the prevalence of prejudice, then provided ratings.
They showed no “in-group representation effect,” suggesting that reading about how another minority group suffers from prejudice reduced raters’ self-referential evaluation bias.

These results indicate that people’s expectations affect perceptions of diversity.
Priming awareness and empathy for similar experiences encountered by other groups reduced in-group biases.

Jim Sidanius

African Americans are often judged as experiencing:

Lower social status,

More negative stereotypes,

More discrimination, reported Harvard’s Jim Sidanius and Felicia Pratto of University of Connecticut.

Felicia Pratto

In contrast, Asian Americans tend to be attributed higher status so report less discrimination than other racial minority groups.

Andrea Romero

Despite this advantage, Asian Americans have a lower return on their investment in education than Whites, even though they achieve higher levels of education and income than other racial minority groups, reported University of Arizona’s Andrea Romero with Robert Roberts of University of Texas and another group led by UT colleague Myrtle P. Bell with David A. Harrison and Mary E. McLaughlin.

Myrtle P Bell

Higher levels of “diversity” have been linked to greater:

Valerie Purdie-Vaughns

These findings were confirmed in studies by Columbia’s Valerie Purdie-Vaughns and Ruth Ditlmann, Claude M. Steele of Stanford, University of British Columbia’s Paul G. Davies and Jennifer Randall Crosby of Williams College and separate work by UCLA’s Jaana Juvonen and Sandra Graham with University of California Davis’s Adrienne Nishina

Jaana Juvonen

Diversity is “in the eye of the beholder” because a team may appear more diverse to raters when the group’s composition aligns with the observers’ own characteristics.

-*How do you reduce personal in-group biases based on individual expectations and experiences?

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“Self-Packaging” as Personal Brand: Implicit Requirements for Personal Appearance?

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Napoleon Hill

Al Ries

During the Depression of the 1930s in the US, motivational writer Napoleon Hill laid the foundation for “personal positioning,” described nearly forty-five years later by marketing executives Al Ries and Jack Trout in Positioning: The Battle for Your Mind.

Tom Peters

By 1997, business writer Tom Peters introduced “personal branding” as self-packaging that communicates an individual’s accomplishments and characteristics, including appearance, as a “brand promise of value.”

Murray Newlands

Positioning, branding, and packaging are related but differentiated.
“Self-packaging is the shell of who you are” whereas “self-presentation (is)…that essence of what sets you apart from the crowd,“ according to blogger Murray Newlands.

The goal of personal branding is to communicate intrinsic, important, differentiating personal characteristics, exemplified in self-packaging details like attire, business cards, speaking style and more.

Daniel Lair

Academic researchers have brought some rigor to considering the intangibles of personal branding, presentation, and packaging.
One example is University of Michigan’s Daniel Lair with Katie Sullivan of University of Utah, and Kent State’s George Cheney academic analysis, Marketization and the Recasting of the Professional Self: The Rhetoric and Ethics of Personal Branding.

George Cheney

They refered to personal branding as “…a startlingly overt invitation to self-commodification” worthy of “careful and searching analysis…as (perhaps) an extreme form of a market-appropriate response.“
Examining complex rhetoric tactics used in personal branding, they identified how these approaches shape power relations by gender, age, race, and class.

Sylvia Ann Hewlett

Sylvia Ann Hewlett of the Center for Talent Innovation identified the potential biases facing women and members of minority groups in meeting unspoken, implicit requirements for executive presence embodied in personal appearance, a component of self-presentation.
These analyses suggest that personal packaging, branding, and marketing can have significant impact on professional opportunities and outcomes, despite challenges of tracing these effects.

-*What elements do you consider in “personal packaging” and the specific case of personal appearance?

-*How do you mitigate possible bias based on expectations for personal appearance?

Consequences of “Facades of Conformity”

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Patricia Hewlin

Employees, especially minority group members, adopt Façades of conformity (FOC) when they “act as if” they embrace an organization’s values to remain employed or to succeed in that organization, found Georgetown University’s Patricia Hewlin.

Facades of Conformity can lead to employees developing “rationalizations” that enable them to carry out distasteful or even assignments, found University of Alberta’s Flora Stormer and Kay Devine of Athabasca University.

Jerome Kerviel

This may explain Jerome Kerviel’s experience at Societe General.
He was branded as a “rogue trader,” though he seemed not to personally benefit from unauthorized trades.

He and others explained his motivation to please his managers and to earn a bonus based on his trades, in the context of his “outsider status” as someone who had not attended elite universities and was not considered a “star.”

-*In what organizational contexts have you observed “Facades of Conformity” and their consequences?

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Hiring by Cultural Matching: Potential for Bias

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Lauren Rivera

Northwestern’s Lauren Rivera found that job interviewing at elite professional services firms – and perhaps in other industries – is a process of skill sorting as well as cultural matching.

She noted that hiring interviewers who did not employ systematic measures of job-specific requirements tended to use themselves as a benchmark of qualification.
As a result, interviewees rated as “most qualified” tended to resemble their interviewers in educational and geographic backgrounds, self-presentation, hobbies, and more.

Katherine Phillips

This hiring practice leads to cultural homogeneity, which undermines innovation from diversity of thought and experience, demonstrated in research by Katherine Phillips, then of Northwestern, with Katie Liljenquist of Brigham Young University, and Margaret Neale at Stanford University.

Katie Liljenquist

Their laboratory study demonstrated the value of diverse groups in task performance and decision making: Teams with out-group newcomers correctly completed a task more frequently than teams joined by an in-group newcomer.
However members of the heterogenous group expressed lower confidence in their performance.

Margaret Neale

Newcomers can improve group performance by shifting alliances and group interaction, and bringing fresh information to problems.

eHarmony, the online dating service, is developing a job search and candidate matching product intended to reduce the rate of “job-hopping,” according to Grant Langston, VP of customer experience.

Grant Langston

This online offering is expected to match supervisors with potential employees based on 40 dimensions including personalities, work habits, hobbies, in addition to competency metrics, corresponding to Rivera’s observation that elite professional service firms “hired in a manner more closely resembling the choice of friends or romantic partners than how sociologists portraying employers selecting new workers.”

Though eHarmony’s candidate matching product may offer a satisfying match between candidate and supervisor, it may exclude qualified candidates who may bring a fresh perspective to the organization and work group.

-*How do you ensure cultural match and diversity of thought and experience in candidate selection?

Doonesbury Celebrates Women’s Contributions to Work Groups via Thought Diversity and Emotional Intelligence

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Doonesbury Celebrates Women’s Contributions to Work Groups via Thought Diversity and Emotional Intelligence

-* How have you seen women’s Emotional Intelligence applied in the workplace?

Kathryn Welds | Curated Research and Commentary

Creating value by connecting people and best practices from research findings, to deliver strategic results

Tag Archives: diversity

Women Board Members + Strong Shareholder Protections = Higher Financial Performance

Ethnic Diversity Reduces “Groupthink,” Economic “Bubbles”

“Self-Packaging” as Personal Brand: Implicit Requirements for Personal Appearance?

Consequences of “Facades of Conformity”

Hiring by Cultural Matching: Potential for Bias

Doonesbury Celebrates Women’s Contributions to Work Groups via Thought Diversity and Emotional Intelligence

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