It is generally accepted that having more women in senior positions is a good thing for companies. Diversity of talent generally equates to diversity of thought, and research has shown that those companies with women on board tend to outperform their competitors on a myriad of financial indicators. Brussels recently proposed a quota system to improve female representation in senior positions, but will this work? The UK has voted against such a measure, preferring “ambitious” voluntary targets, but Aaron Dhir, an associate professor at York University’s Osgoode Hall Law School, has put forward his extensive research which points to a number of clear benefits achieved through the quota approach.
Courtesy of the Harvard Buisness Review here’s a short summary of his main findings, based on an extensive interview-based study of Norwegian directors. Dhir wanted to ascertain the actual, not presumed, impact of a quota system (Norway has a mandatory quota system of 40% women on boards of companies), so he investigated a range of aspects from cultural dynamics to governance issues. Here are the highlights of his research, some of which may surprise you.
Highlights from Aaron Dhir’s research
- Contrary to popular opinion, women are not “stigmatized” for being “quota women”. According to Dhir, this is possibly due to the “critical mass” effect of a quota as opposed to “token representation”.
- Having more women on boards leads to enhanced dialogue. Dhir’s research reveals that women bring a “different set of perspectives, experiences, angles and viewpoints” to the table. In addition, women are more likely to ask more probing questions, leading to more robust dialogue.
- A more heterogeneous board results in better decision-making. However, Dhir notes that decision making was more prolonged due to the need to accommodate a range of perspectives, but highlights a recognition of the “value of dissent” as being a benefit. Furthermore, he notes that managers were forced to be better prepared for questions.
- Mixed boards result in a better approach to risk. Dhir’s observation echoes other research findings that boards with women and men are more effective at reinforcing accountability through audits and risk management.
- Women on boards lead to an improved quality of monitoring of management, including guidance. Dhir’s research corroborates the findings from previous research that boards which comprise women (at least three women) are more effective at identifying criteria to measure strategy and monitoring how strategy is being implemented.
- Mixed boards result in positive changes to the boardroom culture. Inevitably, with increased numbers of women on boards, the culture will change. Interestingly, Dhir observes that “the quota forced a move away from closed social groups and in-group favouritism” and reports more positive behaviour from men.
- Boards with female representation show more organised, "systematic" board work. Echoing findings in previous research, Dhir observes that boards with women are more “orderly” and “systematic”. Other research has revealed that heterogeneous boards are more effective at adopting written policies to guide board governance and conducting formal board director performance evaluations.
Although Professor Dhir’s research also uncovers challenges in the quota approach, his research shows that having more women on boards does change the culture and dynamics of boards for the better (a separate article in the HBR, quotes studies that show that at least three women are needed on a board for cultural change to occur). As the debate rages on regarding the best approaches to improve female representation in senior roles, Dhir’s extensive study, based on a quota system, gives helpful insights.
What are your thoughts on the quota approach to increasing female representation on boards, in the light of this research?