Exploring the use of quotas for women in leadership roles

New research has found many industries have recommended the use of quotas to increase women in leadership roles, although their use also evokes negative reaction. Flickr

In Australia and many other countries, increases in the number of women in senior leadership roles within most corporations have been small and slow to occur. The underemployment and under-utilisation of women has been costly for national economies and organisations alike.

However, even where the benefits of increased gender diversity are recognised, existing policies and practices seem to have peaked in their impact on the number of women employed in traditionally male roles, including senior leadership.

Recent changes to the ASX reporting requirements requiring listed companies to report their progress against voluntary gender diversity targets has ignited considerable debate around whether significant further increases in gender diversity are best achieved by means of gender diversity targets, or mandated quotas.

In response to this question, the Centre for Ethical Leadership at Melbourne Business School, in partnership with industry, designed the Gender Equality Project to look at innovative ways to produce a significant and sustainable improvement in the gender balance in leadership roles of participating organisations. A review of targets and quota practices was the first research paper completed, with work on resilience, mainstreaming flexibility and unconscious bias currently in train.

Our systematic review of target and quota practices found that many industries, public sector, regulatory, and international organisations have recommended the establishment of quotas or targets for the number of female leaders to be recruited and promoted into leadership roles.

The use of quotas for parliamentary representation is widespread across the world, but few companies employ quotas. The use of targets is more widespread amongst companies but the lack of systematic reporting makes it hard to determine just how widespread they are.

Targets and quotas do make a difference to the numbers of women in targeted senior leadership roles, including board and senior management roles. In Norway, following the legislation of quotas, women’s representation on boards rose from 7% in 2003 to 40.3% in 2010. In Australia, following the ASX requirement for the reporting of voluntary targets and actual numbers of women by level, women comprised 27% of all new board appointments in 2010, up from just 5% in the previous year.

However, the evidence that quotas promote the trickle-down effects of increased gender diversity in lower levels of organisations is not borne out by the Norwegian experience.

Women’s representation on executive committees remains at 12%, only 2% of board chairs are held by women, and only 5% of CEOs are women in Norway. Interestingly, the number of women directors in Norway increased less than the number of directorships held by each woman – doubling on the introduction of the legislation; the so-called “golden skirt” effect.

Additionally, those few studies that have examined the company performance effects of the quota legislation have reported mixed results. The more perceptually-based stock price metric appeared to be slightly negatively impacted by greater numbers of women on boards, while evidence around the more stable company performance/profitability metric suggests no impact, or at best minor positive impacts by the addition of more women to company boards.

Although there is little systematic research on the exact impacts of targets and quotas on individuals and work cultures, it is clear that their use evokes negative reactions.

A large body of studies examining the effect of affirmative action policies in the USA since the 1980s have found that women who are appointed under the policies are seen as less qualified, less competent, and less legitimate in their role by both men and women, including the women who are themselves appointed under affirmative action.

This is a non-trivial issue, given that a key reason for the inability of targets to produce a significant increase in gender diversity is arguably due to the extent to which managers in organisations accept them and are committed to their implementation.

Surprisingly, considering the widely held view that targets and quotas are anti-meritocratic, there is no research evidence that women appointed under these measures are in fact less competent or perform less effectively than the men they may have replaced, or women appointed under processes without gender targets or quotas. Contravention of the merit principle remains, however, the most often cited, and impassioned objection against mandated quotas.

Given the implications of quotas in terms of corporate regulation, their cost, the negative cultural and psychological implications, and the ambiguous evidence of their benefits, we do not believe the case for mandated quotas is sufficiently compelling. Regarding the view that voluntary targets have not yielded sufficient progress, we agree. However, we suggest that there are a number of ways in which targets might be better designed and implemented that would greatly improve their effectiveness.

There has long been widespread research evidence that specific, measurable and challenging targets, with feedback on their achievement, are the most effective and robust intervention for changing behaviour and improving performance. Targets are already heavily utilised and highly effective in other areas of managerial work. Most managers are assigned targets for for a variety of tasks such as sales, productivity and budgets, for which they are held accountable, and for which their achievement impacts on rewards, such as short and long term incentives and ultimately promotion opportunities.

We argue that assigned gender targets for which managers are held accountable and, where appropriate, rewarded for achievement, would be similarly effective for diversity.

Effectiveness of targets would be further enabled if accompanied by support strategies to remove constraints on the acceptance of gender targets due to mindsets, culture, systems, and processes. Support in the development of innovative strategies for achieving gender targets will also assist in gaining their acceptance. Internal factors coupled with external drivers such as mandatory reporting requirements of women at all levels of organisations would provide greater transparency and lead to more pressure on companies to address gender equality.

It is clear that the adoption of quotas for women in leadership is not on the immediate horizon in Australia. This makes the systematic investigation of the ways in which targets can be given teeth, supported by reporting and accountability processes, and the cultural and attitudinal impact managed all the more necessary.

Jennifer Whelan and Robert Wood are the authors of Targets & Quotas for Women in Leadership, launched this week.

Read the news story here.