Women are more likely to be promoted to CEO at companies organized into separate business units than at companies that operate as a single entity, according to research from Ulya Tsolmon of the University of Massachusetts Amherst and Tingyu Du of California Polytechnic State University in San Luis Obispo.
Despite women’s gains in corporate leadership through the twenty-first century, they remain less than 10 percent of CEOs of S&P 500 companies. According to the new study, a firm’s structural organization and accounting practices could be contributing to that gap.
“As recently as 2015, there were more men named John running major U.S. companies than there were women,” said Dr. Tsolmon, adding that the gender gap is “not just any disparity. It’s a huge disparity.”
Using 25 years of data (1993 to 2017) from the LexisNexis Directory of Corporate Affiliations regarding 616,754 managers at 49,135 U.S. companies, the authors found women in multi-unit firms (i.e. those with separate business divisions, each with their own revenues, costs, and bottom line) had a 37 percent higher probability of internal promotion to CEO than women in stand-alone firms. For men, internal promotion to CEO was slightly less likely at multi-unit companies.
“We argue that divisionalized firms can reduce the gender gap in internal CEO promotion by generating more individually attributable performance information about senior managers,” the authors write. “Consistent with this argument, we find that women managers are more likely to be promoted to CEO in divisionalized firms than in non-divisionalized firms. Prior [accountable profit-and-loss] experience narrows the gender gap in CEO promotion within divisionalized firms. These patterns suggest that divisionalized structures matter not simply because they create more managerial roles, but because they change the informational basis on which CEO candidates are evaluated.”
They continue, “By making managerial performance attributable, comparable, and visible, firm structure can influence who advances to the highest levels of leadership. For women managers, divisionalized structures may provide a clearer path to CEO promotion because they make accomplishments harder to overlook and easier to evaluate.”
Dr. Tsolmon is an associate professor of strategy in the Isenberg School of Management at the University of Massachusetts Amherst. Her research sits at the intersection of corporate strategy and the managerial labor market, examining how organizations shape, allocate, and retain managerial talent and how these choices become sources of competitive advantage. Dr. Tsolmon holds a Ph.D. in business administration and strategy from Duke University in Durham, North Carolina.
Dr. Du is an assistant professor of strategic management in the Orfalea College of Business at California Polytechnic State University. Her research explores how managerial labor markets and organizational structure shape firms’ strategies and outcomes. Dr. Du is a graduate of Washington University in St. Louis, where she majored in mathematics and economics. She earned her Ph.D. in management strategy from the University of California, Los Angeles.