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Competitiveness a reason for firms to up gender diversity at executive levels
New research from the US reveals that firms are driven to increase gender diversity in senior ranks by rival firms, mimicking them to maintain a competitive edge.
Jess Feyder
Over recent years, the demographic profile of employees has taken on increasing importance as law firms face mounting pressures to address workplace inequality.
The research article The rivalry-based theory of gender diversity was developed by Professor John Mawdsley, Lionel Paolella, and Rodolphe Durand by analysing law firms across the United States.
The study looked at how the identification of new business opportunities influences a firm’s uptake of female representation at senior levels. It asked the question: Are firms being proactive in recognising the competitive value of demographic diversity, and using it as a lever to gain advantages over rivals?
It was identified that diversity in leadership is seen as a valuable strategic opportunity for attracting customers and, therefore, is taken up by firms when it is being done by competitors.
The firms analysed in the study were seen to adjust the level of gender diversity in their executive rank when rival law firms did.
In the largest US corporate law firms, when rival law firms increase their gender diversity in the executive team by 10 per cent (on average), the focal law firm responded by increasing its number of female partners by 4.2 per cent (on average).
Essentially, findings showed that firms increased gender diversity for competitive reasons and that gender diversity improvements can be prompted by the drive to improve a firm’s market position.
“We posit that when buyers of a focal firm’s rivals increase their gender diversity at the executive level, the focal firm has a strategic interest to respond correspondingly and increase its female representation in their senior rank,” the authors stated.
The findings also identified why certain law firms reduced their effort to add female partners or showed weaker responsiveness to the uptake of diversity. Two possible reasons for this were established: one, that there was a lower probability of poaching clients from rival firms, and two, that the focal law firm is more racially diverse at senior levels.
This finding suggests that racial diversity is seen as a “credible alternative signal of pro-diversity values”, the authors stated, which may mean that gender diversity and racial diversity have a substitutive effect, rather complementary effect, in the perception of diversity in firms.
The study showed “that the degree of opportunity for luring rivals’ buyers helps explain why firms proactively increase their gender diversity”, the authors stated.
“We also reveal that firms’ behaviours that reflect societal-related institutional pressures are partially explained by rivalry effects,” they said.
“This research provides a competitive-based view of gender diversity that encourages managers to consider how and when gender diversity improvement can be a mechanism for improving their firms’ market position.”
