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Women on the “Glass Cliff”


by Barbara Ruland, Communications Specialist

Research Shows Why Struggling Organizations Are Likely to Hire Female CEOs

Patricia Russo was appointed to Lucent Technologies in 2002. Mary Barra was hired to General Motors in 2014. Marissa Mayer was appointed CEO to Yahoo in 2012.

What do all of these women have in common? All were tapped to lead organizations that were seen as failing.

SIOP Member Yael Oelbaum wondered why women are asked to take over faltering businesses. She used a combination of financial and media analysis to search for answers.

The term “glass cliff” is a metaphor for the practice of placing women leaders in the precarious position at the top of troubled organizations, first used by English researchers in 2004.

“Some are calling the advancement of Theresa May to prime minister in Britain as the latest example,” Oelbaum said.

Researchers have previously advanced three explanations for the glass cliff effect. Working with advisor Kristen Shockley, Oelbaum tested those theories for her PhD dissertation at Baruch College and the Graduate Center, CUNY, and presented her research at the 2016 SIOP Conference in April.

In the first part of the study, Oelbaum attempted to replicate the previously found glass cliff effect by using financial data from 84 Fortune 500 companies.

She analyzed accounting-based measures (ROA, ROE, and ROIC-WACC) and a market-based measure (shareholder return) of performance for each of the companies, for the four years leading up to each CEO’s hiring. The financial analysis showed companies with slipping relative returns on shareholder earnings were most likely to tap women for CEO positions.

The accounting measures didn’t correlate with hiring patterns (i.e., hiring a male versus female) in a meaningful way. Oelbaum found that “the one measure that takes into account investor perception of future performance is the one that tracks with the hiring of a woman CEO.”
Next, Oelbaum addressed the question of why companies in dire straits would be more likely to hire female CEOs.

One explanation is that hiring a female CEO shows an organization is taking a new path, since a majority of CEOs are still men. This is known as the “women leaders as signals of change” explanation.

The two other explanations are “think crisis-think not male” (TCTNM) and “think crisis-think female” (TCTF). TCTNM theory posits that decision makers do not value women’s careers as much as men’s, and believe the consequences are not as great for women should failure occur. In the TCTF explanation, decision-makers believe that stereotypically feminine attributes make women uniquely suited to handle poorly performing organizations.

Oelbaum used media coverage to clarify the hiring rationale. She had coders analyze media reports about male and female Fortune 500 CEOs in office between 1994 and 2014, for comments reflecting one of those explanations or another.

The media results, when combined with the financial analysis, did not support the TCTF explanation at all, and only partially supported the TCTNM explanation. Conversely, the idea that corporate decision makers are hiring women CEOs to signal change received strong statistical support.

Is this good news for women aspiring to the CEO title? Oelbaum thinks it could be.

“Women can look for these opportunities to increase their visibility, credibility and mobility,” she explained.

But such opportunities also bear risks, and Oelbaum cautions women to carefully consider the potential negative career impacts.

There is always the danger of being pigeonholed, she said, and the risk of failure is high. When a woman is selected to lead change in a struggling organization, she must be given the appropriate resources for the initiative to succeed.

“Women should weigh whether there is support for the change effort,” Oelbaum said.

Board members of organizations considering a woman CEO should also take note of that question. Oelbaum said making the hire without providing appropriate support wastes talent and other resources. That could reflect poorly on the board.

“There’s an element of corporate responsibility,” she added. “If an organization is trying to increase diversity or create change by hiring a woman CEO, they should do it in a way that is actually helpful.”