Corporate Restructuring and Sex Differences in Managerial Promotion•

Women have made significant inroads into management in recent decades, yet they remain underrepresented in leadership positions in large firms. I assess the critical but little analyzed role that widespread corporate restructuring and gender equity considerations plays in this context. Drawing on gender equity and organizational change research, I build on social cognitive research and the opportunity structure for discrimination framework to develop contrasting predictions of corporate restructuring on sex differences in managerial promotion. I test these predictions using a unique data set comprising over twenty-five years of personnel records from a Fortune 500 manufacturing firm that restructured multiple times. Evidence is largely consistent with the opportunity structure for discrimination framework, and suggests that the firm responded to gender equity pressures to promote women. Women’s promotion rates were higher than men’s rates during restructuring relative to previous years, with the difference growing larger in higher job levels. However, few women transitioned into upper management positions in the firm because (1) restructuring slowed promotion rates for all managers, (2) women were placed into lower job levels than were men, and (3) women’s promotion advantages were often short-lived. Implications of taking an historical approach to assess effects of organizational dynamics on gender inequality are discussed. Corporate Restructuring and Sex Differences in Managerial Promotion 2 Women comprise half of the managerial workforce (Bureau of Labor Statistics 2005), yet hold only 15 percent of leadership positions in contemporary Fortune 500 firms (Catalyst 2006). The lack of women in senior management reflects in part sex differences in hiring (cf. Castilla 2005; Fernandez, Castilla, and Moore 2000; Gorman 2005), with women having a longer career path to the top than men. These patterns may also trace to women’s lower promotion rates (Lazear and Rosen 1990), although evidence in this regard is mixed and incomplete. Although scholars uncovered significant effects of sex bias on promotions in the 1960s and early 1970s (cf. Rosenbaum 1985), others found that women were promoted at a higher rate than men in the 1970s and early 1980s, particularly in upper-level jobs (Petersen and Saporta 2004; Spilerman and Petersen 1999). Moreover, few if any studies have explored longitudinal patterns of sex differences in promotion in firms in recent decades. Given historical promotion patterns, the lack of women in leadership roles in contemporary firms is surprising, especially in light of considerable gender equity pressures in recent decades (cf. Shaw, Champlin, Hartmann and Spalter-Roth 1993). I argue that a critical yet little explored reason for women’s slow advancement into senior management is the widespread and ongoing corporate restructuring process that began in the early 1980s (cf. Cappelli, Bassi, Katz, Knoke, Osterman, and Useem 1997). I maintain that restructuring—in the form of large-scale reductions in force (RIF) and reorganization of organizational systems—influenced women’s progress in two main ways. First, restructuring slowed upward mobility rates for all managers as RIF ended the growth process on which promotions in large bureaucratic firms depended (Stewman 1988), and as reorganizing firms reduced the use of promotions by expanding their use of bonus based rewards (Baker 1990).1 Since 1 Restructuring (also referred to as downsizing), may increase promotion rates if layoffs occur disproportionately in lower job levels of a pyramidal shaped organization as there will be fewer managers competing for the same positions at the top. I thank an anonymous reviewer for this comment. Although to my knowledge there is no empirical evidence on effects of restructuring on promotion, consistent with observed layoff patterns (e.g., with middle managers bearing the brunt of layoff), I assume that restructuring had a negative effect on promotion. Corporate Restructuring and Sex Differences in Managerial Promotion 3 most large firms restructured multiple times in recent decades (cf. Cascio, Young, and Morris 1997), women’s upward progress should have slowed substantially. Second, restructuring influenced careers of men and women differently, although the direction of this effect is uncertain in no small part due to a lack of theoretical predictions in this regard (Batt 2005). Moreover, the perceptions of the relation between organizational change and gender equity are sharply divided (McCall 2005): some scholars maintain that organizational change subordinated gender equity issues as firms focused primarily on managing change, whereas other scholars believe that organizational change enhanced women’s careers as it provided firms with opportunities to integrate gender equity policies. In effect, research on the effect of restructuring on gender equity often views the same change process in different ways, leaving open the question of whether restructuring was gender neutral or not. Those arguing that restructuring increased discrimination against women claim that RIF eliminated the middle management pathways into senior management—thereby trapping women in lower level jobs in which they were located (Acker 1992; Reskin and Padavic 1994). Moreover, they argue that restructuring increased the likelihood that bias entered into career decisions because it (1) increased competition for promotions, thereby magnifying pressures on managers to act on cognitive biases; (2) increased flexibility of employment systems, thereby reducing protection against bias; and (3) increased empowerment of managers, thereby escalating managers’ reliance on stereotypes in decision making (cf. Reskin 2000; Bielby 2000). By contrast, organizational change may have enhanced firm’s abilities to incorporate gender equity considerations. For instance, RIF increased job vacancies in senior management through early retirement policies—thereby allowing firms to promote a larger relative percentage of women than men. In addition, corporate reorganization removed prior constraints on upward mobility by replacing time in grade promotion criteria with performance based ones. Due to strong pressures for gender equity, and a commitment of firms and Corporate Restructuring and Sex Differences in Managerial Promotion 4 human resource managers to restrict discrimination against women and foster their movement into senior management (cf. Petersen and Saporta 2004; Spilerman and Petersen 1999), firms may have taken advantage of opportunities created by restructuring to increase women’s promotion rates relative to men’s, even as overall rates of upward mobility declined considerably. In this article, I assess effects of organizational change on gender equity. I do so by building on social cognitive research (cf. Bielby 2000; Reskin 2003) and the opportunity structure for discrimination framework (Petersen and Saporta 2004), to develop contrasting accounts of the effect of corporate restructuring on sex differences in managerial promotion. Because these contrasting accounts do not explicitly address effects of corporate restructuring on sex differences in promotion, I derive predictions based on assumptions of leading scholars in these traditions.2 Social-cognitive researchers note that although organizations can limit cognitive bias, as shown in lab settings, bias is much more likely in the workplace (cf. Reskin 2000; Bielby 2000), and higher still in restructuring firms. By contrast, the opportunity structure for discrimination framework argues that discrimination is limited by legal rules and human resource management oversight in restructuring firms, which are common in large firms that restructured. I analyze the contrasting predictions from the two accounts using a unique data set comprising twenty five years of personnel records for managers in a large U.S. manufacturing firm. Like other Fortune 500 firms, the firm engaged in multiple restructurings (cf. Cascio, Young and Morris 1997), implementing an incentive pay system and a large-scale RIF in the mid 1980s, transforming its performance management system in the late 1980s, and implementing a second large-scale RIF in the 2 Both accounts assume that firms discriminate against women, and that organizational factors influence whether ascribed characteristics influence career decisions. Also, both seek to move research beyond an assessment of the motivations for discrimination (i.e., why firms and individuals discriminate) to focus on understanding how firms discriminate (Reskin 2003) and where in employment relationships bias is most likely (Petersen and Saporta 2004). Corporate Restructuring and Sex Differences in Managerial Promotion 5 early 1990s. After presenting and discussing my findings, I explore benefits of taking an historical approach to study effects of organizational dynamics on gender inequality. SOCIAL-COGNITIVE RESEARCH Social cognitive research argues that individuals automatically (unconsciously) characterize others into in-groups and out-groups, leading to distortion in information processing and decision making (cf. Bielby 2000, Reskin 2000). As such, workers’ risk is “greater than suggested by conventional approaches to discrimination, which fail to recognize discrimination that originates in the nonconscious automatic cognitive processes to which all individuals are subject” (Reskin 2002: 219) For instance, cognitive biases can lead to a cumulative disadvantage for women as barriers to upward mobility become stronger in increasing hierarchical job levels (cf. Valian 1998), although such biases are limited by formalized personnel systems, managerial accountability, and transparency of managerial decisions (Reskin 2000, 2003). An important element of social cognitive research is that variability in “personnel practices and work arrangements plays a nontrivial role in workers’ exposure to discrimination” (Reskin 2002: 219)—as shown in research on employing organizations (Reskin and McBrier 2000) and in lab experiments (see Reskin 2000 for a review). As yet, research has not considered effects of temporal variability in personnel practices in the same firm on cognitive bias. Given the considerably changes in organization in recent decades, assessing dynamics of organizational systems within firms should provide important evidence on the validity of social cognitive accounts. In particular, if assumptions of social cognitive scholars hold, we would expect that corporate restructuring will reduce women’s rates of promotion relative to men as it removes limits on bias by magnifying the intensity of competitions for promotions, empowering managers, and increasing labor market flexibility. Corporate Restructuring and Sex Differences in Managerial Promotion 6 Increased competition for promotions enhances the likelihood that managers favor same-sex colleagues in career decisions (e.g., by placing women behind men in labor queues for desirable jobs (Reskin and Roos 1990)). Corporate restructuring should thus have a negative effect on women’s mobility, as it reduced rates of promotion—and increased competition for promotions—in three related ways. First, by reducing employment, RIF reduced promotion rates, as organizational demography indicates (cf. Stewman 1988). Second, by increasing firms’ reliance on market forces to govern employment relationships (cf. Sørensen 1994), RIF allowed firms to reduce promotion rates as resulting at-will employment contracts increased survivors’ fears of future dismissal (Jensen and Murphy 1990; Katz 1986). Third, by installing incentive pay schemes, firms could reduce their reliance on promotion based rewards (Baker 1990). Because restructuring also increased the workload and stress of managers in restructuring firms (cf. Shaw et al. 1993), we would also expect that the incidence of social cognitive bias on work decisions would increase. As Reskin (2000) notes, Tetlock and Lerner (1999) find that the benefits of accountability diminish under time pressure, and Bodenhausen, Macrae, and Garst (1998) find that information overload and time pressures increase the influence of stereotypes on judgment. In short, as RIF increased competition among surviving managers for a declining number of jobs, and increased work load and stress, bias in promotion decisions also increased. Social cognitive research also suggests that the transformation of performance management systems will increase the incidence of cognitive bias in the workplace as it subordinates gender equity considerations. As part of the performance management transformation process, firms restricted the use of objective measures influencing promotion such as seniority in a job, replacing them with more subjective performance appraisals. In doing so, they empowered managers considerably, with surveys indicating that managers in reorganized firms reported a lack of close supervision yet Corporate Restructuring and Sex Differences in Managerial Promotion 7 substantial control over how they accomplished their work (Osterman 1994). Limits on cognitive bias in decision making should therefore be lower in restructured firms, increasing the likelihood that managers act on stereotypes in promotion decisions. As Nelson and Bridges (1999) document, decentralization of decision making authority in Sears in the 1970s increased the likelihood that women were discriminated against in pay decisions. Finally, social cognitive research suggests that restructuring occurred in an environment where legal protection for women against discrimination was declining, thus increasing the likelihood that cognitive bias would shape career outcomes. For instance, federal courts limited plaintiff’s abilities to win disparate-impact lawsuits (Reskin 2003). In addition, throughout the 1990s, federal courts found few violators of the 1991 amendment to Title VII of the Civil Rights Act explicitly banning disparate-impact discrimination. Moreover, until 1992, private attorneys had few incentives to accept discrimination cases due to the difficulties in winning these suits. As such, pressures on personnel managers to limit bias may have declined considerably, resulting in lower rates of promotion for women relative to men. THE OPPORTUNITY STRUCTURE FOR DISCRIMINATION The opportunity structure for discrimination (OSFD) framework claims that three critical factors influence the presence or absence of discrimination against women: (1) the ease with which information on career decisions can be obtained; (2) the ambiguity of the assembled information; and (3) the availability of a plaintiff (Petersen and Saporta 2004). It also posits that firms seek to treat all employees equally once they are in the organizational “system,” due to internal oversight from personnel and legal departments and to external pressures from governmental legislation and regulatory bodies such as the EEOC (Petersen and Saporta 2004). For example, Spilerman and Corporate Restructuring and Sex Differences in Managerial Promotion 8 Petersen (1999: 224) note that managers in the insurance company they studied claimed that pressures for affirmative action were strong in the period they studied, and “had motivated corporate programs to increase the representation of women in policy-making positions.” In addition, Petersen and Saporta (2004) note that a manager in the firm they study maintained that the firm they had a strong commitment to gender equity, as did other large firms in the time period. The OSFD framework predicts that discrimination against women decreases over time as managers move up the corporate ladder, and as information on past promotion decisions increases. Although the promotion decision involves some subjectivity—and potential disagreement among assessors—the relative qualifications of employees who are promoted and who are passed over for promotion can be documented in an unambiguous fashion (Petersen and Saporta 2004: 861). Moreover, employees passed over for promotion represent a sizable pool of potential plaintiffs. There is a fair amount of evidence consistent with the OSFD framework. For instance, DiPrete (1989) analyzed data on employees in the federal civil service in the mid 1970s and found that although women were promoted at a lower rate than men in entry levels, in higher levels women had a net promotion advantage. These patterns were similar to those in Petersen and Saporta’s (2004) analysis of a large production and service firm for the period 1978 to 1986, and in Spilerman and Petersen’s (1999) study of a large insurance firm for the period 1971 to 1978. There is also a fair amount of evidence suggesting that restructuring enhanced firms’ abilities to enhance gender equity in career outcomes. For instance, pressures for gender equity were strong in recent decades, particularly with respect to desires to eradicate glass ceiling effects (cf. Shaw et al. 1993). In addition, increased competition in product markets reduces firm’s abilities to discriminate against women (cf. Black and Brainerd 2004), suggesting that discrimination is less likely in restructuring firms, particularly in large firms which have substantial personnel and legal staff tasked Corporate Restructuring and Sex Differences in Managerial Promotion 9 that can limit discrimination (cf. Kalev, Dobbin, and Kelly 2006). As a result, during restructuring, women should experience a net promotion advantage that is increasing in increasing job level, albeit with overall rates of mobility reduced during restructuring relative to prior periods. Research also suggests that organizational changes enhanced firms’ abilities to promote women at a higher rate than similarly situated men. For instance, RIF created opportunities for firms to promote women into senior management, as many upper level managers accepted early retirement buyouts. In addition, changes in performance management systems eliminated factors limiting women’s upward mobility, such as the seniority in a job requirement for promotion. Moreover, changes in performance management often increased managerial accountability, thereby restricting potential bias. That is, in transformed performance management systems, managers were often evaluated on their ability to conduct effective performance reviews, suggesting that some degree of control over pay decisions was retained by firms. In other words, organizational changes occurring during restructuring may have increased firms’ ability to monitor workplace decisions, even as organizations became more “flexible” (cf. Rubery 2005). SUMMARY Social cognitive research suggests that corporate restructuring created an environment conducive to sex discrimination, as increased competition for promotion exacerbated pressures for managers to favor in-group members in promotion decisions, and as increased labor market flexibility and empowerment allowed decision-makers to rely on their subjective assessment of performance. Given reduced enforcement of anti-discrimination legislation in the 1980s and 1990s, corporate restructuring should therefore reduce promotion rates for women considerably more than for similarly situated