The image of a 'glass ceiling', which keeps the highest career levels just out of reach for women, has illustrated inequality on the labour market for a while now. A similar concept is the 'glass cliff': According to this theory, companies in major crises are more likely to appoint women to leading positions. Once they have reached a position above the 'glass ceiling', however, these women stand at the edge of a precipice for the survival of the companies and their careers. This is a hidden form of discrimination. Until now, the existence of this phenomenon has been highly disputed, but now researchers from Konstanz provide solid evidence for the 'glass cliff' and how it comes into play.
The 'glass cliff'
"It is a very impressive image", says Florian Kunze from the University of Konstanz who studies the role of leaders in organizations," and, of course, there are several prominent examples, in politics as well. Think of Theresa May, who was elected as prime minister in the United Kingdom after the Brexit vote of 2016, and who failed at the difficult task of negotiating her country's exit from the European Union. But you will find most examples of the 'glass cliff' promotion of top women into executive positions in the business world". There is still great disagreement among researchers about whether these constitute individual examples of a 'glass cliff' or a general phenomenon.
Kunze and his colleagues thus developed a new study on the basis of extensive real-world data: They examined more than 26,000 appointments of top executives to the managing boards of almost 4,000 US companies from 2000 to 2016. Dr Max Reinwald from LMU Munich, a long-time collaborator with Professor Kunze, explains the motivation: "We wanted to evaluate the actual level of discrimination against female executives: When they are appointed to top positions on a 'glass cliff', many women cannot establish themselves there, since the risk of failure during a crisis situation is, of course, many times higher".
Does the 'glass cliff' really exist?
In order to precisely assess how common 'glass cliffs' are, the researchers took a closer look at companies that were either just below or just above the definition of a company in crisis. "The threshold above which a company is threatened with insolvency is an easily calculable figure, and it is widely used in business circles. This does not affect other key figures such as company size", explains co-author Dr Johannes Zaia. "This allows us to isolate the effect of a company crisis on female appointments. And indeed: The likelihood of a woman being appointed to a top position is about 50 per cent higher in companies in crisis." So even though men still make up the vast majority of those appointed, women are much more likely to be considered for the top job during a crisis. The result strongly confirms the existence of the 'glass cliff'.
Appointment of women as a signal
The organizational researchers assumed that companies in crisis do not only look for certain leadership qualities in new top personnel. Above all, they are interested in sending a signal to their investors: "If a company in financial difficulties suddenly appoints a woman to a board position, it communicates to the financial market: 'We know we have to do something, and look, we are actually ready for big changes’. A clear sign of a new spirit, change, the ability to learn!" is how Johannes Zaia explains the theory.
Further findings confirm this signalling effect. The researchers found 'glass cliffs' only in troubled companies for which that effect is important: Companies that are the focus of investors' attention and where there have been no women on the board so far. Based on their data, the authors assume that the signalling effect of female appointments is the main reason for the 'glass cliff'. Florian Kunze explains: "It is not uncommon that companies use the appointment of women who have not been allowed to rise to management level before as a signal – and that is most certainly not the best mechanism to overcome the glass ceiling".
In order to sustainably eliminate the glass cliff, the authors recommend a heightened awareness of the reasons why and under what circumstances certain personnel decisions are made. Instead of negotiations behind closed doors, the filling of board positions should be preceded by a transparent and open search process. If it were thus recognizable that the most suitable leaders are selected in each case, this would also have a positive signal effect – without discrimination.
- New publication: Max Reinwald, Johannes Zaia, Florian Kunze (2022, forthcoming): Shine Bright Like a Diamond: When Signaling Creates Glass Cliffs for Female Executives. Journal of Management. Link: https://journals.sagepub.com/doi/full/10.1177/01492063211067518
- Survey data:26,156 appointments to executive positions in 3,883 US companies from 2000 to 2016 Information about changes in the leadership of the companies was taken from the BoardEx database; information about the financial situation of the companies was taken from the CompuStat North America database
- Professor Florian Kunze is professor of organizational studies at the Department of Politics and Public Administration and principal investigator in the Cluster of Excellence "The Politics of Inequality" of the University of Konstanz. His research work centres on digitalization and new forms of work, diversity and demographic change in public and private organizations and effective leadership behaviours
- Dr Max Reinwald is an assistant professor in the Institute for Leadership and Organization at LMU Munich. His research focusses on leadership, diversity and human resources.
- Until 2020, Johannes Zaia was an academic staff member in the corporate finance research team and a doctoral researcher in the Graduate School of Decision Sciences (GSDS) at the University of Konstanz. He currently works as a risk model developer. His research involves corporate governance, and the composition and payment of top management along with shareholder activism, in particular.