Organizations gain from “moderate” gender diversity 

Diversity can be a polarizing topic, but that doesn’t mean it shouldn’t be studied. 

“It is critical that the claims made about [diversity] are steeped in data-based conclusions,” said Dr. Patrick F. McKay, a professor in the Department of Management at ECU. “Importantly, research is necessary to clarify the facts about diversity – good or bad – as a means of balancing out the seemingly polarized views of those who are pro-diversity and anti-diversity.” 

Recently, McKay and several colleagues from across the country published an article in the Journal of Organizational Behavior. They looked into whether there is a “sweet spot” for gender diversity when it comes to financial performance in organizations. McKay said that previous research showed mixed results of positive, negative and nothing of consequence when it came to the effects of gender diversity on organizational financial performance. They wanted to get clarity on the subject, wondering if the sweet spot for financial performance was with moderate gender diversity. It turned out they were correct. 

“Moderate gender diversity is the ‘sweet spot’ where gender diversity has the most positive impact on company financial performance,” McKay said.   

Moderate gender diversity can be ambiguous. McKay said a good way to think about it is with a mix of men and women, but that the representation slightly favors men or women proportionally. The researchers said low and high levels of gender diversity lead to lower earnings, while moderate levels “optimized company earnings.”  This represents the S-curve relationship between gender diversity and company financial performance described in the article. 

The researchers also wanted to figure out if an organization’s gender equality management would impact the gender diversity financial performance relationship. They said, again, that gender diversity is most beneficial to the business’s financial performance at moderate levels, and the relationship is weakened by ineffective gender equality management.  

“The positive effects of moderate gender diversity on company financial performance were further strengthened for firms with more versus less effective gender equality management,” McKay said. 

McKay said that this research benefits organizations that may be trying to figure out how to best manage gender diversity in their workforce. He said the study identified likely gender dynamics that can emerge at varying levels of gender diversity. Knowing this can help leaders anticipate and respond to those dynamics to enhance organizational effectiveness. 

“Managers and human resource management personnel can take actions based on research by establishing policies and workplace norms that facilitate the effective management of a gender-diverse workforce,” McKay said. 

This research can also apply to anywhere where teams work together – student-based groups in the classroom, assembly-line workers, corporate boards and academic departments. McKay said companies with moderate gender diversity can gain a competitive advantage – especially if managed effectively. 

McKay said their research was conducted through three studies – a mid-sized U.S. retailer (Study 1), a large U.S. retailer (Study 2) and a database of Fortune 500 companies (Study 3). Along with McKay, Orlando C. Richard, Ph.D., University of Massachusetts-Amherst; Pamela Gu, Ph.D., University of Wisconsin-Whitewater; Derek R. Avery, Ph.D., University of Houston; Maria del Carmen Triana, Ph.D., Vanderbilt University; and Marcus M. Stewart, Ph.D., Bentley University, contributed to the article.