The Right Mix? Gender Diversity in Top Management Teams and Financial Performance

• Author: Anders R. Villadsen,Niels Opstrup
• Date: 01 March 2015
• DOI: http://doi.org/10.1111/puar.12310
• Published date: 01 March 2015

Niels Opstrup is assistant professor in

the Department of Political Science and

Public Management at the University of

Southern Denmark. His research focuses

on the management and organization of

public organizations and, specif‌i cally, on the

governance of universities and management

of academics. He has also investigated

developments in the backgrounds and

career paths of top civil servants.

E-mail: nop@sam.sdu.dk

Anders R. Villadsen is associ-

ate professor at Aarhus University,

Denmark. His research interests include

public management and diversity in

public organizations. He has published

in journals such as Journal of Public

Administrative Research and Theory,

Public Administrative Review, and

International Public Management

Journal.

E-mail: avilladsen@badm.au.dk

The Right Mix? Gender Diversity in Top Management Teams and Financial Performance 291

Public Administration Review,

Vol. 75, Iss. 2, pp. 291–301. © 2014 by

The American Society for Public Administration.

DOI: 10.1111/puar.12310.

Niels Opstrup

University of Southern Denmark, Denmark

Anders R. Villadsen

Aarhus University, Denmark

Abstract: Recent research has illustrated that demographic diversity inf‌l uences the outcomes of public sector organiza-

tions. Most studies have focused on workforce diversity; by comparison, little is known about how managerial diversity

af‌f ects organizational outcomes.  is article focuses on gender diversity in the top management teams of public organi-

zations and its relationship to f‌i nancial performance.  eory suggests that management diversity can be a positive asset

for organizations, allowing for the use of more diverse knowledge and human skill sets. Results of this study, however,

suggest that organizations may only be able to leverage these advantages if they have a supporting management

structure. In a longitudinal study of top management teams in Danish municipalities, the authors f‌i nd that gender

diversity in top management teams is associated with higher f‌i nancial performance, but only in municipalities with a

management structure that supports cross-functional team work.  ese results are interpreted in light of existing theory,

and implications are suggested.

Practitioner Points

• Little is known about how the composition of the top management team in public organizations matters for

organizational outcomes.

• Greater gender diversity has the potential to lead to superior organizational outcomes but does not automati-

cally do so.

• To reap the benef‌i ts of diverse top management teams, the organizational structure must facilitate behavioral

integration between members of the top management team.

• Gender diversity in the top management team is related to better f‌i nancial outcomes when organizational

structures promote integration and discretion of the top management team.

• Gender diversity in top management positions has no ef‌f ect in traditional hierarchical organizations.

contracting (Hefetz and Warner 2004, 2012),

and performance-information use (Moynihan and

Ingraham 2004; Moynihan and Pandey 2010).  is

substantial line of research has provided valuable

insights about how managers can af‌f ect the outcomes

of public organizations. Much less research has been

devoted to the composition of management teams and

the dynamics among individuals occupying manage-

rial roles in organizations.  is is a critical gap in our

understanding of public management. Top manage-

ment is composed of individuals who apply their

knowledge, perspectives, and worldviews to contribute

to decision making as well as the overall direction of

organizations (Hambrick, Cho, and Chen 1996).

In this article, we explore how gender diversity in

top management teams (TMTs) af‌f ects f‌i nancial

performance in public organizations. Research

focusing on private f‌i rms indicates that managerial

gender diversity is related to positive performance

outcomes (Auh and Menguc 2006; Carter, Simkins,

 e Right Mix? Gender Diversity in Top Management

Teams and Financial Performance

Recent research has explored how characteris-

tics such as tenure (Juenke 2005), race (Pitts

2005), experience (Villadsen 2012), and

gender (Meier, O’Toole Jr, and Goerdel 2006) inf‌l u-

ence the actions of public managers.  is research,

however, generally fails to allow for the fact that

management is rarely an individual endeavor; while a

single person may top the hierarchy and serve as the

public face of an organization, actual top management

is often better described as a team ef‌f ort (Finkelstein

and Hambrick 1990). In this article, we move the

focus from the individual manager to the top manage-

ment team and examine how its composition af‌f ects

organizational outcomes.

A considerable amount of research has investigated

how various management practices af‌f ect public

organizations.  ese practices include leadership

(Fernandez 2005; Van Wart 2013), managerial net-

working (Meier and O’Toole 2003), organizational

strategies (Andrews, Boyne, and Walker 2006),