Want Women Leaders? Money Talks

Women make up about half of the labor force in the United States and Canada but are less represented in leadership positions. According to a 2024 report from McKinsey, women hold 37 percent of senior management positions and 29 percent of C-suite positions in the US. Around the globe, women fill 32 percent of leadership roles, according to the World Economic Forum, and 23 percent of corporate board positions, per data from Deloitte.

In response to this persistent underrepresentation, some companies have implemented diversity incentives that financially reward managers and executives who help female employees rise up the ranks. For example, both McDonald’s and American Express in 2021 tied 15 percent annual executive bonuses to increasing women’s representation in senior leadership roles.

In a series of experiments that probe potential ways to close the gender gap in leadership, Chicago Booth’s Erika Kirgios and Harvard’s Edward H. Chang find that women were more likely to aspire to managerial roles after learning their company was incentivizing executives to follow through on gender diversity goals.

Although their research ultimately suggests benefits of diversity incentives for women’s leadership aspirations, Kirgios and Chang note that both prior academic literature and common intuition might support two potential opposing outcomes of such incentives.

On the one hand, women may see diversity incentives as a sign of real support. If companies are willing to put their money where their mouth is, so to speak, it suggests they are genuinely dedicated to promoting women’s career success. Women may therefore anticipate receiving more concrete support (e.g., sponsorship, training, and guidance) from managers and, as a result, they may become more ambitious at work.

On the other hand, diversity incentives might suggest women can’t succeed at the company without special treatment. Whether women internalize this message or expect backlash from others as a result, diversity incentives might undermine their confidence, which could hurt their leadership aspirations. The question, then, is: Do incentives signal women will be supported, or do they make women feel undermined?

The researchers conducted a large-scale field experiment in December 2022 at a global telecommunications and engineering company that had set goals to increase female representation in managerial positions from 21 percent to 23 percent by 2024. It had also tied a portion of executives’ year-end bonuses to these goals. The experiment included more than 2,000 female employees—sales, finance, and service delivery workers—in the company’s European and Latin American offices.

As part of the company’s annual performance review process, the women were emailed a self-evaluation survey and were randomly assigned to one of three groups. Participants in a control group received an email that included a broad mention of the company’s commitment to diversity, and a second group received information about the gender-based diversity targets alone. The final group received information about both the targets and the incentives offered to executives.

As part of their annual self-evaluation, women were asked to respond to the statement: “I want to manage/continue managing others.” Because the researchers analyzed data only from the women who were currently nonmanagers, agreeing with this statement would suggest an intention to, at some point, ascend to a managerial role. Overall, 44 percent of women indicated such an interest. Reading about a corporate diversity commitment didn’t make women any more likely to say they wanted to be in management. Neither did learning about the diversity goal alone. But women who were also told about the diversity incentive were nearly 12 percent more likely than women in the other two conditions to express an interest in leadership.

Three online experiments supported these results. One involved a math game played for real financial stakes, and two others included an online survey. All reinforced the finding that women were more likely to aspire to managerial roles if they were aware of both corporate diversity goals and incentives supporting those goals, with the incentives being the critical ingredient. Men had no significant reaction to this information.

Rather than feeling devalued by organizations that implement diversity incentives, women believe they’ll be more supported, the researchers write. Companies that state diversity goals, and support them with real incentives for executives, can increase women’s own leadership ambitions.