Originally posted on The Horizons Tracker.
Investment in diversity and inclusion can often be dismissed as something that’s a nice to have but which doesn’t really positively influence the profitability of a company. Research1 from Columbia Business School decries that notion, and indeed finds that investing in inclusiveness boosts the stock price of companies that do so.
The study finds that the combination of improved employee retention and diversity results in improved corporate performance, but they also find that encouraging employees to speak up on earnings call can also be hugely powerful.
This is because those kinds of managers will also encourage employee voice and other positive things in other aspects of their work, which in turn boosts performance.
There are various traditional measures of organizational inclusivity, but the researchers use the ability to speak up on quarterly earnings calls as a measure of the ability and willingness for managers to support others in speaking up as their metric of choice.
They find that when managers do this, they are not only twice as likely to be promoted to the CEO role but are also more likely to drive the stock market valuation of the company.
“When corporations consider how to improve inclusivity, it’s time to recognize that doing the little things well can go a long way,” the researchers say. “In every business, the chief executive sets the tone. Research shows that when it comes to earnings calls, a manager’s leadership style is on display – providing important insight into collaboration, team management, and workplace culture. This new research advances our understanding of corporate leadership, identifying how interaction with teammates can impact a range of outcomes, from company profitability to career advancement.”
The researchers tracked over 34,000 earnings call transcripts from publicly-traded companies to understand how often managers allowed colleagues to speak up during the calls.
The analysis found that when managers called upon multiple colleagues during a call they were nearly 12% more likely to be promoted, with even one colleague being amplified resulting in a 5% boost in one’s promotional prospects.
The results do suggest a degree of caution is required, however, as women were still called upon nearly 8% fewer times than their male peers. Interestingly, female managers were also more likely to call upon colleagues than male managers were.
Article source: Inclusive Managers Are Good For Company Share Prices.
- Cai, W., Rouen, E., & Zou, Y. (2021). Inclusive Managers. ↩