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

Abstract

AbstractRecent research has illustrated that demographic diversity influences the outcomes of public sector organizations. Most studies have focused on workforce diversity; by comparison, little is known about how managerial diversity affects organizational outcomes. This article focuses on gender diversity in the top management teams of public organizations and its relationship to financial performance. Theory 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 find that gender diversity in top management teams is associated with higher financial performance, but only in municipalities with a management structure that supports cross‐functional team work. These results are interpreted in light of existing theory, and implications are suggested.