NEW YORK – As companies across the globe confront the objectives of embracing diversity and improving employee retention, executives are emphasizing the need to improve inclusiveness – the practice of directly engaging colleagues for their insight and contributions. But small forms of inclusiveness can be shown to have a big impact. New research from Columbia Business School identifies how one form of inclusiveness – managers encouraging their colleagues to speak on earnings calls – is directly tied to company performance: managers demonstrating this kind of inclusivity are being promoted, keeping employees engaged, and even seeing revenue boosts. In the study, Inclusive Managers, Columbia Business School Professor Wei Cai creates a new measure of inclusivity – based on sharing the stage on quarterly earnings calls – and finds that managers who practice this inclusivity are twice as likely to be promoted to CEO. Cai also demonstrates that appointing CEOs who practice this kind of engagement can lead to better inclusiveness among C-Suite executives and drive up the company’s market value. The study also found that teams with inclusive managers have a greater retention rate.
"When corporations consider how to improve inclusivity, it’s time to recognize that doing the little things well can go a long way," said Professor Cai. "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."
According to the research design and data, Professor Cai and Harvard Business School Professors Ethan Rouen and Yuan Zou studied 34,186 transcripts from the earnings calls of publicly-traded companies and tracked how many managers called upon their colleagues during conference calls. Using the call transcripts, the researchers were able to measure how many times a manager would engage their colleagues and recorded the results of the interactions.
Key Findings Included: Managers who call upon multiple colleagues during conference calls in a year are 11.4% more likely to be promoted. An inclusive manager who calls upon on at least one colleague per year during a conference call is 4.9% more likely to be promoted than a manager who calls upon no one. Female managers were called upon to speak during conference calls 7.6 percent fewer times than their male counterparts. The number of times a manager is called upon decreases, on average, by 0.6% for every year of age. Female (older) managers are 4.9% (0.6%) more likely to call on their colleagues. Companies where inclusive employees were promoted to CEO, saw a three-day market-adjusted return of 1.1 percent. This previously unexplored area of how the encouragement managers offer to their colleagues to interact and engage with others, shows that the outcome is both statistically and economically positively significant. The study Inclusive Managers can be viewed here.
To learn more about the cutting-edge research being conducted at Columbia Business School, please visit www.gsb.columbia.edu.
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