Women Advance More Frequently in Decentralized Companies

At smaller units, they can develop a record of objective achievement separate from any male-dominated network

Ambitious women might want to consider a new factor that could work for — or against — them as they scale the corporate ladder: company structure. 

Women make up nearly half the workforce, but they’re still having an inordinate amount of trouble reaching the C-suite. Annual growth in the number of women in senior management in the U.S. in 2023 dropped to the lowest rate in more than a decade — to 0.5% from a 1.2% average over the past decade, according to a recent white paper by S&P Global Market Intelligence. Also in 2023, representation of women in C-suite positions declined for the first time in nearly two decades — to 11.8% of the roughly 15,000 senior-level jobs from 12.2% in 2022.  

The S&P report blames the loss of momentum on a decreasing emphasis on diversity and inclusion.  

Corporate Design Drives C-Suite Diversity

A working paper by UCLA Anderson’s Tingyu Du, a Ph.D. student, and Washington University’s St. Louis’ Ulya Tsolmon suggests another factor behind the gender gap: the way a company is structured. Women working in decentralized companies — those with multiple stand-alone units or subsidiaries — appear more likely to move into top executive ranks than women working in companies where power and control are centralized.

Du and Tsolmon suggest that differences in corporate design affect how performance is measured, the types of skills workers acquire and the degree of exposure to both opportunity and potential bias. The paper builds on past research that describes and evaluates differences between centralized and decentralized companies.

At centralized companies, control emanates from the C-suite, comprised of the CEO, chief financial officer, chief operating officer (if there is one) and other top executives. The central office is generally organized around functions like finance, human resources and communications, in which many roles are difficult to quantify and measure.  

Success in a centralized organization often depends on how well workers are able to get along — to coordinate, cooperate and negotiate with others inside the organization. These abilities depend on networks and social connections that are often predominantly male, which tend also to be exclusionary and difficult for women to join. 

Centralized companies often lack precise performance metrics. Individual performance is often judged subjectively on perceptions of “soft skills,” increasing the opportunity for bias.

Measurable Growth Helps Limit Gender Bias

Decentralized companies have multiple stand-alone divisions or subsidiaries, providing cumulatively more managerial and executive jobs. Multi-unit companies are generally organized around product markets and regions. They tend to have clear, measurable growth and profit goals that make performance easier to quantify and less subject to bias. 

Employees at multi-unit companies are judged less on their ability to cooperate or negotiate than their ability to boost profits and compete internally for resources. This matters, Du and Tsolmon assert, because the skills developed while managing a P&L tend to make employees more attractive to competitors, giving them more negotiating leverage inside their own companies. 

“In decentralized organizations, managers often have clearer accountability for their units’ performance, making their achievements more recognizable both internally and externally,” the paper suggests.

Many of the women CEOs currently running Fortune 500 companies first proved themselves at subsidiaries and independent divisions of decentralized companies. 

Karen Lynch, CEO of CVS Health, who heads the country’s largest woman-run company (sixth by revenue on the Fortune 500) worked her way into that position by running subsidiaries at CIGNA, Magellan Health Services and Aetna, itself now a subsidiary of CVS Health. Jane Fraser, CEO of Citigroup, ran five of Citi’s subsidiaries before being promoted to the company’s top job. The formula doesn’t hold true for all women CEOs. General Motors CEO Mary Barra started at GM as an engineer, then became executive assistant to the company’s chairman, director of internal communications, vice president of global HR, manufacturing planning manager and plant manager on the way to landing the top job in 2014. 

To test their hypothesis, Du and Tsolmon looked at the career paths of nearly 600,000 managers at 15,200 companies from 1993 to 2017. Firms with four or more units were considered to be decentralized, the rest, centralized. They found a greater percentage of women in the C-suites of the decentralized companies (11.4%) than at the centralized companies (9.94%). They found a greater number of women CEOs at the multi-unit companies — 5.5% compared with 4.3% at centralized companies. Their research indicates that women managers in multi-unit firms are 83% more likely to become CEOs than their counterparts at centralized companies.