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Bias and the Glass Ceiling in Finance


Female investment analysts are judged unworthy of promotion if they don’t persist in selling their ideas

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When we last looked at the parlous state of women in finance, we learned that clients were more likely to downplay the investment advice of female analysts than male analysts. This despite female analysts performing as well—even better in some market conditions—as male analysts in forecasting stock earnings and prices.

As this study and others have shown, women working in finance are dogged by unconscious biases, the most salient being that they are more sensitive to investment risk than men. Such biases hold women back not only from delivering full value to their investment clients but also from rising in the ranks of investment firms.

“Women make up less than a fifth of CFA (Chartered Financial Analyst) charter holders, which is an immediate red flag,” says Blake Steenhoven, an assistant professor at Smith School of Business. “But also concerning is that their representation decreases as you look at higher levels in the organization, so they aren’t being promoted at the same rate as their male peers.”

Women in finance “have to work twice as hard to get half as far,” Steenhoven says. He and his colleagues from Cornell University (Robert J. Bloomfield, Kristina Rennekamp and Scott Stewart) wanted to know why. Are biases responsible for this leaky talent pipeline?

The researchers went straight to the source. For their study, they recruited 179 investment professionals and asked them to evaluate research analysts as candidates for promotion to a more senior position at a hypothetical hedge fund. In this scenario, the male or female candidates either persisted in pitching their stock pick after it had been voted down in a meeting or abandoned their stock pick altogether.

As the researchers suspected, their exercise exposed a form of gender bias that can limit the career path for women in finance. The study’s respondents evaluated analysts as less promotable when they chose not to persist in pitching their investment pick, but only if the analyst was a woman. Male analysts suffered no such reputational penalty.

“When women are not persistent, it’s interpreted as evidence that they’re a bad fit for the role,” says Steenhoven, “whereas the same behaviour by men is attributed to contextual factors.”

These perceptions hold outsized power in male-dominated industries where performance management is ambiguous. Steenhoven says there are different types of perceptions at play.

The first are so-called descriptive norms or stereotypes regarding men and women. For men, these characteristics include traits such as aggressiveness, assertiveness and competence. For women, they include co-operativeness, kindness and warmth.

There are also stereotypes attached to roles such as “analyst” or “manager”, largely shaped by how people in these roles look and behave. “In male-dominated industries such as finance,” Steenhoven says, “these stereotypes are more likely to resemble male characteristics, so a stereotypical analyst looks more like a stereotypical man.”

Stereotypes kick in when an investment analyst violates the expectations attached to the position, such as failing to push a stock recommendation after it has been voted down. When the analyst is female, he says, gender provides a convenient explanation for not acting “sufficiently male,” so the behaviour is interpreted as saying something about the analyst. When the analyst is male, gender isn’t thought of as an issue so it’s easier to attribute the unexpected behaviour to some other factor.

Persistent or not?

While the researchers were not able to determine the gender of the investment professionals who were part of the study, it probably doesn’t matter. Research suggests that male and female managers are likely to exhibit this bias. “The root of this bias is in descriptive norms about men and women, which are commonly held across age and gender,” Steenhoven says.

Based on these findings, Steenhoven advises women in finance—or any women in male-dominated industries—to at least understand the biases to which they can be subjected during the evaluation process.

Navigating these biases, however, is a challenge. If a woman is not deemed aggressive enough to earn a promotion, Steenhoven suggests she highlight the many ways in which she does possess these characteristics. “It might have helped Jennifer (the fictitious investment analyst in the study scenario) if she said something like, ‘Well, I’ll drop it this time,’ to remind everyone how often she acts like people expect on Wall Street.”

Going in the other direction—acting like an über-male—could just as easily backfire. Women in finance risk being seen less favourably if they don’t exhibit the typical female qualities. As the researchers note in their paper, “Expectations of aggressive behaviour force women to choose between violating expectations of analysts and violating gender expectations, both of which can have negative consequences.”

Investment firms are in a better position to make headway to mitigate the negative consequences of gender bias. Steenhoven says the quickest measure is to reduce or even remove subjectivity in hiring and promotion decisions. Using appropriate metrics, and applying them consistently, can go a long way to levelling the playing field.

A more long-term project would be to highlight a diverse group of successful women in finance to change what qualities people associate with a “successful analyst.”

“This can help change the reference point that evaluators use when comparing an analyst to their image of what a successful analyst looks like,” says Steenhoven. “It also makes behaviours associated with stereotypes about women less surprising.”