Divisional Firm Structures Reduce CEO Gender Gap
P&L accountability makes female executives' performance more visible
1Organizational structure impacts promotions
The study reveals how divisionalized firm structures with clear profit-and-loss accountability create more transparent performance metrics for senior managers. Unlike integrated firms where individual contributions are hard to measure, divisional structures make managerial performance more visible and comparable. This transparency particularly benefits women in executive pipelines by reducing subjective evaluation biases that often disadvantage female candidates in CEO succession decisions.
2600k manager dataset reveals pattern
Researchers analyzed career paths of over 616,000 managers across 49,135 US firms. The comprehensive dataset showed women in divisionalized firms had higher CEO promotion rates compared to non-divisional firms. The effect was most pronounced for women with prior P&L responsibility, suggesting measurable performance metrics counteract implicit gender biases that typically affect promotion decisions at the highest levels.
3P&L experience changes outcomes
Women with profit-and-loss accountability experience showed the strongest improvement in promotion likelihood. Their strong unit performance relative to peers had greater positive association with CEO promotion than for male counterparts. This suggests quantifiable business results become more decisive than subjective evaluations when available, creating fairer advancement opportunities for qualified female executives.
4Relative performance matters more
In divisional structures, women's promotion probability increased more sharply than men's when their unit outperformed internal peers. This differential effect indicates that when performance is measurable and comparable, strong results benefit women disproportionately in breaking through the glass ceiling, potentially compensating for systemic biases in executive evaluation.
5Structural solutions vs diversity programs
The findings suggest organizational design may impact gender equity as much as diversity initiatives. Clear performance metrics from divisional structures provide an objective basis for promotion decisions, reducing reliance on subjective assessments where unconscious biases often influence outcomes. This structural approach complements traditional diversity efforts in executive pipelines.
6Implications for board governance
Corporate boards seeking to improve gender diversity in CEO succession should examine their organizational structure and evaluation systems. Creating transparent, comparable performance records for senior leaders through divisional P&L accountability may prove as effective as mentorship programs or diversity training in promoting qualified women to the highest roles.
7Limitations and future research
While the study establishes correlation between divisional structures and reduced gender gaps, further research could examine whether certain types of divisions (by product, geography, or function) have differential effects. Additional studies might also explore how these findings apply outside the US context or in different industry sectors with varying structural norms.
8Rethinking executive development
The research highlights how exposing high-potential women to P&L roles earlier in their careers could improve CEO pipeline diversity. Organizations may need to intentionally provide such opportunities, as women are often steered toward staff rather than line roles. Structural changes that make performance measurable appear to create more equitable advancement pathways to the C-suite.
Original article: Strategic Management Journal — Divisional Firm Structures Reduce CEO Gender Gap