Imagine that you are the founder of a start-up that has not been as successful as you’d hoped.
You are thinking about making one last push to get your product off the ground, but you would need some extra financing to do so. A series of deals has fallen through, and you are under great stress. Now you are negotiating what you believe to be the company’s last remaining option: a high-interest loan from a lender with a questionable reputation. Should you close down your company or finalize negotiations on the risky loan?
Interestingly, the choice you make in this type of stressful situation might depend on whether you are a man or a woman. In a recent New York Times Opinion piece, Therese Huston of Seattle University describes neuroscientific laboratory research that finds that men and women react differently when making risky decisions under stress. Specifically, stressed-out men tend to make riskier decisions than stressed-out women.
In one study, cognitive neuroscientist Stephanie D. Preston of the University of Michigan and her colleagues had participants play a gambling game during a 20-minute waiting period before a speech they were told they would have to give (a stress-inducing prospect). At first, both men and women had difficulty making good decisions in the game. As the stressful speech drew near, however, women started making better decisions, while men began risking too much for a slim hope of a big payoff. Women were also more aware than men of the relative riskiness of their behavior.
If that scenario sounds too esoteric, let’s turn to the results of a real-world study by Credit Suisse. Examining almost 2,400 corporations worldwide from 2005-2011, the bank found that those with at least one woman on their boards outperformed corporations with all-male boards by 26%.
Given the prevalence of high-stakes, high-stress decision making in the corporate world, such data raises the question of whether companies in which women are underrepresented in powerful positions, including as negotiators, are at a disadvantage relative to companies where women have a stronger voice.
Some companies may be responding to this suspicion intuitively. In their research, Michelle K. Ryan (University of Exeter) and Alex Haslam (University of Queensland) find evidence that struggling companies are more likely than healthier ones to add women to their boards.
“In a time of a general financial downturn,” Ryan and Haslam write in a BBC News article, “companies that appointed a woman to their board had experienced consistently poorer performance in the five months preceding the appointment than those who appointed only men.” It seems that after breaking through the glass ceiling, women executives are more likely than men to find themselves on a “glass cliff”—a risky or precarious leadership position, according to the researchers.
At first glance, such appointments appear to be a step toward greater gender diversity in corporate leadership. But consider that struggling organizations are less likely to succeed than healthier ones—and their leaders will be the most common targets of blame. Consequently, women leaders at struggling firms are likely to face more criticism than men in comparable positions at better-off firms.
For managers and other leaders, the findings discussed here point to the value of working to correct the underrepresentation of women in the upper echelons of your organization, and not just when it is in crisis. The research suggests that women, on average, will make more rational, less risky decisions than their male counterparts during negotiations and other stressful decision-making contexts. In doing so, women might help create healthier organizations that have less need for the type of clean-up jobs that women recently have been recruited to fill.
Related Article: Negotiating About Pandas for the San Diego Zoo
Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.