Executive Briefing: Watch out for the “glass cliff”

Sep 1, 2013
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Watch Out for the ‘Glass Cliff’

Women and ethnic or racial minorities tend to be promoted to CEO when their companies are struggling and often are replaced by white men, according to a study by Utah State University researchers.

Minorities who are promoted to head companies that are struggling, as measured by return on assets and equity, are often "set up to fail," the researchers wrote. This practice was termed the "glass cliff."

Even using best practices and having similar tenures as white male CEOs, these minority CEOs are likely to have trouble because "to turn that company’s performance around in a relatively short period of time would be hugely challenging for any CEO," says Christy Glass, associate professor of sociology at Utah State University and one of the study’s authors.

When these minority CEOs fail to turn their companies around, or slip off the "glass cliff," the study shows that white men are likely to replace them. The researchers called this "the savior effect."

The researchers identified these trends by studying all CEO transitions in Fortune 500 companies from 1996 to 2010. During that time, 551 white men and 57 minorities were appointed.

The "glass cliff" and "savior effect" result from unconscious biases on the part of boards of directors that use relatively ambiguous criteria to select CEOs.

To combat these trends, HR professionals should work to implement at the executive level the best practices they use at lower levels for hiring and promotion.

"Often boards of directors just look for dynamic individuals," says study co-author Alison Cook, associate management professor at Utah State University.

One thing HR professionals can do, Cook says, "is encourage their boards to incorporate some of the best practices that they have implemented at lower levels: formalizing the recruitment and hiring process; standardizing, to the extent possible, this process; and encouraging boards of directors to tap into social professional networks outside their immediate networks."

The study, "Above the glass ceiling: When are women and racial/ethnic minorities promoted to CEO?" was published online by Strategic Management Journal in June 2013.

Social Networking Up During Work Hours

More employees are spending time on social networks while at work, according to an Ethics Resource Center report released in July 2013.

In a survey of 2,089 social networkers, 72 percent said they spend some time on social networks every workday, and 28 percent said they spend an hour or more.

Employees who are "active social networkers"—those who spend at least 30 percent of their day linked to one or more social networks—tend to post content to sites like Facebook and Twitter that could compromise the company’s reputation or that of its employees, the report states.

More than half of active social networkers said they "comment on their personal sites about their company if it was in the news" and "share information about work projects."

Thanks to active social networkers, who make up roughly 10 percent of the workforce, "workplace ‘secrets’ are no longer secret," according to the report, National Business Ethics Survey of Social Networkers: New Risks and Opportunities at Work.

Managers and HR professionals can minimize potential risks by developing a social networking policy that:

  • Ties into the company’s ethics and values statements.
  • Incorporates social networkers’ views on the issue.
  • Is reinforced with training.
  • Uses social networking to improve in-house communication between employees and company leadership.

"Companies should assume that almost every employee will eventually join a social network and that most of them will be tempted to spend at least a few minutes of the workday engaged in online activity," the study says. "Successful efforts to address it will require flexibility as a ‘just say no’ approach is untenable. But with careful thought and constructive policies that reflect today’s world, companies can mitigate risks."

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