Zhu, Shen, & Hillman (2014). Recategorization into the In-group: The Appointment of Demographically Different New Directors and Their Subsequent Positions on Corporate Boards

Authors:
David H. Zhu – Arizona State University
Wei Shen – Arizona State University
Amy J. Hillman – Arizona State University

Interviewers:
Timothy Hubbard – University of Georgia
Cassandra Aceves – University of Michigan

Article link: http://asq.sagepub.com/content/59/2/240

Question 1. Based in recategorization theory you propose a novel explanation of why board diversity has significantly increased over the last 20 years despite the fact that existing directors tend to favor new directors who are demographically similar to them. Specifically, you argue that prospective directors that greatly differ along dissimilar dimensions of demographics (e.g. a prospective woman director compared to a male-dominated board) will be recategorized as an in-group member to the extent that he or she is more similar to the existing directors along other shared demographics (e.g. functional background, ethnicity, etc.). Can you provide some insights into how you arrived at this novel theoretical approach?

Absolutely. The three co-authors of this paper are all interested in the diversity of boards. We believe that diversity is not only a fundamental feature of boards that influences their major functions but also an issue of social equality in America. Our readings of the existing literature on board diversity tell us that out-group categorization is a major source of the social barriers that minorities face, yet a large number of non-traditional type of directors seem to have overcome such barriers very well. So, it was very puzzling to us how they did that. We sought to find some answers from social psychological research on reducing inter-group biases, and naturally became very interested in recategorization theory. Indeed recategorization is widely viewed as a major mechanism through which out-group categorization can be changed. Of course, we were also interested in decategorization and mutual differentiation as potential mechanisms at the beginning. As we develop the specific theoretical arguments in our context and explore potential ways to empirically examine these mechanisms, it became clearer and clearer that recategorization should be the foundation of this focal study.

Question 2. You conducted additional analyses that excluded each of the eight demographic characteristics one at a time to ensure that certain demographic characteristics (such as gender and ethnicity) did not dominate the recategorization process and found the results to be consistent with your theoretical predictions. Expanding upon this examination of specific demographics, do you anticipate that certain compositions of similar demographics could potentially be more effective than others? For instance, if a prospective director is dissimilar on gender, having complimentary similar demographics (e.g. attending the same elite university and having a similar functional background) could be stronger predictors of appointment than having unrelated similar demographic characteristics (e.g. age and functional background).

We didn’t examine this issue in this study, but that’s a fantastic question for future research. To explore this future research opportunity, we’ll probably need to first think about when two different dimensions of directors’ attributes are more related to each other. One possibility is that directors on a board might have developed a mental script of what a prototypical director looks like based on the profiles of prior members of the focal board. For example, if directors on the focal board have traditionally graduated from the same elite school and shared a similar functional background but varied on age, current directors of the board may view elite educational background as more related to functional background than age. In such an example, a female candidate’s similarity to incumbents along elite educational background and functional background could have a stronger impact on recategorization than similarity along age. In general, we have only identified one moderator of the recategorization effect, and hence it seems very promising to further examine other interesting moderators such as the one that you suggested here.

Question 3. In this context, recategorization theory proposes that directors can cognitively change their perceptions of the group membership of dissimilar directors by focusing on their shared similarities to better integrate them into the board. This finding has strong implications for improving both director integration and board processes. Extending your research forward, how can boards initiate the recategorization process among directors? What steps can they take to improve the outcomes of the recategorization process?

Thank you for these wonderful questions. A female director actually approached us to sponsor a workshop at the National Association of Boards of Directors’ annual meetings to discuss the issue of minority directors. So, we fully agree that this research can have important practical implications. As a general principle, we’d say that recategorization requires explicit effort from the majority to pay attention to minority directors’ similarities to them. A first step that directors can take is to be better aware of their often subconscious tendency to categorize dissimilar directors as less favorable out-group members and institutionalize procedures to counter this tendency. For instance, when directors are considering candidates for a board position, they often exclude candidates who lack one particular background (e.g., top executive experience or industry-related experience). It will be important for each director to be aware of this often automatic and subconscious tendency and to routinely collect information about a dissimilar candidate’s similarities. When the nomination committee or the whole board discusses potential candidates’ qualifications, they can create a comprehensive list of relevant attributes written on the paper to go through for each candidate. Such a simple procedure could significantly increase the likelihood that a dissimilar director’s similarities are noticed by the majority, potentially leading to recategorization. Once dissimilar directors were appointed to the board, it will also be important for the board chairman to proactively remind fellow directors about new directors’ similarities to them before seeking potentially different perspectives from these new directors. For example, a chairman may start by saying that “our two new members of the board both have extensive experience with managing large corporations and finance, just like most of us. I’d like to invite them to share their perspectives on our proposed acquisition”. Efforts like this can thus greatly help dissimilar directors to be viewed as in-group members and play more important roles on board decision making. People who do not have a traditional profile of a director are generally encouraged to proactively communicate their similarities to the majority of directors—such efforts can help them to be recategorized into the in-group, increasing their likelihood to receive board appointments and subsequently play more important roles on boards.

Question 4. The focus of the manuscript was on the positive aspects of recategorizing dissimilar board members and the positive effects of that process, but do you think that there may be negative consequences of recategorization? Moreover, we could envision consequences if there is failure to recategorize a director. For example, by searching for similarities, might one inadvertently highlight differences that might have gone unnoticed? In your research, were there any early observations that may help illuminate the potential negative effects or what happens if recategorization fails?

There might be some negative consequences of recategorization. In particular, recategorization overcomes the biases of out-group categorization and leads to in-group favoritism towards the target. In this sense, the negative consequences of in-group favoritism might also follow recategorization. For instance, people tend to be more tolerant of in-group members’ mistakes, and that could occur following recategorization. Yet, given the widely documented disadvantages that minorities have, the overall impacts of recategorization on society should be largely positive. It would be helpful to be mindful of its limitations though.

You also suggest that in the process of searching for more information about a dissimilar candidate, the majority may identify other dissimilarities that were unnoticed before. We think this is very plausible because research shows that people tend to pay more attention to an out-group member’s dissimilarities than to their similarities. This essentially suggests that efforts to search for more information about a dissimilar candidate do not necessarily lead to successful recategorization—such efforts need to be focused on the similarities of such a candidate. Our theory and supportive findings suggest that failures to recategorize a director as an in-group member would result in out-group categorization of the director, negatively influencing such a director’s career opportunities. If people failed to recategorize a dissimilar person into the in-group after their conscious efforts, they might develop a stronger negative bias toward the person because they may feel that “we tried very hard to only find out that this person just doesn’t belong to our group”. In other words, difference may become magnified after such a failed recategorization process.

Question 5. As we have worked on research projects, we have found that there are particular moments throughout the course of a project that get us more excited about a paper—whether that’s getting access to really interesting data, getting significant effects on an interesting finding, or getting positive feedback from a scholar we admire, et cetera. What was one of your favorite moments from working on this project?

We certainly had a lot fun together. David’s favorite moment was when he found a very strong effect of recategorization after months of data preparation. One of Wei’s favorite moments was when David walked into his office and told him that the empirical results were consistent with their theoretical predictions. Amy’s favorite moment was realizing as a female director that emphasizing her similarities with the men on the board might help her succeed.

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