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8.9.04

Women CEOs And The Adaptive Cycle

I just finished reading Lance Gunderson and C.S. Holling's book Panarchy, in which they elaborate on their "adaptive cycle" model for human and natural systems. They express some concern that it's so easy to see adaptive cycles everywhere that the theory risks explaining everything -- and therefore nothing*.

So perhaps it's no surprise that the adaptive cycle was the first thing to spring to mind when I encountered this story (via Echidne):

Alex Haslam and Michelle Ryan of Exeter University found large British companies that put a woman on their boards experienced consistently worse share price performance in the run-up to the appointment than those appointing only male board memers, the Financial Times reported Tuesday.

... By contrast, when things are going well, "there is no need to change the usual practice of jobs for the boys."

Haslam also said: "The appointment of a woman director was not associated with a subsequent drop in company performance. Indeed companies that appointed a woman actually experienced a marked increase in share price after the appointment."


In brief, Gunderson and Holling say that traditional ecology was right to point out that systems move from a phase of identifying opportunity and moving to exploit it (r-phase), to a phase of increasing connectedness and complexity (K-phase). However, the K-phase is not a stable climax. The increasing connectedness also creates rigidity. The system becomes an accident waiting to happen -- and eventually one does (Ω-phase). Following the breakup and release of the accumulated "capital," the system enters a phase of unpredictability and experimentation (α-phase), from which a new r-phase is selected.

An adaptive cycle interpretation of the article would go something like this: companies start out with a certain way of doing things in the r-phase -- hiring mostly men for top jobs. That strategy seems to work all right, so it gets locked in as they move into the K-phase. But their old-boys' network becomes a sort of a rut, decreasing the company's resilience to changes in the market. As they tip over into the Ω-phase, they're forced to think outside the box -- for example, seriously considering women for top-level positions. And it seems like an advantageous bit of novelty to introduce into the system, as companies start to recover (move into a new r-phase) once they try appointing a woman**. The danger, of course, is that once the backloop (Ω-α) is past, companies will revert to the old r-phase of relying on men.

The adaptive cycle idea also suggests an argument for a degree of affirmative action. Gunderson and Holling point out that, since things look so good during theK-phase, we have a tendency to want to stay there forever. But efforts to lock in a K state tend to exacerbate the size of the inevitable Ω. Rather, we should deliberately introduce small backloops to keep our K phases fresh and avoid a hard fall. The classic example is fire management -- frequent small fires allow us to avoid the huge conflagrations that follow total fire suppression. So perhaps companies ought to consider shaking things up by hiring women during their K-phase, rather than waiting for a big Ω.

The whole situation might not be a good example of an adaptive cycle, however. I've painted a relatively optimistic view of forward-thinking managers taking a risk on hiring women during the backloop. But it may be that they expect the company to go under, or to recover on its own, regardless of their hiring decisions. In this case, hiring a woman is just a way to shift the responsibility (though considering the beneficial effects of hiring a woman, this may be classified as an inadvertant α).

*They do manage to find a few ecosystems, such as pelagic ocean environments, that don't seem to follow the adaptive cycle.

**The articles aren't clear on why. I'm skeptical about how much of it is due to women having an intrinsically different management style. It may be that, by being willing to seriously consider women, companies can tap into a better pool of candidates, since the good women haven't been snapped up by other companies. Or it may be that thinking outside the old-boys' network box leads them to use a different and better set of criteria for hiring, which happens to include "may be a woman."

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