Size Matters: Toward a Contingency Theory of Diversity Effects on Performance

Abstract

This study examines the diversity-performance link by focusing on two types of diversity—gender and functional—in the context of governing boards of 24 quasi-government agencies in Korea over 16 years (2000–2015). Although public management scholarship contains evidence regarding the importance of diversity in public organizations, there is little consensus on what constitutes diversity and how it affects public sector performance. This study expands the scope of dialogues by highlighting multidimensional characteristics of diversity and the contingent nature of diversity effects. Multiplicative interaction models confirm that there are distinctive effects of different types of diversity on performance, and the relationship is moderated by the size of the group to which minorities belong. While the effect of board gender diversity is limited in our data, the effect of having a female chief executive is positively significant with decreasing marginal effect as the number of board members increases. On the other hand, the relationship of functional diversity in the boardroom to agency performance is negative, while the negative marginal effect decreases and becomes positive when board size rises above a critical number.

Keywords:

• functional diversity
• gender diversity
• governing boards
• group size
• public sector performance

Declaration of interest

The author declares no conflicts of interest with respect to the research, authorship, and/or publication of this article.

Notes

Acknowledgments

The author is grateful to the agencies for sharing their information about their board members and Nishikant Kamble for his research assistance. I would like to thank Kenneth J. Meier and the anonymous reviewers for their comments that substantially improved this work.

Notes

1 Yet the reform of quasi-government agencies has been more focused on the appointment process itself rather than the diverse composition of the boards. The appointment of board members has been criticized as Nakhasan (parachute in Korean) referring negatively to a kind of spoils system where someone is designated to a post with political strings attached (for details, see Park & Kim, 2014).

2 Although the effect of being a minority member can differ according to gender and career backgrounds, tokens are often negatively stereotyped, doubted, and labeled, which results in lower performance (Kanter, 1977).

3 A uniform methodology for performance evaluation was initiated by the Korean government since 1999 right after the East Asian financial crises. Other countries take a similar approach to monitor targets for these hybrid organizations. For example, Sweden developed performance indicators with four categories include “occupancy, customer satisfaction, control group, and customer surveys,” according to public policy assignment (PPA) (Alexius & Örnberg, 2015, p. 196).

4 The means and standard deviations of performance evaluation scores before and after 2008 were similar: M = 76.37 and 75.28; SD = 6.61 and 8.19; Min = 60.77 and 60; Max = 60 and 90.

5 The executive and non-executive directors have the same legal responsibilities and liabilities as board members making collective decisions. Yet executive directors are more involved in daily management of the organization, while non-executive directors play more of the mentoring role independent from the management. According to the four archetypes of boards presented by Van Thiel (2015), public sector organizations in Korea correspond to Type II (mixed composition board) with one tier including non-executive members.

6 The linear fixed-effects estimation results are available upon request.

Additional information

Notes on contributors

Sanghee Park

Sanghee Park is an assistant professor at School of Public Service, Boise State University.