The Control of Managerial Discretion: Evidence from Unionization’s Impact on Employment Segregation

Abstract

Does limiting managers' discretion limit organizations' scope for discrimination? Social--psychological research argues that it limits opportunities to exercise cognitive biases. Organizational research has found that formal personnel practices that establish accountability for workplace diversity have increased women and minority representation in management. However, drawing causal inferences from such studies is complicated because adopting such policies may be endogenous to the firm's wish to hire and promote women and minorities. This study uses unionization elections to conduct a regression--discontinuity test from which stronger causal inferences can be made. I find that while unionization is associated with more representative workplaces and more women and minorities in management, these effects disappear close to the discontinuity threshold. Most of the effects of unionization on workforce diversity may be attributable to the unobserved drivers of selection into unionization. This has similar implications for the causal effects of diversity policies adopted by managers. Acknowledgments The author would like to thank Emilio Castilla, Roberto Fernandez, Aruna Ranganathan, Susan Silbey, Jesper Sørensen, and seminar participants at Stanford GSB, Berkeley--Haas, MIT--Sloan, INSEAD, and the 30 th EGOS Colloquium for comments on the manuscript. Sheldon Friedman, Alfonso Nevárez, and Gordon Pavy at the NLRB and Bliss Cartwright and Ronald Edwards at the EEOC gave invaluable support with the data. Direct correspondence to John--Paul Ferguson, Stanford Graduate School of Business. Email: jpferg@stanford.edu. suggests that it does. This work situates much employment discrimination not in the conscious actions of bigoted managers but in the unconscious impact of cognitive biases, deployed through personnel policies that fail to take such biases into account. As one classic review of the subject summarized, "We cannot rid work organizations of discrimination until we recognize both that much employment discrimination originates in automatic cognitive processes, and that it occurs because of work organizations' personnel practices" (Reskin 2000, p. 321).This social--psychological approach to discrimination reinforces an older organizational perspective on the subject. Organizational research has long emphasized the existence of informal social structures within formal organizations (Mayo 1984;Dalton 1959;Scott and Davis 2006) and recognized that, in the absence of formal structures, informal processes like ascriptive homophily will shape organizational careers and rewards. This is why, in his unromantic defense of complex organizations, Perrow (1986, p. 6) emphasizes the importance of rules that limit managers' discretion in "Purging Particularism":Particularism means that criteria irrelevant for efficient production (e.g., only relatives of the boss have a chance at top positions), in contrast to universalistic criteria (e.g., competence is all that counts), are used to choose employees. The criteria of eff...

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