Human Resources



The risky business of gender bias

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Picture this. Your organisation is kicking off two projects.

The first involves the prospect of significant risks, but it will deliver a big payoff for the company if it succeeds. You must choose one of your team members to run it, someone who handles and manages risk well under stress.

The second project involves less risk. It will require a manager who can operate independently in a situation where risk-taking is not a significant part of the equation. Your top two people are a man and a woman. Who do you choose to run the respective projects?

If you base your decision on old gender stereotypes about risk aversion and risk tolerance, you could be making a serious mistake.

Recent academic research shows that the risk preferences of men and women are much closer than is commonly believed. For example, a 2017 study of the venture-capital industry, demonstrated no significant statistical difference between male and female entrepreneurs on hard financial risk indicators such as the use of bank overdraft facilities.

Other studies suggest the dynamics within an organisation – and the particular situation in play – are more important factors than the gender of the decision-maker, and how much risk the decision-maker is prepared to take.

This does not mean that there are no differences at all. There is significant variation among men and women depending on their individual circumstance: single or married, younger or older. In this study, single women demonstrated higher risk preferences in financial investments than single men.

Testosterone can also be a factor. For example, a 2018 study found that male fund managers with high levels of testosterone were more likely to take unhealthy operational risks than male managers with lower levels of testosterone.

One of the traits of a good leader is to become free of preconceived notions about gender and risk. So how do you choose the right person for a key role?

Sit down with your team member and have an open conversation about what he or she thinks about risk, and how they have handled risky situations previously.

Determine how risky a specific course of action is most likely to be and try to ascertain your team member’s natural inclination towards risk. Making the correct call is vital for companies looking to thrive amid uncertainty.

On balance, when choosing the right person it’s less about gender and more about individual attributes.

Parts of this article were first published on the strategy+business website.

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