2 Why Managing Diversity Is
at the Core of Leadership Today
In Chapter One, I suggested that a series of environmental forces have combined to make managing diversity a high priority issue for contemporary organizations. By managing diversity I mean planning and implementing organizational systems and practices to manage people so that the potential advantages of diversity are maximized while its potential disadvantages are minimized. Further, I view the goal of managing diversity as maximizing the ability of all employees to contribute to organizational goals and to achieve their full potential unhindered by group identities such as gender, race, nationality, age, and departmental affiliation.
In this chapter, I wish to develop more thoroughly the idea that managing diversity is crucial to the accomplishment of organizational goals and therefore should be of paramount concern to managers. Three types of organizational goals facilitated by managing diversity are (l) moral, ethical, and social responsibility goals; (2) legal obligations; and (3) economic performance goals.
Managing Diversity as a Moral Imperative
In most organizations, the representation of culture groups in the overall work population, and especially in the most powerful positions, is highly skewed. For example, in the Netherlands, Dutch men are dominant; in New Zealand, Pakeha men are dominant; in the United States, White men are dominant. This fact and the pervasive tendency for in-group members to be favored over out-group members in human transactions combine to make dominance-subordination and other equal opportunity issues prominent aspects of diversity work in organizations. Thus for nations and organizations that subscribe to a creed of equal opportunity, a major motive for investing in managing-diversity initiatives is that it is morally and ethically the right thing to do. Moreover, it is certainly prudent to include, among the many goals of organizations, social responsibility objectives such as promoting fairness and improving economic opportunities for underachieving members of society. It also seems fair to say that achievement of social responsibility goals enhances economic performance goals in the long term. For example, in the United States it seems clear that improving educational achievement among non-Cuban Hispanics, Blacks, and poor people of all racioethnic groups has major implications for national economic competitiveness.
Since the moral and social justice objectives of managing diversity have been addressed in the management literature for many years (mostly under the heading of equal opportunity), I will not dwell on them here except to reemphasize that the ethical, moral, and social responsibility motives for managing diversity work remain highly relevant in today’s organizations.
Legal Requirements
Certain aspects of managing diversity are necessary, or at least strongly advised, as a matter of law. In the United States, the Civil Rights Act of 1964 (as amended in 1972), the Pregnancy Discrimination Act of 1978, the Age Discrimination Act of 1967, and the Americans with Disabilities Act of 1990 (ADA) collectively outlaw discrimination on the basis of sex, color, race, religion, pregnancy, national origin, age, or physical ability. With regard to the ADA, the act provides that a physical disability cannot be an issue in an employment decision if the individual is qualified or could be made qualified to do the job by a “reasonable accommodation” on the employer’s part In addition to the above legislation, the Equal Pay Act of 1963 specifically outlaws pay discrimination on the basis of gender, and the Vietnam Veterans Readjustment Act of 1974 expressly outlaws employment discrimination against veterans of the Vietnam War. The vast number of workers covered by these laws suggests that employers are well advised to invest in such managing-diversity activities as worker training and organizational research to uncover evidence of unfair treatment of workers related to the various group memberships addressed in the legislation. Moreover, history has shown that the failure of organizations to manage diversity in this respect can lead to costly lawsuits. To mention just a few examples, in 1991 a jury awarded $20.3 million to a single person in a sex discrimination suit involving denial of promotion (“Jury Awarded,” 1991); in 1988, Honda Motor Company made a $6 million settlement of a suit involving charges of discrimination by Blacks and women in its U.S. operations (Cole & Deskins, 1988); and in 1992, Shoney’s agreed to set aside $105 million to compensate victims of racial discrimination after a lawsuit was filed against the company (Pulley, 1992). Although the above examples deal with race and gender, age has been the subject of more litigation under Title VII of the Civil Rights Act than either gender or race in recent years. Thus it is clear that there are economic as well as good-citizenship implications of the legal obligations in this area of management.
In addition to the laws protecting members of workplace minority groups against discrimination, Executive Order 11246 requires that U.S. businesses wishing to serve as government contractors take steps to ensure that past discrimination is remedied and that discrimination does not occur in the future. Ostensibly, this requirement means that a large percentage of U.S. firms must maintain active affirmative action programs in order to ensure the right to bid on government contracts; however, in practice the penalties for not doing so are rarely enforced (Werther & Davis, 1993). Thus organizations have considerable latitude in defining how aggressively they will pursue affirmative action efforts. Despite this fact, many organizations have sustained active affirmative action initiatives since the late 1960s.
The previous discussion makes clear that in addition to the ethical and social conscience goals of managing-diversity initiatives, there are legal reasons for managers of organizations to give attention to diversity issues. However, I believe that a third, equally important but often overlooked motive is that managing diversity affects organizational performance in ways that have little to do with the social and legal rationales.
Diversity as a Factor in Organizational Performance
In my contacts with practicing managers of organizations, the question managers ask more than any other is how does diversity and its management affect the bottom-line performance of organizations. Moreover, they ask whether there is any tangible evidence that there is a relationship between them. These difficult but important questions will be addressed next. The remainder of this chapter will be devoted to explaining the philosophical foundations for connecting diversity and organizational performance, while Chapter Three will discuss relevant research supporting this linkage.
As suggested in Figure 1.1, two types of diversity effects on organizational effectiveness can be identified. One type addresses effects that derive from the impact of group identity on the experiences and work outcomes of individual members. I will refer to this type as equal opportunity and motivation to contribute (EOMC) effects. The other type of effects relates to the impact of cultural diversity in itself. These effects of diversity on organizational outcomes address the question of how the performance of homogeneous workgroups compare to that of heterogeneous workgroups. Both types of effects are explained in more depth below.
EOMC Effects
The IMCD model of Figure 1.1 suggests that EOMC effects of diversity occur because a set of individual, group, and organizational factors interact to influence a set of individual outcomes that in turn influence organizational outcomes. The set of individual, group, and organizational factors in the model were defined previously as the diversity climate. Also, the individual and organizational outcomes may each be thought of as occurring in two forms. At the individual level, the diversity climate impacts affective outcomes and achievement outcomes. As noted previously, affective outcomes refers to how people feel and think about their jobs and their employers. In Figure 1.1, these outcomes include job/career satisfaction, job involvement, and organizational identification. In emphasizing affective outcomes, the importance of employee perceptions about the workplace is duly recognized. It is well known that behavior is driven by perceptions of reality. Therefore, what people believe about their opportunities in the work environment is of vital importance regardless of whether or not these beliefs are consistent with the facts. In a recent study illustrating the relevance of individuals’ perceptions to work outcomes, Eisenberger, Fasolo, and Davis-LaMastro (1990) examined the impact of attitudes on various individual work outcomes with samples of police officers, brokerage clerks, and public school teachers. The authors found that employees’ perceptions of being valued by an organization had a significant effect on their conscientiousness, job involvement, and innovativeness. A sense of being valued, in turn, may well be influenced by cultural differences. Because of such things as stereotyping, ethnocentrism, and prejudice, members of minority groups often feel less valued, and hence the dynamics of diversity as explained in this book have implications for organizational innovation.
In support of the premise that perceptions in the workplace are influenced by diversity dimensions such as gender and racioethnicity, both Jones (1986) and Fernandez (1981) report survey data indicating that many non-Whites perceive that their race has hindered their advancement. Likewise, Beehr, Tabor, & Walsh (1980) found that Blacks were more likely than Whites to say race is a factor in promotion decisions. In my own recent work diagnosing organizational climate for diverse workgroups, I have found consistent differences of perception that are predictably related to group identities. In general, non-majority-group members are more likely to be aware of the effects of group membership than majority group members. For example, in one recent analysis of three-hundred managerial/professional employees in a research and development company, White women were nearly three limes as likely as White men to say that being a man was an important factor in being promoted to senior positions, and non-Whites (both men and women) were three times as likely to say that race was an important factor.
The fact that perceptions are so vital is a major factor behind my recommendation (presented in Part Five of this book) for extensive use of employee opinion data in organization development work on managing diversity.
Returning to the logic of the IMCD model, achievement outcomes refers to tangible measures that are, at least theoretically, indexes of the employee’s contribution to the organization. These include performance ratings, promotion rates, and compensation.
Affective and achievement outcomes of individuals are thought to influence organizational effectiveness measures such as product/service quality, productivity/efficiency, and labor turnover. These first-level organizational outcomes, in turn, directly impact the profitability of profit-making firms and instrumental goal attainment of nonprofit firms.
Thus, according to the logic of the model, by understanding the diversity climate we can predict effects on individual outcomes and ultimately effects of diversity on organizational effectiveness. The specific relationships between diversity-climate factors and individual outcomes is addressed in subsequent chapters of the book. For example, in Chapter Five, which deals with stereotyping, it is pointed out that stereotyping behavior tends to adversely affect the individual outcomes of persons in the stereotyped groups. Carrying this a step further, stereotyping is predicted to indirectly lower organizational performance.
In summary of the EOMC effects, a major theme of this book is that in many organizations diversity dynamics such as ethnocentrism, stereotyping, and cultural differences interact with a highly imbalanced power structure (on a culture group basis) to produce work outcome disadvantages for members of out-groups. As suggested previously, the poorer work outcomes include affective and achievement outcomes, and these in turn are thought to adversely affect first-level organizational measures such as productivity, absenteeism, and turnover. In such circumstances, it is necessary for organizations to improve the diversity climate in order to fully tap the potential of all workers to contribute to organizational performance. EOMC-relaled effects of diversity follow the line of thought suggested by Roosevelt Thomas’s (1990) definition of managing diversity: “Managing in such a way as to get from a heterogeneous work force the same productivity, commitment, quality and profit that we got from the old homogeneous work force” (p. 109).
The research reviewed in this book suggests that these EOMC effects of diversity can be of great magnitude, and hence a major reason for organizations to manage diversity is to minimize barriers to performance that may occur due to diversity-related dynamics.
Direct Effects of Diversity
The previous discussion clarifies how group-identity diversity in organizations may indirectly determine levels of organizational performance. There is evidence, however, that the existence of diversity, in itself, may affect certain organizational processes such as communications, creativity, and problem solving, which are closely related to performance. One prominent perspective on diversity that follows this line of thought is the “value-in-diversity” philosophy (Cox, Lobel, & McLeod, 1991; Mandell & Kohler-Gray, 1990; Marmer-Solomon, 1989; Esty, 1988; Copeland, 1988). These writers are among those who argue that, when properly managed, diverse groups and organizations have performance advantages over homogeneous ones. I will refer to this possible impact of diversity in workgroups as the VID effect. Standing somewhat in contrast to the VID perspective is the argument that increasing diversity in workgroups may lead to certain dysfunctional outcomes such as mis-communications and lower team cohesiveness (Cox, 1991).
The potential for these direct effects of diversity on organizational performance are indicated in Figure 1.1 by the arrow extending from the diversity climate items of cultural difference, structural integration, and informal integration to the organizational outcomes of creativity, problem solving, and communications.
These potential direct effects of diversity on key organizational processes related to performance hold considerable importance for organizations. Enhancing creativity and problem-solving quality are prime concerns of organizational leaders. To the extent that the existence of group-identity diversity facilitates these, it adds an important motivation for actively seeking to maintain a diverse workforce rather than merely to manage one if it happens to present itself. Likewise, if increased diversity can hamper communication and reduce member attraction to workgroups, managers must find ways to minimize these effects. This need is made even more critical by the trend toward the increased use of self-managed workteams in organizations.
Summary
This chapter has provided a conceptual logic for the relationships between cultural diversity in workgroups and various aspects of organizational performance. Both direct and indirect (EOMC) effects were discussed. In the next chapter, some of the available empirical research relevant to these effects is reviewed.