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Diversity

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Does workforce diversity always result in better organizational performance?
In today’s global competitive environment, workforce diversity became a competitive edge that helps firms better understand different cultures and different ways of conducting business globally (“Benefits and problems”). Taylor Cox emphasized that increasing workforce diversity for better organizational performance is still an essential business issue that receives great attention, as “most of today's small business owners and corporate executives recognize that attention to the challenges and opportunities associated with the growing trend toward culturally diverse work forces can be a key factor in overall business success”. Rob McInnes identified 7 factors that motivate companies to diversify their workforces:
As a Social Responsibility: companies exercise corporate social responsibility role by diversifying their workforces and supporting their good living.
As an Economic Payback: “diversifying the workforce, particularly through initiatives like welfare-to-work, can effectively turn tax users into tax payers”.
As a Resource Imperative: companies shouldn’t be hindered from attracting best talents available in the markets because of discriminatory practices.
As a Legal Requirement: law requires companies not to be discriminatory in their employment practices or they will be exposed to penalties, as “fines and loss of contracts with government agencies”.
As a Marketing Strategy: companies hire diversified people for their unique talents, knowledge and perspectives to be able to produce products and services that appeal to wide markets and more customer bases.
As a Business Communications Strategy: diversified workforce is more able to effectively handle external communications with other bodies, like vendors, suppliers, and clients.
As a Capacity-building Strategy: diversified talents, insights, and experiences of workforces would provide today’s companies with “capacity required to effectively solve problems, rapidly adapt to new situations, readily identify new opportunities, and quickly capitalize on them”.
Rob McInnes added that the greatest benefit of workforce diversity comes from the company’s ability to better manage diversity and employ people because of their individual differences in terms of “personality, age, gender, race, ethnicity, nationality, culture, religion, sexual orientation, income, marital status, work experience, and perceptions that uphold organizational core values” (Mkoji & Sikalieh, 2012).
Despite workforce diversity importance for today’s companies to succeed in global operations, they still need to understand workforce diversity mechanisms (benefits and disadvantages) to minimize its impact when it threatens to exacerbate the organizational performance.
Benefits of workforce diversity
Creativity increases: when people with different ideas and perspectives work together, they come up with more creative and better solutions to a problem (“Advantages and disadvantages”).
Client base increases: when a firm is well known by its adoption of workforce diversity, its customer base will increase believing in firm’s commitment to its community (Mayhew).
New processes: “people with different ideas collaborate together to bring multiple skills to working environment, think cross culturally, and adapt quickly to new situations” (“Advantages and disadvantages”).
Conflict: conflict helps diverse workforce to come up with more effective decisions and solutions, and thereby better performance and results (“Benefits and problems”).
Lawsuit reduction: workforce diversity helps reduce lawsuits against companies applying equal employment opportunity practices, and thereby increasing recruitment and enhancing their images (“Benefits and problems”).
Shareholder value increases: diversified knowledge and experiences with international markets and various customer bases help in increasing profits (“Benefits and problems”).

Disadvantages of workforce diversity
Complexity increases: diverse workforce had difficulty reaching agreements on decisions and actions due to increased complexities of processes during problem solving (“Benefits and problems”).
Training cost increases: all organizational members should attend training programs that support diversity within the organization (“Advantages and disadvantages”).
If not well managed, workforce diversity can lead to “lower team cohesiveness” and slower decisions due to stress and tension resulting from miscommunications and misunderstandings (“Benefits and problems”).
Conflicts increase: diverse workforce is more susceptible to conflicts due to ignorance or unwillingness to accept different cultures, thus creating stereotype and ethnocentrism attitude (Deshwal & Choudhary, 2012).
Competition rather than teamwork: diversity initiates competition among employees in case they ignore or not accept other cultures (“Advantages and disadvantages”).
Failure to respect others: lack of respect between different cultures will restrain effective communication among diverse workforces in workplace (“Advantages and disadvantages”).
All types of organizations should know that workforce diversity and suitable environment for diversity aren’t mutually exclusive and that a suitable working environment is required for workforce diversity to thrive; or diversity will have a negative impact on organizations’ performance (Cox). General Mills and Shell are 2 examples of companies that successfully adopted workforce diversity in their workplaces.
General Mills
General Mills previous CEO Steve Sanger emphasized that diversity is the “key business strategy” that helped the company to have a competitive advantage over the competitors and thereby gaining more profits (Glover, 2009). General Mills is a worldwide company in food categories producing leading brands, such as Cheerios, Betty Crocker, Pillsbury, and Haagen-Dazs. Its success derives from its internal working environment culture where employees trust and respect each other, and management supports its employees with professional training sessions to prepare them for future leadership positions in the company. Moreover, management provides its employees with flexible working environment to increase their job satisfaction and thereby encourage creativity and productivity. Such working conditions are supported with diversity as the “business strategy” that guides the company’s direction in terms of recruiting best talents available in the markets considering both surface level diversities and deep level diversities of individuals. So by establishing workforce diversity, General Mills benefited from different ideas and perspectives of its workforce, and thus came out with healthy leading brand products that meet needs of global customers, and so establishing strong connections with diverse customers and also with diverse communities through philanthropic and volunteer activities; in addition to gaining tremendous profits (Diversity & Inclusion, 2011). Diversity also helped General Mills to be considered a great place for work, as it was ranked among “the best 100 companies for work based on Fortune”, “one of the top 5 best companies for multicultural women based on working mother magazine”, and also “one of the top 50 companies for diversity based on DiversityInc”
Shell
Shell is a leading energy company worldwide that adopts workforce diversity. As a global company, “Shell ensures there is consistent understanding of diversity across all offices” (“Workplace Diversity”). Diversity is highly valued at Shell believing that more creative ideas can come out due to different minds thinking to solve one problem. Shell encourages diversity in recruitment processes, as recruitment officers regularly receive training on promoting diversity to hire best talents in the market regardless of surface level diversities and deep level diversities. Even when sending representatives for employment career booth, Shell ensures diversity in terms of gender, cultural background, and technical skills. When Shell employees are too different, but work confidently with each other, then employees had reached Shell’s commonality goal and are directed by its vision. Shell’s increase of women recruitment in technical roles emphasized its value for diversity, as it has established Women’s Networks where women can share experiences to benefit from diversity within the company, and such network initiative was a main reason for Shell’s rank as the 14th in “the Times Top 100 table of graduate employers for females”(“Workplace Diversity”). Every employee in Shell is given diversity workshops and training programs by the company’s diversity practitioners to understand how to better manage diversity and how it can help him achieve his professional goals wherever and whatever job he is working.
Not all companies that have diverse workforces are as successful as General Mills and Shell, because a diverse workforce doesn’t necessarily result in better organizational reputation and more profits unless diversity is well managed. So as companies are becoming more diversified, they must implement strategies to effectively manage diversity; and that process usually starts with top management’s commitment to diversity, but with some assistance from the organizational employees (“Benefits and problems”). Deshwal & Choudhary introduced the guidelines for effective workforce diversity in the workplace:
1) Effective diversity starts with top management’s commitment, and any human resources management practices, such as recruitment, training, performance management, and succession planning shouldn’t involve any discrimination based on color, race, gender, religion, and nationality. Employees are rewarded based on their competencies and task related abilities.
2) The organization should establish a satisfying working environment for diverse people to increase their acceptance, motivation, and commitment to the organization and organizational diversity through removing any barriers to diversity success.
3) Diverse workforce should be given objective and effective performance feedback against company performance standards without bias, so that desirable and undesirable behaviors within the organization would be clearly communicated. 4) Management must first study firm’s culture, and its readiness for diversity to be able to implement appropriate diversity strategy for its workforce. The higher the level of employees’ awareness of firm’s culture, the easier it is for managers to implement and manage organizational diversity.
5) Providing diverse workforces with practical training will help them better deal with daily diversity issues, and respect diverse opinions, as diversity will be retained by management at all organizational levels.
6) Management must understand how cultural differences can create conflicts to be able to come up with solutions for such conflicts and better manage diverse workforces in later situations using the cultural differences knowledge.
7) Managers should be involved in mentoring programs as advisors for employees on workforce diversity concept and clarify reasons for diversity management in the workplace.

8) Establishment of formal support system and informal networks is very important, so that people with different cultural backgrounds better understand each other’s work values in addition to support of diversity at all levels of the organization and reduction of discrimination.
9) Diversity training programs should clarify for all levels of the organization what is diversity and how the organization can achieve its objectives through effective diversity management.

Despite the guidelines, are there still differences in characteristics of diverse workforce that can impede better organizational performance or do commitments to workforce diversity always result in better organizational performance? 4 tests showing the impact of workforce diversity on organizational performance will answer such questions.

1st test: “The Effects of Diversity on Business Performance: Report of the Diversity Research network”

Thomas Kochan et al. summarized the effect of gender and racial diversity on business performance in 4 large well reputable firms committed to building and managing effective workforce diversity. Quantitative and qualitative data were collected from the four studies considering demographic characteristics of teams and business units as “unit of analysis” to come up with the conclusion that both gender and racial diversities have no positive or negative effect on business performance.

Study 1: data were collected from a “large information processing company” that supports diversity through its business meetings agenda, and its diversified taskforce work structure. The results were as follows: (Kochan et al, 2003).

Gender diversity had positive impact on team processes, unlike racial diversity that had negative impact on team processes. No significant effect of gender and racial diversity on performance.
Study 2: data were collected from a “large financial services firm” highly committed to diversity. 3 types of data were collected: 1) demographic characteristics of employees in each branch, 2) employees’ satisfaction attitude, and 3) each branch performance for allocation of rewards and bonuses. And the results were as follows:
In branches where employees participated in diversity education programs, greater gender and racial diversity didn’t have any positive relationship with performance, but rather inverse relationship (i.e. lower performance).
Study 3: data were collected from “another information processing firm” that manages diversity in human resources practices, as staffing, training and performance management. And the results were as follows: (Kochan et al, 2003).
No significant relationship between team gender and ethnic diversity and team performance.
No significant relationship between team gender and ethnic diversity and team processes, such as “team cooperation”.
Gender diversity has no significant relationship with “team goal achievement”, unlike ethnic diversity that has a negative relationship with team goal achievement.
Study 4: data were collected from a “large retailer” to examine whether workplace diversity had an impact on workplace performance without studying interactions among employees. And the results were as follows:
Customers don’t care whether salesperson serving them is of the same gender or race or not, as there is “no harm or benefit” from gender and racial diversity in the workplace on the workplace performance.

2nd test: “The Influence of Personality Dimensions on Organizational Performance” (Mkoji & Sikalieh, 2012).

A descriptive research design was formulated; and both qualitative and quantitative data were collected using questionnaires sent by email to a sample of 85 Kenya Medical Research Institute employees to study the effect of personality as a workforce diversity factor on organizational performance. Personality dimension refers to 5 big personality traits: “extrovert/ introvert, agreeableness, conscientiousness, emotional stability, and openness to experience”.

The results revealed that conscientiousness trait is the best predictor of workforce performance in the organization followed by openness to experience, agreeableness, extroversion, and finally emotional stability. So employees with high performance are positively influenced by conscientiousness trait.

Moreover, the results showed that there is no direct cause and effect relationship between personality and performance at KEMRI, as other dimensions also influence the organizational performance.

3rd test: “The Impact of Gender Diversity on Performance in Services and Manufacturing Organizations”

Muhammad Ali et al’s study collected quantitative data using a longitudinal research design to test 3 predictions of gender diversity relationship with organizational performance: positive linear prediction, negative linear prediction, and inverted U-shaped prediction. Also, the type of industry, whether service or manufacturing, affected the relationship between gender diversity and organizational performance.

Multiple regression technique was used to test the 3 predictions and the results were as follows:
Positive relationship and inverted U-shaped relationship predictions were supported; on the contrary negative relationship prediction wasn’t supported.

Positive Linear Prediction

The positive linear prediction is based on “resource-based view of the firm” where gender diversity provides the firm with scarce and valuable resources that help the firm gain a sustainable competitive advantage that should result in better organizational performance (Barney, 1991) (Grant, 1991). Thus, positive linear prediction suggests more diversity for better performance.

Negative Linear Prediction

The negative linear prediction is based on “self categorization and social identity theories” where people classify themselves into different social identity groups. So unlike positive linear prediction, negative linear prediction suggests less diversity for better performance.

Inverted U-shaped Curvilinear Prediction

Inverted U shaped prediction is based on integration of both positive linear and negative linear predictions. The integration of these theories means that different ranges of gender diversity are associated with different dynamics explained by one or other theory. And such different ranges of gender diversity have different effects on organizational performance. Moderating Effect of Industry Type

Different industry types had an impact on the “strength of relationship” between gender diversity and organizational performance. Positive linear prediction is much stronger in service firms industry, while negative linear prediction is much stronger in manufacturing firms industry.
4th test: “Effect of Workforce Age on Quantitative and Qualitative Organizational Performance: Case Study Evidence”

This study analyzes the impact of workforce age on organizational performance that is measured on two dimensional variables: Quality and Quantity; and how each dimension is affected differently. The case study shows the impact of age of German judges on their qualitative and quantitative performance in the court (decisions on labor related cases). Quantity refers to the number of cases completed by the judge in the court during one year, while quality refers to the share of judge decisions that are confirmed subsequently by Federal Labor Court
The German Labor Court of Appeal is the best setting to demonstrate such relationship, as judge’s task has many performance dimensions that can be measured; and courts usually employ senior old judges on judicial tasks because of their “comparative advantage” over younger judges.

The results were as follows: higher court judge age is positively related with qualitative court performance, while higher court judge age is negatively related with quantitative court performance, as “an increase in average age of one standard deviation is estimated to lead to a reduction in processed cases of about 5 percent, but to an increase of the confirmation rate by higher authorities by about 10 percent

The 4 tests results revealed that differences in characteristics of diverse workforce can have a negative impact on outcomes and organizational performance, and that commitment to workforce diversity solely doesn’t necessarily lead to better organizational performance; so effective diversity management is a must requirement for better organizational performance and results.…...

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