To what extent does diversity management contribute to business? Use academic literature to support your argument

This blog post contains an essay submission from the Managing Director of Element Media Limited, during his professional development as a mature student, doing a Business Administration Degree at Durham University Business School

5th July 2022

 Author Michael Chapman-Johns, Managing Director.

Estimated reading time: 8 minutes, 38 seconds.

Michael Chapman-Johns

Michael Chapman-Johns

Managing Director

Michael has16 years of experience being self-employed and found his true passion is helping others achieve their entrepreneurial goals and dreams through digital marketing & business support. Having helped many small businesses get off the ground and stay viable, he prides himself on personal development and believes passionately in putting people first in everything.

This essay will explore the business case for diversity using evidence from academic literature. Diversity management in this essay will refer to the policies and procedures a business actively engages with to create a diverse workforce that goes above and beyond externally driven equal opportunities law. For context, the studies discussed will be from Western democratic capitalist countries. It should be noted that diversity is a cultural phenomenon relative to the society in which it is discussed. Different social norms due to geographical differences can create unique levels of diversity beyond basic demographics. Social Identity Theory (SIT) is the main theoretical framework this essay will use to explain biases that affect diversity in an organisation; however other sociological theories can help understand the complex nature of diversity in society. First, social identity theory will be discussed through the lens of diversity. Second, an argument supporting the business case for diversity will be presented. Third, a critical analysis of why some diversity programmes fail to deliver these possible benefits will be discussed. Fourth, an individual’s socioeconomic status will be addressed as the forgotten dimension of diversity to highlight the power of cognitive diversity and a need to understand how diversity transcends mainstream thinking around demographics. Fifth, a brief discussion will highlight the shift from diversity management to a culture of inclusion in contemporary thinking, with some practical examples of business practices which can aid this. Concluding in the argument that for a business to truly benefit from the advantages of diverse thinking, innovation of thought and recombination of ideas that different minds can bring to a business. A business needs to go beyond tick boxing practices when it comes to diversity management and takes diversity to a deep level within the organisation by creating a culture of inclusion.

SIT (Tajfel & Turner 1979; Islam 2014) developed out of Henri Tajfels early research on social and cognitive grouping; the theory seeks to explain the phenomena of people seeking out others in their social networks who are similar to them (Barak, 2017). SIT explains the security people can find by forming social groups that help them protect themselves through a perceived safety in similarity phenomena. Homogeneity, while instinctive, has no grounds in logic. This research could argue against diverse work teams due to the conflict arising from different social categories mixing (Tajfel & Turner 1979). However, in light of the central assumption that ingroup bias is motivated by the desire to see your group in a positive light and create a them and us paradox leading to the self-esteem hypothesis. While evidence for the self-esteem hypothesis is mixed (Brown, 2000); however, it could be a logical assumption to conclude that the desire to fit in and feel safe around others who are similar. This may lead to a desire to have higher self-esteem and, therefore, to deem others as of lower standing, creating negative stereotypes and prejudice. Research aiming to prove correlations between such behaviour relies heavily on self-reporting levels of self-esteem, so are limited (Brown, 2000). It could be argued that such behaviour leads, therefore, to cognitive biases, both conscious and unconscious, confirmation, blindspot and bandwagon biases, to name a few (Barak 2017; Huddy 2001; Turner 1996). Consequently, many managers will hire similar to them, promote those identical to them, and not see past their blind spots or biases. Behaviours that can lead to adverse performance outcomes (Barak 2017; Redman et al., 2021; Syed 2020).

A Gallup study published in the Journal of Leadership & Organisational Studies discovered a strong connection between perception of inclusiveness and employee engagement, supporting other studies which show a link between inclusivity, employee engagement and a 46% to 58% increase if financial KPIs (Harter et al., 2013; Jones et al., 2005). Discrimination perception can negatively impact a company’s performance due to its relationship with an employee’s commitment and engagement. Discrimination perception can be an antecedent for absences, low productivity, and high staff turnover (Kunze et al., 2010). Therefore, when age diversity increases in a workplace, the risk of perceived discrimination increases; management awareness is essential to mitigate this negative perception (Kunze et al., 2010). Likewise, evidence suggesting a strong link between sexuality and gender-related discrimination and adverse outcomes for individuals, groups and organisations has been observed (Corning, 2002; Gutek et al., 1996; Mays & Cocharn, 2001). Leads to diversity management and organisational inclusivity being a key driver in an organisation’s performance; however, this requires leadership to foster a true sense of inclusion (Sabharwal, M, 2014). As well as academic papers support a business case for diversity, business-led research supports the case. Notably, McKinsey & Company is a global management consultancy firm that advises business leaders and governments. Found in their 2015 diversity report found in 366 companies a signification connection between diversity and financial performance; companies in the top quartile for ethnic diversity were 35% more likely to have financial returns above the national average for their industry (Hunt et al., 2015). With both academic and business studies supporting a case for diversity, the validity of its impact on organisations solidifies. With this in mind, it could also be argued that teamwork and collaboration are engines for success. This phenomenon can be seen in a decline in solo-authored research papers, with analysis from business and economics journals showing a dramatic drop from 54.8% in 1980 to 15.6% in 2015. A perceived advantage of working with others in research is the exchange of thought and diverse thinking this can bring. These perceived benefits are desired to create the best product, the paper (Mossa & Li, 2019; Syed, 2020). The profound effect of diversity is the recombination of ideas and radical and incremental innovation that cognitive diversity brings to a business (Frost, 2014; Syed, 2020). Examples of this power can be seen in corporations like Apple, Google, Netflix and Facebook, all startups with teams or friends collaborating and exchanging ideas to innovate and solve problems. There is also a moral case for diversity which is powerful enough alone. Corporate responsibility should include reaching out and including diverse talent in a workforce for inclusivity, efficiency and optimum productivity during fast-changing economic and business landscapes (Frost, 2014).

A significant hurdle in harnessing the power of diversity is that leaders forget to foster change in the organisational culture and misunderstand how to create a culture of deep level inclusivity. This change needs to be at a deep level within the actions and behaviours of leaders to then trickle down the organisation’s structure. A proper shift in the culture of a company is required, and individuals should feel empowered to be unique and have a sense of belonging at the same time. Creating a genuinely equal environment for employees supports learning and respect for others (Ely & Thomas, 2020). While SIT explains categorising people into groups, organisations should avoid this practice, and innately many diversity management programs define employees by using identity as a crude proxy for cognitive diversity, creating stereotypes and identities that are counterproductive (Page, 2007). Many diversity programs concentrate on improving the numbers of underrepresented groups without genuinely changing the culture to make these individuals feel safe, secure and valued. Simply representation is not enough to add value to a business and create positive change; systematic inequalities ingrained in organisations need to be addressed by giving value to the ideas, thoughts and suggestions made by those in underrepresented groups. Shifting the power balance within an organisation improves systemic inequalities and creates more fairness (Dobbin et al., 2016; Ely et al., 2020). Truly overcoming negative stereotyping and nepotism requires more than passive policies like diversity quotas, blind applications, and positive discrimination practices. For diversity management programs to not fail, a focus needs to be on cultural and systemic changes that create a culture of openness, fairness and inclusion. Terminology and the packaging of a program can also be a barrier to success; for example, mentoring programs that place colleagues together would create groups, as stated in SIT. Leading to higher performance outcomes and less friction associated with mandatory diversity training programmes. Simply changing the name of a programme and reshaping it in a positive light supports better performance results (Dobbin & Kalev, 2016). These programs aim to address the intergroup conflict that can be raised when groups of different backgrounds are forced to work together (Tajfel, 1974; Tajfel et al., 1979). Along with interpersonal social niche, development is created when employees actively seek friendships with those who share a similar set of broader-ranging dynamics, like values, attitudes, beliefs and even prejudices (Bahns et el., 2017). From a leadership management style viewpoint, studies into leadership outcomes and Leader Membership Exchange theory from an SIT perspective found a culture of individualistic thinking, not collectivism, led by depersonalised leaders proved a more effective management style (Hoog, 2005). Explaining why creating a culture of inclusion that nurtures the individual over the group results in more effective diversity management. This tension between the need to feel like you belong and be unique is an area of research in business management (Shore et al,. 2011). This is where diversity management can fail, and the new contemporary shift to inclusion practices presents exciting opportunities truly create a positive culture of inclusion. Creating value through an inclusive culture must come from the top down and be in the fabric of all management actions and words to benefit both the employee and the corporation (Shore et al,. 2011; Frost., 2014). This inclusivity paradigm is one that the Home Office seeks to create via its Inclusive by Instinct human resources management programme. They define inclusive as being an environment where everyone can be themselves while performing to the best of their abilities. A working environment that is supportive and flexible. A culture that promotes the raising of ideas, and challenging of them in a respectful manner (Home Office, 2018).

An exciting way to understand the complexity of diversity and how cognitive diversity is created in people is by examining the forgotten dimension of diversity, socioeconomic status. Two people with very different demographics can think very similarly and have similar social capital if their social class origins are similar. They may have very similar social capital, access to resources, and similar people around them to engrain a specific identity or thought process (Ingram, 2021; Martin, 2019). Research suggests that individuals from lower socioeconomic backgrounds have higher levels of empathy and understanding of other people’s distress (Ingram, 2021; Stella et al., 2012), characteristics which can lead to better management outcomes in a business setting of elevated stress (Ingram, 2011). Socioeconomic status also affects the ability to become hired or promoted within an organisation due to the lack of social capital. This means excluding socioeconomic status as a marker in diversity management will leave dissonance within a programme to reduce systematic inequities within an organisation or the broader community (Ingram, 2021). More research in this area is urgently needed to shape the discourse and explore the subject more.

Three key areas have been suggested in academic research that promotes the sense of inclusion in a workplace. Decision-making influences access to work-sensitive information and job security (Hope Pelled et al,. 1999). A shift from equal opportunities to diversity management has meant that the legal case for equality has become a much-accepted business case (Tatli, 2011). However, an actual paradigm shift towards inclusion is now underway. One that improves the numbers of underrepresented groups in the workforce to an inclusive culture where everyone is valued as an individual but also feels a sense of belonging is underway and is a move from passive management of diversity to a more active approach (Redman et al., 2021; Sabharwal, M, 2014; Shore et al., 2011). Creating a culture of inclusion also reduces the risk of retention issues that some diversity recruitment programs experience due to the lip servicing nature of many surface-level programs. Failing to address the culture in an organisation, matching the diversity management policy of a management or recruitment drive leads to high staff turnover (McKay & Avery, 2005). A few key strategies around the practical application of these findings are; Being open about your diversity goals and shifting to an inclusive rhetoric that values everyone’s voice, while being transparent about the aims and objectives of the organisation. Concurrently fostering a culture of openness and leaving management socially accountable. Management can devote specific time where they are available to hear employees’ ideas, thoughts and concerns (Johnson, 2020). During meetings, always be aware of hierarchical power dynamics that often shape meetings; let the employee with the lowest level of power in the room speak first, and the employee with the highest amount of hierarchial power speaks last. Assign someone to play devil’s advocate and share this role with each person in the organisation on a rotating basis (Ely & Thomas, 2020). While Amazon’s record on employee relations is weak, this is a technique used within their higher management levels to generate innovative ideas.

In conclusion, SIT is an easy to understand why people develop biases, and by knowing why, managers and leaders can tackle these biases at the root cause. While it must be noted that correlation does not mean causation, evidence is growing which supports both benefits for employers and the wider community when a business creates a culture of inclusivity that goes further than surface-level diversity management. A culture of inclusion is one that truly respects the individual while creating the psychological safety of a group, which allows for an element of group identity without the negative impacts of biases and negative stereotyping. The power of cognitive diversity cannot be overstated; training and cultural development are required to allow innovation and idea generation through exchanging thoughts. A level of awareness of possible pitfalls and tensions is also needed to reap the rewards and not create conflict. Change must, however, come from the top of an organisation and an active approach with action which matches intentions is ultimately more likely to lead to better outputs for business. More research is required to explore areas such as social class origins as a marker of diversity and what this can bring to the field of management, with the view to supporting policymakers and business leaders in shaping a better and more productive tomorrow.

We hope you have found this essay interesting. Please take a look at the rest of our blog articles that cover a selection of topics like branding, website maintenance, tech news, & business. Below is the reference list for this essay, which offers a wide selection of reading around diversity management and inclusion in business.

References

Bahns, A.J., Crandall, C.S., Gillath, O. and Preacher, K.J. (2017) ‘Similarity in relationships as niche construction: Choice, stability, and influence within dyads in a free choice environment.’ Journal of Personality and Social Psychology, 112(2), p.329.

Barak, M.E.M. (2017) ‘Managing diversity: Toward a globally inclusive workplace.’ Sage Publications.

Corning, A.F. (2002) ‘Self-esteem as a moderator between perceived discrimination and psychological distress among women.’ Journal of Counselling Psychology, 49(1), p.117.

Brown, R. (2000) ‘Social identity theory: Past achievements, current problems and future challenges.’ European journal of social psychology, 30(6), pp.745-778.

Dobbin, F. and Kalev, A. (2016) ‘Why diversity programs fail.’ Harvard Business Review, 94(7), p.14.

Ely, R.J. and Thomas, D.A. (2020) ‘Getting serious about diversity.’ Harvard Business Review, 98(6), pp.114-122.

Frost, S. (2014) ‘The inclusion imperative: How real inclusion creates better business and builds better societies.’ Kogan Page Publishers.

Gutek, B.A., Cohen, A.G. and Tsui, A. (1996) ‘Reactions to perceived sex discrimination.’ Human relations, 49(6), pp.791-813.

Harter, J.K., Schmidt, F.L., Agrawal, S., Plowman, S.K. and Blue, A. (2013) ‘The relationship between engagement at work and organisational outcomes.’ Gallup Poll Consulting University Press, Washington.

Hogg, M. A., Martin, R., Epitropaki, O., Mankad, A., Svensson, Al., Weeden, K. (2005) ‘Effective Leadership in Salient Groups: Revisiting Leader-Member Exchange Theory From the Perspective of the Social Identity Theory of Leadership’, Personality and Social Psychology Bulletin, 31(7), pp. 991–1004. doi: 10.1177/0146167204273098.

Hogg, M.A. (2016) ‘Social identity theory’, In understanding peace and conflict through social identity theory (pp. 3-17). Springer, Cham.

Home Office (2018) ‘Diversity and inclusion strategy 2018 to 2025.’ Home Office UK Government. Available at: https://www.gov.uk/government/publications/diversity-and-inclusion-strategy-2018-to-2025 (Accessed: 19th April 2022).

Hope Pelled, L., Ledford, Jr, G.E. and Albers Mohrman, S. (1999) ‘Demographic dissimilarity and workplace inclusion.’ Journal of Management Studies, 36(7), pp.1013-1031.

Huddy, L. (2001) ‘From social to political identity: A critical examination of social identity theory.’ Political Psychology, 22(1), pp.127-156.

Hunt, V., Layton, D. and Prince, S. (2015) ‘Diversity matters.’ McKinsey & Company, 1(1), pp.15-29.

Jones, J.R. and Harter, J.K. (2005) ‘Race effects on the employee engagement-turnover intention relationship.’ Journal of Leadership & Organizational Studies, 11(2), pp.78-88.

Islam, G. (2014) ‘Social identity theory.’ Journal of personality and Social Psychology, 67, pp.741-763.

Johnson, S.K. (2020) ‘Inclusify: the power of uniqueness and belonging to build innovative teams.’ Harper Business.

Martin, S.R. and Côté, S. (2019) ‘Social class transitioners: Their cultural abilities and organisational importance.’ Academy of Management Review, 44(3), pp.618-642.

Mays, V.M. and Cochran, S.D. (2001) ‘Mental health correlates of perceived discrimination among lesbian, gay, and bisexual adults in the United States.’ American journal of public health, 91(11), pp.1869-1876.

McKay, P.F. and Avery, D.R. (2005) ‘Warning! Diversity recruitment could backfire.’ Journal of Management Inquiry, 14(4), pp.330-336.

Moosa, I. and Li, L., (2019) ‘Trends and cycles in the publication of solo papers in business and economics journals.’ Journal of Scholarly Publishing, 51(1), pp.76-98.

Ingram, P. (2021) ‘The Forgotten Dimension of Diversity.’ Harvard Business Review, 99(1), pp.58-68.

Kunze, F., Boehm, S.A. and Bruch, H. (2011) ‘Age diversity, age discrimination climate and performance consequences—a cross-organisational study.’ Journal of organisational behaviour, 32(2), pp.264-290.

Page, S.E. (2007) ‘Making the difference: Applying a logic of diversity.’ Academy of Management Perspectives, 21(4), pp.6-20.

Redman, T. and Wilkinson, A. (2021.) ‘Contemporary human resource management: Text and cases.’ Pearson Education.

Sabharwal, M. (2014) ‘Is diversity management sufficient? Organisational inclusion to further performance.’ Public Personnel Management, 43(2), pp.197-217.

Shore, L.M., Randel, A.E., Chung, B.G., Dean, M.A., Holcombe Ehrhart, K. and Singh, G. (2011) ‘Inclusion and diversity in work groups: A review and model for future research.’ Journal of Management, 37(4), pp.1262-1289.

Stellar, J.E., Manzo, V.M., Kraus, M.W. and Keltner, D., 2012. Class and compassion: socioeconomic factors predict responses to suffering. Emotion, 12(3), p.449.

Syed, M. (2019) Rebel ideas: The power of diverse thinking. Hachette UK.
Tajfel, H., Turner, J.C., Austin, W.G. and Worchel, S. (1979) ‘An integrative theory of intergroup conflict.’ Organisational identity: A reader, 56(65), pp.9780203505984-16.

Tajfel, H. (1974) ‘Social identity and intergroup behaviour’, Social Science Information, 13(2), pp. 65–93. doi: 10.1177/053901847401300204.

Tatli, A. (2011) ‘A multi‐layered exploration of the diversity management field: diversity discourses, practices and practitioners in the UK.’ British Journal of Management, 22(2), pp.238-253.

Wilkinson, A., Redman, T. and Dundon, T. editors. (2021). ‘Contemporary Human Resource Management: Text and Cases, 6th Edition.’ London: Pearson.

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