In this paper we explore previous literature on the subject of managing diversity. We begin by looking at the various definitions of diversity. An analysis of the arguments found in the literature for, and against, workplace diversity is then presented. We then look at the results of empirical research conducted to examine the affects of diversity on organisational performance. A number of cases are included to illustrate real world examples to the literature reviewed. So why does diversity matter?
The most simple and compelling answer is because it has the potential to lead to increased firm performance (Capowski 1996; Johnson 1999; Von Bergen, Soper & Parnell 2005). This has significant ramifications for business strategy because a diverse workforce can lead to higher quality decisions (Miller, Burke & Glick 1998) Thomas Roosavelt Junior defines diversity as ‘dealing with the collective mixture of differences and similarities along a given dimension, and it extends to age, personal and corporate background, education, function and personality’ (De Janesz, Dowd & Schnedier 2006, p.91).
His broad definition includes lifestyle, sexual orientation, geographic origin, tenure with an organisation, physical and mental disability, exempt or non-exempt status, and management or nonmanagement (De Janesz et al. 2006). Hazard (2004, p. 29) also views workplace diversity as ‘more than race and gender. It refers to a broad range of differences that influence how people interact and achieve business results’. A broad definition of diversity is also adopted by Worth (2006), Richardson (2005) and Gill (2003).
Therefore, as almost all workplaces have a diverse group of employees, managers and directors, being able to effectively manage workplace diversity is important to the majority of businesses. In this article, we have chosen to adopt a broad definition of ‘diversity’ as it is more relevant to most businesses. Kramer (1998) makes an important distinction between diversity and affirmative action, arguing that diversity management is an approach to management rather than an extension of affirmative action.
Roosavelt (1990, p. 108) argues that ‘affirmative action is artificial’, whilst managing diversity consists ‘of enabling people, in this case minorities and women, to perform to their potential’. Accordingly, ‘managing diversity is a philosophy about how differences among individuals and organisations can be embraced rather than feared, encouraged rather than squelched’ (De Janesz et al. 2006, p. 93).
It is ‘a dynamic process that needs to influence business strategy and support business goals (Worman 2005, p. 27). ‘For diversity management to be effective, all groups in the workplace need to perceive that employment policies operate to satisfy their needs as well as those of individuals with different personality characteristics’ (Kramer 1998, p. 141). It is argued by Kramer (1998) that to be managed effectively, it must be done at the strategic, managerial & operational levels within an organisation.
Gilbert & Ivancevich (2000) support Kramer’s (1998) argument by highlighting the difference between a genuine commitment by senior management to managing diversity as opposed to superficial commitment in two organisations, finding that unless there is a real commitment at the strategy level of business the benefits an organisation can attain from managing diversity will be limited. This is supported by research conducted by Lowther (2006) at Dell Computers that found having support for the diversity strategy at board level was an important driver to the success of their diversity program.
However, ‘recruiting diverse staff is not enough. Once you hire employees, you must make sure the environment doesn’t create obstacles to teamwork or promotions’ (Capowski 1996, p. 15). As a result, a shift has occurred within firms from merely complying with affirmative action legislation to managing diversity in order to increase firm performance. Furthermore, Merrill-Sands, Holvino and Cumming (2000) acknowledge that while a diverse workforce may offer a wider pool of approaches, perspectives and resources–and even better decision making–it can also reduce team cohesion, complicate communication and heighten conflict.
Accordingly, multicultural teams can often generate frustrating management dilemmas and create substantial obstacles to effective teamwork. Brett, Behfar & Kern (2006) recognised four challenges that exist within multicultural teams. They are: * Direct versus indirect communication; * Trouble with accents and fluency; * Differing attitudes towards hierarchy and authority; and * Conflicting norms for decision making. Brett et al. (2006) further identified strategies to deal with challenges relating to workplace diversity.
They are: * Adaptation – cultural differences are acknowledged and team members figure out how to live with them; * Structural intervention – deliberate reorganization or reassignment designed to reduce or remove interpersonal friction and the source of conflict; * Managerial intervention – when a manager acts as a judge and makes the final decision without the teams involvement; and * Exit – a strategy used as a last resort when emotions were running high and when too much face was lost. For example, a US team and Latin American buyers was negotiating with a team of Korean buyers where discussions were conducted in English.
Often, the Korean would caucus in Korean, frustrating the buyers, who responded by caucusing in Spanish. This approach proved effective, conveying to the Koreans in an indirect manner that the caucus in Korean was frustrating to the other side. Therefore, as a result both teams interacted in a more professional and respectable manner (Brett et al. 2006). Johnson (1999) and Richard (2000) have both argued that superior firm performance results from a culturally diverse work force. It was however, Von Bergen, Soper & Parnell (2005) that found a link between minority friendly firms and share performance through rigorous empirical analysis.
For example, the senior management at IBM ‘insisted that the task force create a link between IBM’s diversity goals and its business goals – that this would be good business, not good philanthropy’ (Thomas 2004, p. 107). Accordingly, IBM’s revenue that was derived from women-owned businesses and others minority groups has risen dramatically, from ‘$10 million in 1998 to hundreds of millions in 2003’ (Thomas 2004, p. 107). Capowski (1996, p. 13) argues that ‘diversity as a bottom-line line issue has overshadowed diversity as a do-good initiative’.
Ferlie, Hartley & Martin (2003) also found justification for increasing organisational diversity as a strategy to increase firm performance. This may come in the form of increased adaptability (Wiersema & Bantel 1993) or increased productivity (Jackson 1993). For example, Dell recognised that a diverse workforce was critical to the exploration of new ideas and the creation of innovation (Lowther 2006). However, not everyone agrees that increasing workplace diversity automatically translates to improved organisational performance.
For example, Thomas and Ely (1996) argue that the way in which diversity is managed leads to increased productivity, rather than the mere existence of diversity. This is supported by Kwak (2003) who argues that the organisations’ culture, its strategies and policies can have an impact on the ability of a diverse workforce to perform exceptionally. Hence, managing diversity becomes increasingly important for businesses that want to maximise the potential of their workforce. De Janesz et al (2006) have identified a number of barriers that exist within some individuals to accepting diversity.
They include prejudice, ethnocentrism, stereotypes, discrimination, harassment and backlash. Backlash is defined as the ‘negative reaction to the gaining of power by members of previously underrepresented groups, leading to fear, resentment, and reverse discrimination’ (De Janesz et al. 2006, p. 94). However, by focussing on overcoming these barriers firms can improve their ability to manage diversity (Stalinski 2004). For example, by successfully managing its diversity programs, Dell has built a stronger, more flexible organisation (Lowther 2006).
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