The world is split into two types of people: those who nod empathetically at the mention of diversity in organizations and those who roll their eyes at this seemingly oversaturated word in a world that appears dominated by start-ups, and firms wanting to adopt ‘innovative’ organizational cultures and pandering to millennials, who are slated to soon comprise the largest working demographic. Yet in today’s political climate, this innocuous word has come to mean more than just multicultural environments and innovative firms that can stay ahead of the curve. It has come to represent the collective anxiety of entire groups, policies that have become cultural battlegrounds in courts, and the steady vitriol in our social media (and increasingly what was once considered fringe media) that frighteningly reflect historical tragedies.
There are abundant articles that cite research by economists, organizational scientists, psychologists, sociologists, and demographers, which find that diversity improves creativity, innovation, and bottom lines. A quick google search of ‘workplace diversity’ for this article revealed a list of snazzy titles: “top 5 reasons why diversity will improve your office”, “how to be an inclusive leader”, “diversity increases creativity” — okay, maybe not really snazzy but click on an article and you’ll be given a shortlist of why diversity is good. But rarely are these articles good enough to overcome this idea that affirmative actions and other diversity policies only serve to promote the under-qualified, increase workplace hostility, decrease the influence of organizational culture and ultimately aren’t worth implementing for all the potential creativity, innovation and bottom line that they achieve. After all, aren’t all the paragons of modern innovation still white, male and firmly from the upper-middle class? So let’s take it a step back (rewind). What exactly does diversity in an organization mean?
Diversity in organizations aim to maximize an individual’s inclusion and contribution, increase social equity, and achieve greater organizational success by understanding and including different groups in the workplace to reduce or eliminate bias and discrimination, and to benefit from the differences. It builds on, and goes beyond, working on prejudices, stereotypes, and discrimination to address the management of diversity to reap benefits. Diversity in organizations is a shade different from inclusion, which entails creating an environment where individuals can truly be themselves as they engage in group tasks and activities, contributing fully to the organization. Inclusion goes beyond diversity to focus on an individual’s experience of feeling engaged, involved, safe, valued and authentic both at the individual, group and organizational levels.
Diversity and inclusion in organizations, however, can have very different assumptions and recommendations based on how they are defined. Is diversity the presence of different social groups that are distinctive because of their historical and cultural handprint or its interaction with other groups? Is diversity the presence of different personalities, traits, and capabilities distributed across the population — empathetic, diligent, inspiring? Is diversity the reflection of the country’s demographic population? Or is diversity the intersection of multiple group identities (different demographics? demographic and merit? different demographics and merit?)? Identifying what diversity means to you and your organization is crucial to implement appropriate diversity policies and training. Diversity policies to address gender will be different from those to address race, but they would also differ from policies that focus on the intersection of both race and gender.
It’s easier said than done. Researchers themselves often define diversity and groups in vague broad terms anywhere from race and gender to tenure and education level.
Research into diversity in organizations is largely led by industry and organizational psychologists (IO) and cross-cultural psychologists who aim to identify groups, how these groups become salient, whether diversity of individuals from different groups benefits organizations, and conflicts that may arise from diverse organizations. The literature sprawls across decades and authors, and our understanding of ‘groups’ have traced along some theories that sound familiar if you strip away the multi-syllable words:
1.Individualism-collectivism theory (is this culture focused on the individual or the collective?)
The individualism-collectivism theory outlines a spectrum of cultures that sit from the individualism end to the collectivism end based on properties of ‘social entities’ (culture or group) rather than individual properties. Simply put, cultures are identified along the spectrum based on whether the culture encouraged individual goals, not whether individuals favour individual goals. Individuals are termed ‘idiocentric’ and ‘allocentric’ instead, based on whether they are individual or group-driven, respectively. The theory differentiates among three types of ‘self’ that is prioritized by different cultures across the spectrum: 1) the private self, 2) the public self, and 3) the collective self. For instance, cultures closer to the collectivism end encourage and bring forth an individual’s public and collective self over their private self.
The largest shortcoming of this theory is immediately apparent: cultures and groups are multidimensional and more often cannot be classified neatly on a linear spectrum. Moreover, individuals in groups will perceive and interpret events differently, based on their personal context, experience and intersectional identity. The history of branching political and social movements is rife with such examples as the Black Panthers and SlutWalk. A better multi-dimensional understanding of groups, their histories and interactions is essential, especially when designing diversity policies and training to effectively engage with the dynamics of increasing diversity in an organization.
2. Embedded intergroup relations theory (know yourself before knowing someone else)
The embedded intergroup relations theory emphasizes that it is necessary for you to first deeply understand your own group and culture in order to improve your capacity to respectfully and effectively work with other groups. Understanding your own group and its history makes it less likely for you to project historically held stereotypes and prejudices against another group. Individuals who are aware of historical and cultural contexts are crucial for an organization that aims to bridge any ‘cultural miscommunication’ or avoid group conflict.
3. Functional theory of intergroup conflict and cooperation (the enemy of your enemy is your friend?)
The functional theory of intergroup conflict and cooperation, aside from being a mouthful, is the idea that groups cooperate if they have similar goals and engage in conflict if they have opposing goals. The theory is, however, a very simple reduction of group interactions, shared histories, and intersectionality of an individual’s identity.
4. Social identity theory (you belong to a group)
In-group/out-group discrimination lies at the heart of social identity theory, which proposes that membership in a group in and of itself is crucial in shaping both intragroup (among other individuals in the group you belong to) and intergroup (among individuals who belong to different groups) behaviour attitudes, more than even having the same foe or friend. The theory traces several steps, starting with the creation of distinct social categories in an individual’s mind, social categorization of individuals into these cognitively defined groups, perceiving in-group individuals to be similar to themselves and treating such individuals favourably while discriminating against other out-group individuals.
Understanding that theories just scratch the surface of our study and research into identities, group behaviour, and collective identities, it’s important for organizations to realize that increasing and heading towards diversity requires responsible commitment, beyond marketing yourself as a diverse organization by having a single poster employee or making public commitments to diversity that are as empty as the budget allocated to realizing that commitment.
The takeaway from these theories is the understanding that diversity isn’t simply a word that can casually be thrown around to make your organization feel like it belongs in 2019. Organizations are after all made up of individuals who were born into groups that have distinct histories and patterns of interactions, and to ignore the larger context, assuming that individuals within organizations are blank slates, is both irresponsible but also leaves you woefully unprepared.
If diversity then requires commitment, is it really worth it (ignoring those less than snazzy titled articles)?
Putting aside all the ethical, moral, political and social reasons why diversity is crucial, research has shown that diversity does indeed improve performance.
A study by MIT (“Diversity, Social Goods Provision, and Performance in the Firm”) found that a more gender-balanced workplace increases revenue by nearly 41%. Some of the reasons proposed by the study to explain the increased revenue was that diversity contributes to greater collective knowledge and shared experiences. Interestingly, the authors also found that individuals were more satisfied and cooperative when they believed their firm was accepting of diversity, whether or not it was truly diverse. Another study by Credit Suisse Research Institute found that firms with higher female participation in top management positions had higher returns, valuations and payout ratios. Average sector adjusted ROE of companies with at least one female member in top management was 14.1% compared with 11.2% from companies with zero representation. The study also debunks the popularly held stereotype that women make more conservative financial decisions by finding a negligible difference in the net debt to equity ratio of companies with and without female board representation.
A more recent survey by the Boston Consulting Group (BCG) finds that diversity of management teams strongly increases overall innovation. Companies with above-average leadership diversity reported 19%p higher innovation revenue than that of companies with below-average leadership diversity (45% of total revenue to a paltry 26%). BCG found that leadership diversity along national origin, industry background, gender, and career paths had the most gains and that relatively small changes in an organization can still have an outsized impact.
So it looks like diversity can actually translate to better profit margins — but why?
The answer is simple. Emphasis on diversity and equality, both within organizations, and the public, political and legal sphere, has served to slowly chip away (either willingly or by the law) at historically held prejudices and stereotypes that have traditionally rewarded members of the in-group, whether or not they were qualified. This tendency of in-group members to adopt practices that resist affirmative action and other diversity policies by purposefully promoting under-qualified members of other groups to ‘prove’ stereotyped beliefs that other groups are always under qualified is well documented in two important studies: Nordlie (1979)’s study on promotion of African Americans in the military and Alderfer (1992)’s research to reduce organizational barriers against promotion of African Americans to managerial positions. Now that it’s 2019, and organizations are taking diversity seriously, promotions and hiring can be based on merit rather than in-group/out-group identities. So you no longer have a board of ten white men, where two might be under-qualified but chosen just because of their identity as white men.
If organizations have started to truly operate on a merit basis, then why aren’t we seeing more diversity everywhere?
The answer is that sadly, organizations have yet to truly operate on merit basis because they hold onto stereotypes and hold unequal expectations across individuals from different groups: studies have found that individuals from “out-groups” have to work nearly twice as hard and long as their peers from in-groups. Moreover, individuals from out-groups are often pressured to abandon their identity from the group in order to reach higher executive positions: a well-known example is “code-switching” by African Americans. Code-switching involves adjusting behaviour, appearance, and expressions that conform to in-group expectations and aims to distance away from negative stereotypes. Such distinctions not only impose unfair burdens of a narrow understanding of “acceptable behaviour” but individuals who code-switch often face hostility from other members of their group. There are also, of course, wider relevant social issues such as unequal opportunities to education and training that remain to be solved. We’re on our way to diverse organizations, but we’re by no means anywhere near our destination.
But rewarding deserving individuals isn’t the only reason why diversity in organizations improves performance — it’s also because different cooks truly serve up a delicious meal. Diversity is proven to increase creativity in organizations, especially when it comes to brainstorming as individuals with diverse backgrounds, experiences, context, knowledge, and understanding are ideal for throwing out ideas and thinking outside the box. One person’s box is another person’s field. Organizational processes and needs that require divergent thinking and a portfolio of original ideas particularly benefit from diversity. To sum up, organizations with diversity have shown tangible improvements in performance, increases employee satisfaction and increases creativity and divergent thinking.
Now that I’ve covered why there are some very good reasons for organizations to seriously start on their diversity goals, if they haven’t already, let’s get to the more organizational side of things (heh).
Is the road to achieving diversity in organizations lined with daisies?
I’m going to give you a very infuriating answer — yes and no. Most studies on diversity in organizations cite the same drawbacks, even if they find that diversity does make the grass greener. Increased workplace conflict, different working styles, and ethics make it harder to implement actual ideas, discomfort at seeing the organization being “taken over”, poor communication and poor organizational cohesion. The debate today is about the value of diversity versus increased diversity that makes group functioning more difficult. These are all real organizational problems that can hamper productivity, innovation, and growth, but these problems shouldn’t be the excuse to abandon diversity, not when it has a solution waiting in the wings. All of the significant shortcomings of culturally diverse workplaces are in fact problems associated with poor internal communication, decision-making and implementation, and organizational culture. It’s a collective organizational problem rather than a diversity problem.
For instance, playing to stereotypes, for every North-East Asian person who is quietly diligent, non-combative, doesn’t speak their mind and disregard their work satisfaction because it’s considered their ‘duty’, there’s a North-East Asian who has very loud opinions, works in bursts of energy, raises issues with management and takes their work-life balance seriously. Remember the earlier theories on groups and behaviours by IO psychologists I briefly mentioned? Well, cultures and groups might have shared experiences and histories, but that does not necessarily extend to individuals. A handy way of thinking about this is stereotypes vs. sociotypes.
There are three steps to successfully tackle problems associated with diversity:
- Approach it from an organizational and management science perspective.
Poor communication, weak organizational culture, difficulties in implementing decisions can be addressed with existing tools or new tools adopted by organizations to ensure divergent thinking translates to convergent thinking and encourage a culture of open and honest communication and knowledge sharing.
- Incorporate diversity training in your organization.
Diversity training is particularly effective for individuals who are most skeptical of it. While the organization can always choose between avoiding conflict, managing conflict or addressing conflict, for the long-term development of both individuals and organizations, addressing conflict through active measures such as a rigorous HR system, conflict resolution workshops or a healthy environment, is imperative. These once again tie into the first step, that requires organizations to define what they want for their employees and what they want their legacy to be.
- Good leadership is critical.
Leadership is a cornerstone of an organization. Its merits are often touted widely and loudly, yet few firms manage to cultivate and foster leadership. Good and effective leadership will mitigate most of the problems associated with diversity, and this leadership doesn’t have to only exist in boardroom meetings. Good leadership in teams is equally important, as good managers and team leaders will help resolve issues between individuals but also constantly refocus and guide the team toward the larger organizational goal.
Diversity in organizations comes with its own sets of rewards and limitations, but these limitations fall under the purview of organizational and management science overall rather than being a thorn in diversity’s side. An important lesson for organizations is to acknowledge that the main challenge that diversity presents, is to work with group differences in a way that serves everyone involved — the employees, groups, and organizations, rather than avoiding a better way forward.