Diversity in the Workplace

What you'll learn to do: Define diversity and discuss its influence on the workplace

Four women and one man in business attire posing in front of a white background. Living in a technically-curated, self-reinforcing echo chamber of media and social media, it’s all too easy to assume that our world view and perception of reality is the consensus view—perhaps even the truth.

But that’s a monochromatic—and inaccurate—view of our nation and of reality in general. Perhaps more importantly, it’s a view that generally won’t serve you well as a business professional, manager, or entrepreneur. In this section, we’ll explore what diversity means in a business context and the competitive advantages and operational challenges of managing a diverse workforce.

Learning Outcomes

  • Identify factors that define a diverse group of employees
  • Explain the advantages of employee diversity within organizations
  • Explain the challenges of employee diversity within organizations

Factors of Diversity

What do we mean by diversity? Despite the fact that it’s in the top one percent of words searched on Merriam-Webster, the concept isn’t as well understood as you might think. And, indeed, Wikipedia’s entry on diversity is an alphabet soup of related terms that will have you retreating to the simplicity of the old standard. Even Merriam-Webster’s definition feels a little loose and ill-defined:

the condition of having or being composed of differing elements VARIETY especially the inclusion of different types of people (such as people of different races or cultures) in a group or organization[5]
In practice, diversity can be understood as a range of human characteristics that differ from our own or from those of the groups we belong to.

Points of difference can include a range of demographic and psychographic factors, both of which are traditionally used by marketers, researchers, and influencers to target segments of a larger population. Demographic factors describe the “who,” including traits such as age, education, gender, race/ethnicity, religion, income and profession, and marital or family status. Psychographic factors are considered the “why" (how we’re wired) and reflect our behavior, beliefs, lifestyles, and values. Other important aspects of diversity include disabilities, sexual orientation and cognitive styles. A key point to note is that there are many more possible points of difference than there are categories legally protected from discrimination.

In practice, diversity is not about meeting the letter of the law. That is to say, managing to the minimum requirements of legislation or minimizing legal exposure and the associated liability for claims of discrimination based on sex or color or some other factor is not enough. Businesses pursuing a true diversity strategy define diversity broadly and seek to leverage the possibilities of diversity across categories.

Key Takeaways

For perspective on the composition of our labor force, see the Bureau of Labor Statistics Demographics page, a merger of employee statistics and demographic data from the Current Population Survey.

Practice Question

Advantages of Employee Diversity

While social justice, legal compliance, or maintaining industry standard employee environment protocols is typically the initial impetus behind [inclusion and diversity] efforts, many successful companies regard I&D as a source of competitive advantage, and specifically as a key enabler of growth.

—McKinsey & Company. Delivering Through Diversity, Jan 2018.
Four people holding hands. In the workplace, employee diversity can be a source of competitive advantage. Here are a few specific advantages:

  • Leveraging a cross-cultural (in the broadest sense of the word) awareness to identify opportunities and avoid blind spots
  • Increasing the productivity of employees who feel valued
  • Improving an organization’s employer brand and, therefore, ability to recruit and retain talent
  • Improving the market relevance and market value of a company/organization

Apple's Health App

As a case in point, consider Apple’s Health App that claims to allow you to “keep tabs on a wide array of data that matters to you—from measurements of your blood pressure and blood glucose to records for your weight and reproductive health.” Despite the promised capability to track reproductive health, the app was launched without a provision for monitoring menstrual cycles in what was critiqued as a stereotypical case of gender blindness. TechCrunch writer Sarah Perez summarized the disconnect, noting that menstrual tracking is a key function that “roughly half the population would expect to see included in a comprehensive health tracking app.” And as Perez noted, perhaps that’s not surprising given that 80 percent of Apple’s engineering staff is male.

Perez concludes: “the issue with the Health app is a perfect example of how not having the right [gender] balance internally can actually impact innovations and technology developments.”[6] Over a year after the product’s initial launch, Apple still hadn’t addressed the oversight and didn’t respond to Splinter writer Kashmir Hill’s request for comment, prompting her to suggest that the answer to her question why there's still no period-tracking in HealthKit might be answered by the composition of the executive team: nine men and one woman.

For a financial performance view, let’s consider McKinsey Consulting’s research on diversity in the workplace. In a 2015 report titled Why Diversity Matters, McKinsey highlights the following findings, based on the composition of top management and boards:

  • Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
  • Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.
  • Companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).
  • In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every ten percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.
  • Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

In their 2018 publication, Delivering Through Diversity, McKinsey Consulting again reported finding a “positive, statistically significant correlation between executive team diversity and financial performance.” Although correlation is not causation, the report notes that “there is a real relationship between diversity and performance that has persisted over time and across geographies.”[7] The conclusion drawn from their 2015 Why Diversity Matters report still applies: “diversity is a competitive differentiator shifting market share toward more diverse companies.”[8]

Practice Question

Challenges of Employee Diversity

Three people in business attire taking appart a brick wall. Image is drawn in a cartoon style. Figure 1. The Walls that Separate Us. The time, place, and way we grow up shape how we view people. It's common to develop biases and avoid people who you view as very different from you. This can cause tension in the workplace.

The things that make us different can also make it challenging for us to work well together. These challenges are not only based on actual or perceived differences embedded in our culture or psyche but also on perceived threats to the established order. Society is (at least nominally) striving to move away from these challenges and become a more equitable place.

The issue that is less obvious and, perhaps for that reason, more pervasive, is unconscious bias. We know perception is personal and subjective; however, what we are largely unaware of is that there can be a disconnect between our conscious thoughts and our unconscious beliefs or biases, primarily a product of sociocultural conditioning. And unless we circumvent the automatic responses, the unconscious rules.

In 1998, scientists from Harvard, the University of Virginia, and the University of Washington launched “Project Implicit,” a series of implicit association or social cognition tests (IAT) designed to reveal participants' unconscious (attitude and belief) biases based on demographic factors such as color, race, and sex. Briefly, an IAT measures the strength of associations between concepts (for example, gay or straight people) and judgments (good or bad) or associations (for example, joyous or tragic).

The idea behind the Implicit Association Test is that we don’t always know our minds; that is, we are unaware of the divergence between our conscious attitudes and our unconscious beliefs. The divergence between the two is a blind spot and is as potentially dangerous as a blind spot when driving—on both individual and organizational levels. Thus, the goal is to raise awareness of hidden biases or blind spots so we can take action to counter our own biases.

For example, you may consciously believe that black and white individuals should be treated equally; however, your responses (and those of many others) may show that you associate black individuals with negative actions (e.g., violence and crime) more than you associated white individuals with the same actions. This association may contribute to individual decisions, a pattern of behavior, and a culture that reinforces these associations and significantly decreases the opportunities for black individuals to participate in society from a starting place equal to that of white individuals.

The Social Attitudes category of the Implicit Association Test includes a number of tests such as the things you associate with a Man-Woman pairing, an Arab Muslim-Other People pairing, and a Disabled-Abled pairing.

If not recognized and challenged, these unconscious—and conscious—biases can become codified in the culture or a sub-culture and become a cultural norm, effectively nullifying the benefits of a group’s diversity by marginalizing minority individuals or prompting industry avoidance or an exodus of certain groups away from a field, as is being seen with women in STEM (science, technology, engineering and math) occupations.

The critical problem with biases is that they undermine both an organization’s brand and its strategic intent. Whether actions are conscious or not, the gap between stated attitudes and operational realities undermines market credibility and effectiveness along a continuum from recruiting to new product development. Without awareness and appropriate intervention, bias can lead to dominant group ("person like me") favoritism in selection, evaluation, project assignment, and promotion and preclude or silence the differences of opinion critical to innovation.

For additional perspective on the challenges of achieving employee diversity, watch Helen Turnbull’s TED Talk titled “Inclusion, Exclusion, Illusion and Collusion.” Key takeaway: “The unchallenged brain is not worth trusting."

Key Takeaways

For additional perspective on the benefits and challenges of diversity in the workplace, explore Hult Business School’s summary of diversity benefits and challenges.

Practice Question

  1. "Diversity." "Merriam-Webster.com. Merriam-Webster, n.d. Web. 7 May 2018."
  2. Perez, "Sarah. \"Apple Stops Ignoring Women's Health With iOS 9 HealthKit Update, Now Featuring Period Tracking,\" Tech Crunch, 09 Jun 2015. Web. 26 June 2018."
  3. McKinsey&Compan. "Delivering Through Diversity, Jan 2018. Web. 26 June 2018."
  4. McKinsey&Compan. "Diversity Matters, 2015. Web. 26 June 2018."
  5. "Diversity." "Merriam-Webster.com. Merriam-Webster, n.d. Web. 7 May 2018."
  6. Perez, "Sarah. \"Apple Stops Ignoring Women’s Health With iOS 9 HealthKit Update, Now Featuring Period Tracking,\" Tech Crunch, 09 Jun 2015. Web. 26 June 2018."
  7. McKinsey&Compan. "Delivering Through Diversity, Jan 2018. Web. 26 June 2018."
  8. McKinsey&Compan. "Diversity Matters, 2015. Web. 26 June 2018."

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