The Business case for diversity management

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The worlds increasing globalization trend demands more interaction between people from a vast diverse of cultures, beliefs, and backgrounds than the past. Today, people no longer live and work in an insulated marketplace. The reality is: they are now part of a worldwide (or commonly mentioned as flatten) economy with competition coming from nearly every angle of the globe. For this reason, businesses need to be open to change and accept the concept of diversity to become more creative (Kulik, 1998).

The article in this section will be arranged as follow. Firstly, the concept of diversity will be defined. Then, the article further investigates and defines the concept of diversity management. Then, the perceived and often discussed advantages and disadvantages of diversity management program will be discussed. After that, some real life business cases on companies successfully managing diversity and subsequently reaped the benefits of growth, profitability and improved performance from an effective diversity management program will be presented. After the review of academic and research journals regarding the topic, the article proceed to suggest some do and don't for practical diversity management program. The article concludes with some outlook and general direction for managers to follow in implementation of diversity management program.

Defining Diversity

In daily conversation, the word of "diversity" has the meaning of differences or variety. However, in the business world and in the business textbook, diversity often refers to the many differences present among people today in workplace as well as marketplace that were not aware of by most people in the past.

However, in-depth investigation discovered that different researchers may have different perceptions or definition on the concept of diversity. For example, Mondy (2010) argues that diversity refers to any perceived difference among people, be it from the dimensions of age, race, religion, functional specialty, profession, sexual orientation, geographical origin, lifestyle, tenure with the organization, position in an organization, or any other perceived differences. McShane and Von Glinow (2010), however, divided the concept of diversity into two parts, namely the surface-level diversity and the deep-level diversity. The surface-level diversity is referred to the observable demographic or psychological differences in people, such as their race, ethnicity, gender, age, and physical disabilities. In contrast, the deep-level diversity is referred to those differences in the psychological characteristics of employees, including personalities, beliefs, values, and attitudes. Whatever the definition employed, all these definitions share a common theme; where the terms of diversity encompasses any sort differences between two or more people from various dimensions of factors that can affect workplace relationships and achievement.

Defining Diversity Management

According to Mondy (2010), diversity management is often referred to the effort of ensuring that factors are in place to encourage the continuous development of a diverse workforce by melding actual and perceived differences among workers to achieve maximum productivity. Esty et. al. (1995), however, define diversity management as acknowledging, understanding, accepting, valuing, and celebrating differences among people with respect to age, class, ethnicity, gender, physical and mental ability, race, sexual orientation, spiritual practice, and public assistance status for better workplace performance. The definitions of diversity management used by researchers are vast and may vary in the details. However, generally, it is safe to assume that the term diversity management indicates the implementation of strategies or policies to knit a network of varied individuals together into a dynamic work force.

Advantages and Disadvantages of Diversity Management

In recent years, diversity is increasingly perceived as an important issue in the context of business management. This is due to the increasing differences in the U.S. population, globalization process, increasing of international business and cross borders business dealing activities. Many researchers recognize such a trend and highlighted that diversity is an invaluable competitive asset that organizational decision makers cannot afford to ignore (Robinson, 2002). In the business community, companies have also tend to pay more focus on diversity and look for ways to reap the opportunities offered by diversity as they acknowledge that diversity has the potential of yielding greater productivity and competitive advantages (Cooke et. al., 2010). Apparently, managing and valuing diversity is a key component of effective people management, which not only can improve workplace productivity, but also contribute significantly to the strategic objectives of human resource management.

Advantages of Diversity Management Program

Many researchers and businessmen have been arguing about the importance and roles and contributions of managing diversity nowadays. Generally, they often present the idea that diversity can be a sort of strategy which enables organization to gain competitive advantage in the market competitive landscape. For example, according to researcher, namely, Bledsoe et. al. (2010) claim that: managing cultural diversity is one of the key factors differentiating a particular company at factors such as (1) efficient work practices or procedures, (2) technological innovation or change, (3) product or services related innovation and lastly, (4) client or consumers related services. However, there are more contributions of managing diversity to the strategic objectives of a company. The following paragraph will outline these contributions or benefits of diversity in workplace to an organization in details.

Improved and enhanced competencies in terms of customer services. As a matter of fact, diverse workforce will often means diverse expertise, talent, experience and capabilities in the employees. If a manager understands the intricacies and complexity of how to manage diversity effective, he will be able to put the right person into the correct position, by minimizing his weaknesses while enhancing the particular employee's strength. From this perspective, a diverse workforce enables a manager to choose the correct candidate for a particular position in the organization. For example, someone with cheering personality and has the ability to build rapport fast with customers can be send to the customer services department. All these means that diversity management will make the company to enjoy higher competencies in providing higher satisfaction to a customer (McMahon, 2010).

Able to compile and improve the strength of customer intelligence. As we employ diverse workforce, we can indirectly tap into the knowledge and experience of these workforce. In the era of information, we understand that marketing intelligence or customer intelligence has becoming more and more important. Diversity in workforce in this picture can help a company to compile and collect more relevant and effective data on the market place.

Ability to operate effectively as well as efficiently in a global context. As a well known fact, the entire world is a colorful depiction of diversity. Thus, to go global, a diverse workforce is some sort a basis requirement. We simply need the local experts to assist us in managing business units at foreign countries or simply to expand market share in the other countries. Thus, it is not hard for us to understand that a diverse workforce will enable a company to operate more effectively and efficiently (Bledsoe et. al., 2010).

Able to produce more satisfied workforce, and thus leading to more productive workforce. If a company can manage diversity in a proper way, then the individual employee will no longer need to clone or purposely changed himself to adaption of the corporate culture. This can often leads to a more satisfied workforce. A more satisfied workforce, will in turn, leads to more productive workforce (McMahon, 2010).

Effective managing of diversity enables reduction in industrial disputes. Of course, proper management of diversity can also ensure less industrial dispute or court case arises from employees' issues (Cooke et. al., 2010).

Diverse workforce can lead to increased creativity and innovation. Diversity can produce synergy and creativity and innovative as well. A group of different people is better than a results produced by a single person. The combined efforts are always much outstanding. Not only that, it is also often mentioned by textbook that: Diverse workforce can produce more diverse perspectives, which in turn is highly beneficial in seeking or implementing solutions to problems (McMahon, 2010).

Having better chance to attract higher quality employees from a larger pool of employees (Tatti et. al., 2009). As a company prepare or has already adopted the mindset of having diversity is beneficial, then the company automatically access to a diverse pool of human talents, which means that the company can choose the employees from a larger pool of workforce. As now the choices are enlarged, then we can have access to better talents around the world, or in other words, we can access to the world class talents around the globe (Pitts et. al., 2010).

            Avoidance of group-think or cloning. (McMahon, 2010)mentioned that workplace heterogeneity can assist in avoiding 'groupthink' or cloning, which in turn this will lead to increased productivity and reduces costs. To explain further, cost reduction is possible when we can have a reduction in conflict, lower turnover and absenteeism and improved cohesion. Likewise, Tatti et. al. (2009) finds that there is ample evidence to suggest that 'diverse groups with the skills and support systems to integrate effectively are likely to be significantly more effective than non diverse or homogeneous groups in the same activities'.

Disadvantages of Diversity Management Program

However, the relationship between managing diversity and a particular company's performance from various empirical researches is not always straightforward. A good example by Stephensen and Lewin (1996) indicate that poorly integrated heterogeneous groups can be as damaging to the organization as overly integrated homogeneous groups. Apparently, managing diversity is an art, while although the contribution to a company strategic management picture is bright, the execution is nothing easy. Besides, unfortunately, there are also evidences that diversity can bring disadvantages to companies as well. For example, it is found that teams with diverse employees usually take longer to perform effectively. Besides, diversity also brings numerous communication problems as well as "faultiness" in informal group dynamics. At some serious cases, diversity can also be a source of conflict, that can cause issues such as reluctant to share information among workforce, employee morale deterioration problems, and higher turnover due to degradation of job satisfaction (McShane & Von Glinow, 2010). Not only that, it is also mentioned that there can be various drawbacks due to implementation of diversity management program in the short term. For example, if handled insensitively, a diversity management program may invade employee privacy. Also, implementation of the diversity management program may be expensive in the short term. Apart from that, during the implementation process, deep seated prejudices within employees may be brought into the open, causing short-term tension. Particularly for a poorly handled program, conflicts and ill-feeling may be the end results for managers to handle (Tatti et. al., 2009).

Case Study of Diversity Management

There are various cases or real-life stories showing that diversity management can contribute to improved productivity, sales, market share, or profitability. There are three examples shown in the following section.

Case I: Petro-Canada. The first case is about Petro-Canada. Recognizing that diversity management is essential; a Petro-Canada site in Vancouver's Chinese community, started to post signs in both English and Mandarin. The company is interested increase the company's presence within the community. Apart from that, after a team of sales associates found out that they had to be able to speak their customers' native language as well, recruitment changes were made accordingly. Soon, the company was able to reap the benefit of diversity with a diverse workforce. The results and outcomes are outstanding, kiosk sales increased by 15 percent, and gasoline sales rose from 2.7 million liters to 3.1 million liters at the Main and Terminal stations, in just a mere four year period, between 1991 and 1994 (Pitts et. al., 2010).

Case II: The McGraw Hill Companies. The second example is about a well-known book publishing company. The McGraw-Hill Companies emphasizes diverse workforce management. The reason is to tap into different talents available and critical to enhance the company presence worldwide. One program of the company talent management strategy is called the Associate Development Program (ADP). Since the program began in 1993, it has attracted talented individuals from top MBA business schools who are diverse in race, ethnicity, experience and perspective. All these diversity management programs had enable the McGraw-Hill Companies to leverages talent in global markets, on a worldwide basis. One striking example of using diverse workforce to tackle a foreign market is as follow: recruitment of local talent has enabled The McGraw-Hill Companies to solidify its brand reputation and market share in Latin America due to their expertise, cultural know-how, teamwork, experience and knowledge of the needs of the local market (Tatti et. al., 2009).

Case III: Reebok. The well-known sport company has also been benefiting from a diversity management program. In the year of 1980s, a group of women at Reebok complained the fact that they could not find a good aerobics shoe. Listening to that complaint, Reebok began marketing aerobics shoes. The outcome is outstanding - within just a period of two years, the company went from a $12 million-a-year shoe company to a $3 billion powerhouse. Since the incident, the company started to be aware of the importance of diversity. According to the CEO, Paul Fireman said that in order to become diverse and compete globally, a company must find people with different stories to tell at every level of employment, and then provide chances and opportunity for them to talk and perform (Pitts et. al., 2010).

Case IV: IBM. IBM has a century-long diversity heritage based on the company's belief and philosophy that diversity is the "bridge between the workplace and the marketplace". Such a belief and the act of valuing diversity are central to the company's ability to win in the global marketplace. Today, diversity management permeates every corner of IBM's management and technical operations and management style. Statistically speaking a convincing fact showing that the company is embracing diversity management whole-heartedly is this: 57% of IBM's Board of Directors is women, multicultural, and/or non-U.S. born (i.e., they are the minority group). Apart from that, it is also found that 40% of IBM's top 54-member Worldwide Executive Council is women, multicultural, or non-U.S. born. On closer scrutiny, it is not surprising to found that these women and multicultural executives have significant revenue responsibility. Not only that, further investigation also discover that 30 members of IBM's Worldwide Executive Council are involved in guiding specific corporate-wide diversity initiatives. They are held accountable for recruitment, retention and advancement of all talent and, most important, linking IBM's diversity initiatives to the global marketplace, which is in turn the main reason that IBM has been able to stay on top of the business landscape for decades (Cooke et. al., 2010).

Case V: Levi Strauss & Co. At Levi Strauss & Co., diversity is a core company value being embraced by the company's management and workforce. The diversity management concept permeates throughout the organization - the evidence is in the corporate belief that diversity is right for business, communities, and for families. The company senior managers had also argued that diversity creates greater tolerance. To sum up the implementation and philosophy of diversity management program in the company, we can observe the following statement from the company's officers. Specifically, the company officers mentioned that the company's diversity belief system translates into a four-component diversity strategy that has been instrumental in building their business. The four-components are as follow: (1) Sourcing diverse talent, (2) Empathetic marketing: "If you are who you serve, [then] you will be a better marketer." (3) Creativity and innovation, and lastly (4) Community involvement. Such a belief system is critical and powerful factors which ensure Levi Strauss & Co. sustainable growth and success in the global marketplace (Cooke et. al., 2010).

Do and Don't in Diversity Management

As we have discussed above, there are perceived advantages and disadvantages of embracing diversity in workplace. It seems that there are evidences and cases indicating that diversity are possible source of competitive advantage and superior performance for businesses, but the implementation and the management of diversity is not an easy one. Apparently, the mismanagement of diversity or inability of the leader or manager to outline and execute and effective diversity management program will cause troubles to the organization with diverse workforce. In fact, for inexperience mangers, diversity indeed looks more like a curse than a blessing.

Anyway, this writing has the opinion that it the presence of diversity is well-managed, it can create synergy and improve organizational performances. It is believed that diversity is a powerful strategy as managers can leverage on the strengths of some people in the team while making the weaknesses of some others irrelevant. The strengths in a person can compensate for the weaknesses of others, while his weaknesses are covered by others' strengths, and this is essential for a high performing team. Consistent with such a view, this section will outline some do and don't for practitioners to follow. It may serve as a general guideline for managers to refer to in applying the concept of diversity management to daily management tasks (Cooke et. al., 2010).

The first thing the manager should perform in managing diversity is that to ensure effectiveness of the diversity management program, the managers should communicate constantly to employees, managers, customers, shareholders, and other stakeholders at all stages of the program (Bledsoe et. al., 2010). It is vital to keep people informed as their support is necessary for the successful implementation of a diversity management program. The execution should involve everyone; as such a program is not an issue for only the personnel department or a responsibility of senior managers. Besides, it is also critically important to apply a change management processes to implement the program. The leader driving the changes should be aware that a long term perspective is required in implementation of a diversity management program (i.e., changes involves attitudes and don't happen overnight, and leaders have to expect that the program will last for years rather than a few weeks or months). Last but not least, the leaders must also have the correct expectations that resources are required for the program. Leaders must be prepared to invest money, time and resources to achieve successful diversity management program.

On the other hand, there are two general don't rules to be aware of by managers. Firstly, managers should not confuse equal opportunities with diversity management. The equal opportunity approach can be part of any diversity initiative, but a successful diversity management program should go far beyond traditional equal opportunity issues. Secondly, managers should not design the diversity goals and policies for "them" (i.e., referring to the minorities), but they should instead think of "us" (i.e., everyone involved in the organization) (Bledsoe et. al., 2010).


This writing takes a critical view on the business case of diversity management. The results from researchers have been mixed. There are both advantages and disadvantages to a diversity management program. Successful cases of diversity management to improve company and workforce performance are also widely available. Apparently, from a review of the many journals related to diversity management, it can be summarized that the program can bring forward many benefits to a firm, but the implementation of the program can be challenging and resources consuming.

Perhaps what is relevant for us to consider is how to cope with the increasing trend of workforce diversity in the globalization era. Organizations should recognize the changing workforce and other social pressures that are constantly demanding businesses to cope with diversity. Achieving diversity is not merely to become politically correct; it is more about cultivation of a culture that values individuals and their wide arrays of needs characteristics, nature and contributions. The good news is that correctly promoting and executing a diversity management program can improve company performance and to enhance the corporate reputation among marketplace, even though the implementation of the program is challenging.