Diversity's Business Benefits are Not Automatic


Diversity's Business Benefits are Not Automatic


 

It's essential to understand and manage organizational context to foster positive links between diversity and business performance. "Organizations that invest their resources in taking advantage of the opportunities that diversity offers should outperform those that fail to make such investments." -Thomas Kochan, et al.

 

 

Thomas Kochan and a team of researchers sought to study the impacts of racial and gender diversity on business performance through field research at actual companies. They published a study in 2003 based on a five-year research effort to examine whether workforce diversity increases organizational effectiveness. They used mixed qualitative and quantitative field research from four Fortune 500 companies.

Their research didn't reveal many positive or negative direct impacts on business performance based on racial or gender diversity. (Although there is research since their study that has draw a positive correlation between racial and gender diversity and business financial performance.) But they do point to organizational context as a vital factor in determining the type of impact diversity may have on business performance.

They found, for example, in organizations that promote a culture of learning from diversity, racial diversity can enhance performance. And effective training and development can help mitigate potential negative effects of diversity. Whereas in organizations with highly competitive cultures, racial diversity can negatively impact business performance.

Given the small sample size, they advise caution in drawing broad conclusions from the study, but they offer several takeaways. The evidence in their study did not support a simple assertion that diversity inevitably positively or negatively impacts business performance. They found that racial and ethnic diversity can produce both positive and negative benefits. They advise that organizations can increase the chance of gaining value from diversity when they take the following steps:
 

1: Foster a culture of learning through diversity.

2: Equip people with strong leadership and group process skills.

3: Adopt an experimentation and analytical approach by testing and measuring the impact of diversity practices on business performance overtime.
 

Given the reality of increasingly diverse labor and customer markets, the researchers suggest: "Organizations that invest their resources in taking advantage of the opportunities that diversity offers should outperform those that fail to make such investments."

 

 

Reference:

Kochan, Thomas, Katerina Bezrukova, Robin Ely, Susan Jackson, Aparna Joshi, Karen Jehn, Jonathan Leonard, David Levine, & David Thomas, The Effects of Diversity on Business Performance: Report of the Diversity Research Network, Human Resource Management, Vol. 42, No. 1, March 2003, pp. 3-21.