2.2 Demographic Diversity

Higher Creativity in Decision Making

An important potential benefit of having a diverse workforce is the ability to make higher quality decisions. In a diverse work team, people will have different opinions and perspectives. In these teams, individuals are more likely to consider more alternatives and think outside the box when making decisions. When thinking about a problem, team members may identify novel solutions. Research shows that diverse teams tend to make higher quality decisions (McLeod, Lobel, & Cox, 1996). Therefore, having a diverse workforce may have a direct impact on a company’s bottom line by increasing creativity in decision making.

Better Understanding and Service of Customers

A company with a diverse workforce may create products or services that appeal to a broader customer base. For example, PepsiCo Inc. planned and executed a successful diversification effort in the recent past. The company was able to increase the percentage of women and ethnic minorities in many levels of the company, including management. The company points out that in 2004, about 1% of the company’s 8% revenue growth came from products that were inspired by the diversity efforts, such as guacamole-flavored Doritos chips and wasabi-flavored snacks. Similarly, Harley-Davidson Motor Company is pursuing diversification of employees at all levels because the company realizes that they need to reach beyond their traditional customer group to stay competitive (Hymowitz, 2005). Wal-Mart Stores Inc. heavily advertises in Hispanic neighbourhoods between Christmas and The Epiphany because the company understands that Hispanics tend to exchange gifts on that day as well (Slater, Weigand, & Zwirlein, 2008). A company with a diverse workforce may understand the needs of particular groups of customers better, and customers may feel more at ease when they are dealing with a company that understands their needs.

More Satisfied Workforce

When employees feel that they are fairly treated, they tend to be more satisfied. On the other hand, when employees perceive that they are being discriminated against, they tend to be less attached to the company, less satisfied with their jobs, and experience more stress at work (Sanchez & Brock, 1996). Organizations where employees are satisfied often have lower turnover.

Higher Stock Prices

Companies that do a better job of managing a diverse workforce are often rewarded in the stock market, indicating that investors use this information to judge how well a company is being managed. For example, companies that receive an award from the U.S. Department of Labor for their diversity management programs show increases in the stock price in the days following the announcement. Conversely, companies that announce settlements for discrimination lawsuits often show a decline in stock prices afterward (Wright et al., 1995).

Lower Litigation Expenses

Companies doing a particularly bad job in diversity management face costly litigations. When an employee or a group of employees feel that the company is being discriminatory based on gender, race, ethnicity, ability or age, among other factors, the employee or group of employees may seek to take legal action. For example, in 2019 Robert Shaw, a Toronto man who is confined to a wheelchair, sued Apple for $162,500 for failing to accommodate his disability (Mandel, 2019). Regardless of the outcome, these lawsuits are expensive and include attorney fees as well as the cost of the settlement or judgment, which may reach millions of dollars. The resulting poor publicity also has a cost to the company. In 2004, the clothing retailer Abercrombie & Fitch faced a race discrimination lawsuit that led to a $40 million settlement and over $7 million in legal fees. The company had constructed a primarily Caucasian image and was accused of discriminating against Hispanic and African American job candidates, steering these applicants to jobs in the back of the store. As part of the settlement, the company agreed to diversify its workforce and catalog, change its image to promote diversity, and stop recruiting employees primarily from college fraternities and sororities (Greenhouse, 2004). As you can see, effective management of diversity can lead to big cost savings by decreasing the probability of facing costly and embarrassing lawsuits.

Higher Company Performance

As a result of all these potential benefits, companies that manage diversity more effectively tend to outperform others. Research shows that in companies pursuing a growth strategy, there was a positive relationship between racial diversity of the company and firm performance (Richard, 2000). Companies ranked in the Diversity 50 list created by DiversityInc magazine performed better than their counterparts (Slater, Weigand, & Zwirlein, 2008). And, in a survey of 500 large companies, those with the largest percentage of female executives performed better than those with the smallest percentage of female executives (Weisul, 2004).

Similarity-Attraction Phenomenon

One of the commonly observed phenomena in human interactions is the tendency for individuals to be attracted to similar individuals (Riordan & Shore, 1997). Research shows that individuals communicate less frequently with those who are perceived as different from themselves (Chatman et al., 1998). They are also more likely to experience emotional conflict with people who differ with respect to race, age, and gender (Jehn, Northcraft, & Neale, 1999; Pelled, Eisenhardt, & Xin, 1999). Individuals who are different from their team members are more likely to report perceptions of unfairness and feel that their contributions are ignored (Price, Harrison, & Gavin, 2006).

The similarity-attraction phenomenon may explain some of the potentially unfair treatment based on demographic traits. If a hiring manager chooses someone who is racially similar over a more qualified candidate from a different race, the decision will be ineffective and unfair. In other words, similarity-attraction may prevent some highly qualified women, minorities, or persons with disabilities from being hired. Of course, the same tendency may prevent highly qualified Caucasian and male candidates from being hired as well, but given that Caucasian males are more likely to hold powerful management positions in today’s Fortune 500 companies (Jones, 2017) similarity-attraction may affect women and minorities to a greater extent. Even when candidates from minority or underrepresented groups are hired, they may receive different treatment within the organization. For example, research shows that one way in which employees may get ahead within organizations is through being mentored by a knowledgeable and powerful mentor. Yet, when the company does not have a formal mentoring program in which people are assigned a specific mentor, people are more likely to develop a mentoring relationship with someone who is similar to them in demographic traits (Dreher & Cox, 1996). This means that those who are not selected as protégés will not be able to benefit from the support and advice that would further their careers. Similarity-attraction may even affect the treatment people receive daily. If the company CEO constantly invites a male employee to play golf with him while a female employee never receives the invitation, the male employee may have a serious advantage when important decisions are made.

Why are we more attracted to those who share our demographic attributes? Demographic traits are part of what makes up surface-level diversity. Surface-level diversity includes traits that are highly visible to us and those around us, such as race, gender, and age. Researchers believe that people pay attention to surface diversity because they are assumed to be related to deep-level diversity, which includes values, beliefs, and attitudes. We want to interact with those who share our values and attitudes, but when we meet people for the first time, we have no way of knowing whether they share similar values. As a result, we tend to use surface-level diversity to make judgments about deep-level diversity. Research shows that surface-level traits affect our interactions with other people early in our acquaintance with them, but as we get to know people, the influence of surface-level traits is replaced by deep-level traits such as similarity in values and attitudes (Harrison et al., 2002). Age, race, and gender dissimilarity are also stronger predictors of employee turnover during the first few weeks or months within a company. It seems that people who are different from others may feel isolated during their early tenure when they are dissimilar to the rest of the team, but these effects tend to disappear as people stay longer and get to know other employees.

As you may see, while similarity-attraction may put some employees at a disadvantage, it is a tendency that can be managed by organizations. By paying attention to employees early in their tenure, having formal mentoring programs in which people are assigned mentors, and training managers to be aware of the similarity-attraction tendency, organizations can go a long way in dealing with potential diversity challenges.

Faultlines

A faultline is an attribute along which a group is split into subgroups. For example, in a group with three female and three male members, gender may act as a faultline because the female members may see themselves as separate from the male members. Now imagine that the female members of the same team are all over 50 years old and the male members are all younger than 25. In this case, age and gender combine to further divide the group into two subgroups. Teams that are divided by faultlines experience a number of difficulties. For example, members of the different subgroups may avoid communicating with each other, reducing the overall cohesiveness of the team. Research shows that these types of teams make less effective decisions and are less creative (Pearsall, Ellis, & Evans, 2008; Sawyer, Houlette, & Yeagley, 2006). Faultlines are more likely to emerge in diverse teams, but not all diverse teams have faultlines. Going back to our example, if the team has three male and three female members, but if two of the female members are older and one of the male members is also older, then the composition of the team will have much different effects on the team’s processes. In this case, age could be a bridging characteristic that brings together people divided across gender.

Research shows that even groups that have strong faultlines can perform well if they establish certain norms. When members of subgroups debate the decision topic among themselves before having a general group discussion, there seems to be less communication during the meeting on pros and cons of different alternatives. Having a norm stating that members should not discuss the issue under consideration before the actual meeting may be useful in increasing decision effectiveness (Sawyer, Houlette, & Yeagley, 2006).

Stereotypes

An important challenge of managing a diverse workforce is the possibility that stereotypes about different groups could lead to unfair decision making. Stereotypes are generalizations about a particular group of people. The assumption that women are more relationship oriented, while men are more assertive, is an example of a stereotype. The problem with stereotypes is that people often use them to make decisions about a particular individual without actually verifying whether the assumption holds for the person in question. As a result, stereotypes often lead to unfair and inaccurate decision making. For example, a hiring manager holding the stereotype mentioned above may prefer a male candidate for a management position over a well-qualified female candidate. The assumption would be that management positions require assertiveness and the male candidate would be more assertive than the female candidate. Being aware of these stereotypes is the first step to preventing them from affecting decision making.

Gender Diversity in the Workplace

In 1999 the Canadian Human Rights Act was amended to include a section about “equal pay for work of equal value” after a group of women filed a complaint under the act.  Despite the existence of strong legislation, women and men often face different treatment at work. The earnings gap and the glass ceiling are two of the key problems women may experience in the workplace.

Race Diversity in the Workplace

Race is another demographic characteristic that is under legal protection in Canada under the Canadian Human Rights Act. Yet race discrimination still exists in organizations. Visible minorities in Canada are 11% more likely to face discrimination during the hiring process than in the United States (Collie, 2019).  In a Korn-Ferry/Columbia University study of 280 minority managers earning more than $100,000, 60% of the respondents reported that they had seen discrimination in their work assignments and 45% have been the target of racial or cultural jokes. The fact that such discrimination exists even at higher levels in organizations is noteworthy (Allers, 2005; Mehta et al., 2000). In a different study of over 5,500 workers, only 32% reported that their company did a good job hiring and promoting minorities (Fisher, 2004).

Among Fortune 500 companies, only four (Merck & Co., TIAA, Lowe’s and Tapestry) have African American CEOs in 2020. It is interesting that while ethnic minorities face these challenges, the demographic trends are such that by 2042, Caucasians are estimated to constitute less than one-half of the population in the United States. This demographic shift has already taken place in some parts of the United States such as the Los Angeles area where only 30% of the population is Caucasian (Dougherty, 2008).

Canada is known for its diverse population, but unfortunately, discrimination against ethnic minorities still occurs in the workplace. A 2018 Canada Centre for Diversity and Inclusion report states that Indigenous people earn less, experience higher rates of unemployment and were less likely to work in “knowledge education”. Canadians from other racialized minority groups also earn less than their counterparts and experience higher levels of unemployment (CCDI, 2018). One study found that out of almost 13,000 résumés with similar work experience, education and language proficiency that were sent out to employers in Montreal and Toronto, résumés with “English” sounding names like Mathew Wilson were 39% more likely to get callbacks compared to non-“English” sounding names like Arjun Kumar (Oreopoulos, 2011). Similarly, in a study conducted by Harvard University researchers Chicago-area companies were sent fictitious résumés containing identical background information and résumés with “Caucasian” sounding names (such as Emily and Greg) were more likely to get callbacks compared to résumés with African American sounding names (such as Jamal and Lakisha) (Bertrand & Mullainathan, 2004). 

Studies also indicate that ethnic minorities are less likely to experience a satisfying work environment. One study found that African Americans were more likely to be absent from work compared to Caucasians, but this trend existed only in organizations viewed as not valuing diversity (Avery et al., 2007). Another study found differences in the sales performance of Hispanic and Caucasian employees, but again this difference disappeared when the organization was viewed as valuing diversity (McKay, Avery, & Morris, 2008). In a survey of workers in Toronto in 2012, 30% of workers mentioned challenges in the workplace specifically attributed to being Black (Black Experience Project, 2017). It seems that the perception that the organization does not value diversity is a fundamental explanation for why ethnic minorities may feel alienated from coworkers. Creating a fair work environment where diversity is valued and appreciated seems to be the key.

Organizations often make news headlines for alleged or actual race discrimination, but there are many stories involving complete turnarounds, suggesting that conscious planning and motivation to improve may make organizations friendlier to all races. One such success story is Denny’s Corporation. In 1991, Denny’s restaurants settled a $54 million race discrimination lawsuit. In 10 years, the company was able to change the situation completely. Now, women and minorities make up half of their board and almost half of their management team. The company started by hiring a chief diversity officer who reported directly to the CEO. The company implemented a diversity-training program, extended recruitment efforts to diverse colleges, and increased the number of minority-owned franchises. At the same time, customer satisfaction among African Americans increased from 30% to 80% (Speizer, 2004).

Age Diversity in the Workplace

The workforce is rapidly aging. It is projected that by 2068 seniors (aged 65 and over) could make up around 21% to 30% of the population of Canada, increasing from 17% in 2018 (Statistics Canada, 2019).  The same trend seems to be occurring elsewhere in the world. In the European Union, employees over 50 years of age are projected to increase by 25% in the next 25 years (Avery, McKay, & Wilson, 2007). According to the International Labor Organization (ILO), out of the world’s working population, the largest group is those between 40 and 44 years old. In contrast, the largest segment in 1980 was the 20- to 24-year-old group (International Labor Organization, 2005). In other words, age diversity at work will grow in the future.

What happens to work performance as employees get older? Research shows that age is correlated with a number of positive workplace behaviours, including higher levels of citizenship behaviours such as volunteering, higher compliance with safety rules, lower work injuries, lower counterproductive behaviours, and lower rates of tardiness or absenteeism (Ng & Feldman, 2008). As people get older, they are also less likely to want to quit their job when they are dissatisfied at work (Hellman, 1997).

Despite their positive workplace behaviours, employees who are older often have to deal with age-related stereotypes at work. For example, a review of a large number of studies showed that those between 17 and 29 years of age tend to rate older employees more negatively, while younger employees were viewed as more qualified and having higher potential (Finkelstein, Burke, & Raju, 1995). However, these stereotypes have been largely refuted by research. Another review showed that stereotypes about older employees—they perform on a lower level, they are less able to handle stress, or their performance declines with age—are simply inaccurate (Posthuma & Campion). The problem with these stereotypes is that they may discourage older workers from remaining in the workforce or may act as a barrier to their being hired in the first place.

In Canada, age discrimination is prohibited by the Canadian Human Rights Act at the federal level. In British Columbia, it is illegal to discriminate against someone because of their age in the workplace, for example forcing someone to retire because of their age (see Human Rights in British Columbia). Still, age discrimination is prevalent in workplaces. For example, while not admitting wrongdoing, Honeywell International Inc. recently settled an age discrimination lawsuit for $2.15 million. A group of older sales representatives were laid off during company reorganization while younger employees with less experience were kept in their positions (Equal Employment Opportunity Commission, 2004). Older employees may also face discrimination because some jobs have a perceived “correct age.” This was probably the reason behind the lawsuit International Creative Management Inc. faced against 150 TV writers. The lawsuit claimed that the talent agency systematically prevented older workers from getting jobs at major networks (TV writers settle age discrimination lawsuit, 2008).

What are the challenges of managing age diversity beyond the management of stereotypes? Age diversity within a team can actually lead to higher team performance. In a simulation, teams with higher age diversity were able to think of different possibilities and diverse actions, leading to higher performance for the teams (Kilduff, Angelmar, & Mehra, 2000). At the same time, managing a team with age diversity may be challenging because different age groups seem to have different opinions about what is fair treatment, leading to different perceptions of organizational justice (Colquitt, Noe, & Jackson, 2002). Age diversity also means that the workforce will consist of employees from different generations. Some organizations are noticing a generation gap and noting implications for the management of employees. For example, the pharmaceutical company Novo Nordisk Inc. noticed that baby boomers (those born between 1946 and 1964) were competitive and preferred individual feedback on performance, while Generation Y workers (born between 1979 and 1994) were more team-oriented. This difference led one regional manager to start each performance feedback e-mail with recognition of team performance, which was later followed by feedback on individual performance. Similarly, Lockheed Martin Corporation noticed that employees from different generations had different learning styles, with older employees preferring PowerPoint presentations and younger employees preferring more interactive learning (White, 2008). Paying attention to such differences and tailoring various aspects of management to the particular employees in question may lead to more effective management of an age-diverse workforce.

Religious Diversity in the Workplace

The Canadian Charter of Rights and Freedoms and the Canadian Human Rights Act prohibits employers from discriminating against employees or potential employees because of their religion. After September 11, cases involving religion and particularly those involving Muslim employees have been on the rise (Bazar, 2008). Religious discrimination often occurs because the religion necessitates modifying the employee’s schedule. For example, devout Muslim employees may want to pray five times a day with each prayer lasting 5 to 10 minutes. Some Jewish employees may want to take off Yom Kippur and Rosh Hashanah, although these days are not recognized as holidays in Canada. These situations pit employers’ concerns for productivity against employees’ desires to fulfill religious obligations.

Accommodating someone’s religious preferences may also require companies to relax their dress code to take into account religious practices such as wearing a turban for Sikhs or covering one’s hair with a scarf for Muslim women. In these cases, what matters most is that the company makes a good faith attempt to accommodate the employee. Although Sikh RCMP officers wear a turban as part of their uniform, this was not always the case. The first Sikh RCMP member to challenge the dress code was Baltej Singh Dhillon who used the Canadian Charter of Rights and Freedoms to support his case in 1988 (Baker, 2019).

Employees with Disabilities in the Workplace

Employees with a wide range of physical and mental disabilities are part of the workforce. In Canada, employers are required to accommodate the various needs of employees or potential employees. In British Columbia, this is outlined by the BC Human Rights Code and prohibits discrimination of employees based on a number of grounds including mental and physical disability (see Managing Employee Accommodation in the Workplace). For example, an organization may receive a job application from a hearing-impaired candidate whose job responsibilities will include talking over the phone. With the help of a telephone amplifier, which costs around $50, the employee will be able to perform the job; therefore, the company cannot use the hearing impairment as a reason not to hire the person, again, as long as the employee is otherwise qualified. Particularly employees suffering from illnesses that last for a long time and require ongoing care seem to be at a disadvantage, because they are more likely to be stereotyped, locked into dead-end jobs, and employed in jobs that require substantially lower skills and qualifications than they possess. They also are more likely to quit their jobs (Beatty & Joffe, 2006).

What can organizations do to create a better work environment for employees with disabilities? One legal requirement is that, when an employee brings up a disability, the organization should consider reasonable accommodations. This may include modifying the employee’s schedule and reassigning some nonessential job functions. Organizations that offer flexible work hours may also make it easier for employees with disabilities to be more effective. Finally, supportive relationships with others seem to be the key for making these employees feel at home. Particularly, having an understanding boss and an effective relationship with supervisors are particularly important for employees with disabilities. Because the visible differences between individuals may act as an initial barrier against developing rapport, employees with disabilities and their managers may benefit from being proactive in relationship development (Colella & Varma, 2001).

Sexual Orientation Diversity in the Workplace

Lesbian, bisexual, gay, transgender, and queer (LBGTQ) employees in the workplace face a number of challenges and barriers to employment. In Canada, it is prohibited by federal law to discriminate against employees based on sexual orientation. LGBTQ employees have more protections in Canada than in other countries, for example, the United States.

Research shows that one of the most important issues relating to sexual orientation is the disclosure of sexual identity in the workplace. According to one estimate, up to one-third of lesbian, gay, and bisexual employees do not disclose their sexual orientation at work. Employees may fear the reactions of their managers and coworkers, leading to keeping their sexual identity a secret. In reality though, it seems that disclosing sexual orientation is not the key to explaining work attitudes of these employees—it is whether or not they are afraid to disclose their sexual identity. In other words, those employees who fear that full disclosure would lead to negative reactions experience lower job satisfaction, reduced organizational commitment, and higher intentions to leave their jobs (Ragins, Singh, & Cornwell, 2007). Creating an environment where all employees feel welcome and respected regardless of their sexual orientation is the key to maintaining a positive work environment.

How can organizations show their respect for diversity in sexual orientation? Some companies start by creating a written statement that the organization will not tolerate discrimination based on sexual orientation. They may have workshops addressing issues relating to sexual orientation and facilitate and create networking opportunities for lesbian and gay employees. Perhaps the most powerful way in which companies show respect for sexual orientation diversity is by extending benefits to the partners of same-sex couples. In fact, more than half of Fortune 500 companies currently offer health benefits to domestic partners of same-sex couples. Research shows that in companies that have these types of programs, discrimination based on sexual orientation is less frequent, and job satisfaction and commitment levels are higher (Button, 2001).

Build a Culture of Respecting Diversity

In the most successful companies, diversity management is not the responsibility of the human resource department. Starting from top management and including the lowest levels in the hierarchy, each person understands the importance of respecting others. If this respect is not part of an organization’s culture, no amount of diversity training or other programs are likely to be effective. In fact, in the most successful companies, diversity is viewed as everyone’s responsibility. The United Parcel Service of America Inc. (UPS), the international shipping company, refuses to hire a diversity officer, underlining that it is not one person’s job. Companies with a strong culture—where people have a sense of shared values, loyalty to the organization is rewarded, and team performance is celebrated—enable employees with vastly different demographics and backgrounds to feel a sense of belonging (Chatman et al., 1998; Fisher, 2004). Canada’s Best Diversity Employers publishes a list of Canada’s top diverse companies in the country annually. The list showcases the companies which have taken proactive approaches to creating a work environment where everyone feels they belong.

Make Managers Accountable for Diversity

People are more likely to pay attention to aspects of performance that are measured. In successful companies, diversity metrics are carefully tracked. For example, in PepsiCo, during the tenure of former CEO Steve Reinemund, half of all new hires had to be either women or minorities. Bonuses of managers partly depended on whether they had met their diversity-related goals (Yang, 2006). When managers are evaluated and rewarded based on how effective they are in diversity management, they are more likely to show commitment to diversity that in turn affects the diversity climate in the rest of the organization.

Diversity Training Programs

Many companies provide employees and managers with training programs relating to diversity. However, not all diversity programs are equally successful. You may expect that more successful programs are those that occur in companies where a culture of diversity exists. A study of over 700 companies found that programs with a higher perceived success rate were those that occurred in companies where top management believed in the importance of diversity, where there were explicit rewards for increasing diversity of the company, and where managers were required to attend the diversity training programs (Rynes & Rosen, 1995).

Review Recruitment Practices

Companies may want to increase diversity by targeting a pool that is more diverse. There are many minority professional groups such as the National Black MBA Association or the Chinese Software Professionals Association. By building relations with these occupational groups, organizations may attract a more diverse group of candidates to choose from. The auditing company Ernst & Young Global Ltd. increases diversity of job candidates by mentoring undergraduate students (Nussenbaum, 2003). Companies may also benefit from reviewing their employment advertising to ensure that diversity is important at all levels of the company (Avery, 2003).

Employment Equity Programs

Employment equity programs in Canada ensure the hiring and selection process is fair for all candidates and stems from the Employment Equity Act. The Act is intended to achieve equality in the workplace and takes into consideration four historically disadvantaged groups in the workplace: Women, Aboriginal peoples, persons with disabilities and members of visible minorities (Queen’s University, n.d.). Employment equity programs in Canada are different to affirmative action that takes place in the United States. Affirmative action includes policies designed to recruit, promote, train, and retain employees belonging to a protected class. Based on Executive order 11246 (1965), federal contractors are required to use affirmative action programs. In addition, the federal government, many state and local governments, and the U.S. military are required to have affirmative action plans. An organization may also be using affirmative action as a result of a court order or due to a past history of discrimination. Affirmative action programs are among the most controversial methods in diversity management because some people believe that they lead to an unfair advantage for minority members.

In addition to employee reactions to affirmative action, there is some research indicating that affirmative action programs may lead to stigmatization of the perceived beneficiaries. For example, in companies using affirmative action, coworkers of new hires may make the assumption that the new hire was chosen due to gender or race as opposed to having the necessary qualifications. These effects may even occur in the new hires themselves, who may have doubts about the fact that they were chosen because they were the best candidate for the position. Research also shows that giving coworkers information about the qualifications and performance of the new hire eliminates these potentially negative effects of affirmative action programs (Heilman et al., 1993; Heilman, Rivero, & Brett, 1991; Heilman, Simon, & Repper, 1987; Kravitz, 2008).