Herring, Cedric. “Does Diversity Pay?: Racial Composition of Firms and the Business Case for Diversity” Paper presented at the annual meeting of the American Sociological Association, Montreal Convention Center, Montreal, Quebec, Canada, Aug 11, 2006. 2008-09-13
The answer to the question in the post title is Yes.
In the last year or so, I have been challenged and challenged myself personally to understand the impact of workforce diversity, and these scholarly works helped a lot to understand it better. The impact is significant.
The first paper was written by Cedric Herring at the University of Illinois at Chicago and widely reported, both on NPR and in the Washington Post. It is a well-done regression and factor analysis of 251 for-profit business organizations’ performance dependency on racial diversity.
As defined in the paper:
Diversity is an all-inclusive term that extends beyond race and gender and incorporates people in many different classifications. It includes age, geographic considerations, personality, culture, sexual preferences, tenure issues, and a myriad of other personal, demographic, and organizational characteristics. Generally speaking, the term Aworkforce diversity refers to policies and practices that seek to include people within a workforce who are considered to be, in some way, different from those in the predominant group. In the 21st century, workforce diversity has become an essential business concern.
The paper represents a first-of-its kind analysis in that it controls for organization size, region, and age (with the idea that larger organizations typically have more racial diversity in them). And all of the tested hypotheses are statistically significant in the affirmative:
- The more racial workforce diversity a business organization has, the greater that business organization’s sales revenue will be.
- The more racial workforce diversity a business organization has, the more customers it will have.
- The more racial workforce diversity a business organization has, the larger market share it will have.
- The more racial workforce diversity a business organization has, the greater that business organization’s profits will be relative to its competitors
The second scholarly work is about the attributes of effective diversity initiatives. Not surprisingly, one of the cornerstones of effectiveness in this area is leadership, and leadership at the executive level. The intermediate outcome, that leads to the important outcomes above are the creation of an organization whose “population of underrepresented minorities experience the firm climate as being open to diversity and feel as if their race will not hinder them from career progression.”
Why is this important?
People like me are interested in the topic of diversity and disparities because we want to grow, learn, and do better every day. We also want to be in environments where we can succeed by performing well for the people we serve. Data shows that most people prefer to live in diverse environments. This information promotes the idea that people probably prefer to do business with organizations that create diverse environments. The data support the idea that leaders who are truly interested in organizational performance are interested in supporting diverse environments.
As mentioned in the second paper, the world’s best companies understand this:
Several Fortune 500 firms (e.g. IBM, Verizon, Pepsico, GE) have experienced sustained success in their efforts to recruit and retain a diverse workforce, making these firms exemplars in diversity management and ripe for future empirical research.
Why is this important for me?
Around the time that this blog post appeared, I was sitting in a Seattle Metro bus on the way home, in one of the front seats, looking at a poster of Rosa Parks placed overhead, celebrating her accomplishments. It was right after Martin Luther King, Jr’s birthday. I knew that in a different time or place, even in 2007, that I’d be sitting in one of the seats in the back. More importantly, those who would come after me would also be asked to sit in the back, if I did not make a sustained commitment. I realized at the moment that there’s a lot of good news out there – so many organizations have made clear commitments to diversity, and are able and willing to hire the best talent regardless of background. Those are the organizations I will always be a part of.
And yes, Kaiser Permanente is one of them.