Diversity’s Importance To The Competitive Advantage
David Calderone
Management 300
Dec. 06, 2011

Table of Contents Cover Page – Pg. 1
Table of Contents – Pg. 2
Analysis of Topic – Pg. 3-9
References – Pg. 10
Appendix – Pg. 11-12

Diversity is important for workplaces to retain a competitive advantage in today’s global economy. “Diversity enriches the workplace by broadening employee perspectives, strengthening their teams, and offering greater resources for problem resolution” (Cox). Diversity is becoming a more common aspect of the business world, but the importance of diversity is often undervalued. “Up to 79% of organizations indicated that they use some form of diversity training” (Madera). Diversity training helps to inform employees about the benefits of diversity, and how you can achieve diversity. According to Barb Peluso “diversity training is becoming a bigger part of the workplace as economies and marketplaces become globally intertwined”. Diversity is a necessary entity in order for a company to achieve a competitive advantage in the economy. Diversity can often have many different definitions. For this paper I will be using the University of Tennessee’s definition. “Diversity is a commitment to recognizing and appreciating the variety of characteristics that make individuals unique in an atmosphere that promotes and celebrates individual and collective achievement” (University of Tennessee). Diversity can be experienced in numerous different ways. Any individual characteristic that makes a person different leads to diversity. Some common diversity issues include age, language, race, religion, and gender. Diversity’s most prominent barrier is resistance from the dominant groups due to feelings of entitlement. “Although majority group feelings of entitlement are perhaps most apparent around race and gender, they clearly emerge based on sexual orientation and gender expression as well” (Hill). It is important to realize what diversity encompasses before you can evaluate how to achieve diversity. Diversity allows for unique views from employees. These unique views can be beneficial to a company as they offer more than one possible solution to any given problem. “Attention to diversity helps companies tap into wider pools of talent, reflect the demographics of the communities they serve and market more successfully to these communities” (Minter). Diversity helps companies to take approaches that they would not normally take if they were less diversified. These approaches allow companies to retain a competitive advantage by allowing them to achieve success in markets that they would not normally pursue. “Diversity yields superior outcomes over homogeneity because progress and innovation depend less on lone thinkers with high intelligence than on diverse groups working together and capitalizing on their individuality” (Herring). Diversity allows for synergy to exist. Synergy is the result of a combined group effort producing a better result than any one individual could produce alone. With the use of diversity business are able to achieve optimal outcomes. One specific way that diversity helps companies retain a competitive advantage is an increase in sales. A study conducted by Cedric Herring took data relating to levels of diversity and levels of revenue (see Figure 1). This study only used gender diversity and racial diversity to calculate the relationship between the statistics. “Average sales revenues are associated with higher levels of racial diversity: the mean revenues of organizations with low levels of racial diversity are roughly $51.9 million, compared with $383.8 million for those with medium levels and $761.3 million for those with high levels of diversity” (Herring). The results for the gender diversity resulted in similar outcomes. The more diverse a company is according to Herring’s study, the more revenue the company makes. Herring’s study also goes on to say that the more diverse companies achieve higher profitability and capture a larger share of the market. This study provides tangible results which one can use to correlate the benefits of diversity in the workplace. To retain a competitive advantage companies need to be able to achieve higher revenues, maintain a high market share, and achieve higher profitability; diversity allows companies to be able to accomplish these goals. In order to allow diversity to prosper you must remove any barriers that may exist. If barriers to diversity are in place in the work environment then companies will struggle to retain their competitive advantage. Barriers to diversity can be individual, group, and organizational. (Cross). “Employee support is one of the key determinants of whether diversity is managed effectively or poorly” (Avery). Employees also might support or oppose diversity based on whether they view it as a potential asset or liability for organizations” (Avery). It is very important to encourage employees to accept diversity. “Refusal to transition with an organization may result from the different social positions that members of organizations occupy” (Hill). Often, the members of a dominant group cannot sympathize with the minority. It will be important for the business to be able to evoke empathy in their employees. Convincing an organization’s members to accept diversity is not always easy. Change is always resisted when it is seen as an inconvenience. The feeling of entitlement that the dominant group possesses is a strong barrier that an organization needs to help their employees overcome in order to achieve true diversity. For corporations to maintain their competitive advantage they will need to figure out ways to motivate and educate their employees about the positive benefits of diversity. Educating employees about the advantages of diversity is important for companies to maintain a competitive advantage. In one study biases and negative attitudes towards non-English speaking individuals were examined. Participants in the study had their attitudes toward the diverse (non-English speaking) group calculated both before and after diversity training. The diversity training provided a simulation in which participants were put into a situation where they could not speak the native language fluently. Due to this training the individuals became more empathetic towards the diverse group because they realized what it was like to be in their shoes (See Figure 2). Diversity training is important because it evokes empathy in individuals. Creating a feeling of empathy in the dominant groups is important to ensure the success of a diversity program in the workplace. Not allowing diversity to occur in the workplace can often have many negative effects and remove the competitive advantage from the company. When a company fails to allow diversity to exist either knowingly or unknowingly there can be several negative consequences. “Inability to attract and retain minorities, increased legal costs, and inadequate communication” (Cross) can all be results of an absence of diversity. If diversity training is not a part of the workplace then a “perceived deep-level dissimilarity evokes perceived relationship conflict” (Tepper). Having workers that are in conflict with one another will result in negative performance in the workplace. In order to maintain a competitive advantage in the workplace employers need to educate their employees that dissimilarity should not result in conflict. Another negative result of not having a proper diversity training program in place is abusive supervision, or hostility from managers. “Abusive supervision is a costly workplace phenomenon in terms of lost productivity, absenteeism, turnover, and health care expenditures” (Tepper). In order to avoid negative thoughts and actions by employees it is important to educate them about diversity. When proper education is not put in place, the company suffers as a result of the lack of diversity training. It is important to educate all employees about the advantages of diversity to maintain a company’s competitive advantage in the workplace. Knowing what diversity is, its advantages, and its disadvantages is only a start. In order for your company to maintain a competitive advantage in today’s economy you must learn how to properly implement diversity into your workplace. The first step for properly implementing diversity is for senior management to become as educated as possible about diversity. It is important for your senior management to be knowledgeable about diversity and its advantages because they will be creating the diversity education programs, checking their progress, and more importantly implementing diversity in the workplace through hiring diverse individuals. Senior management will be making a major organizational culture change by deciding to implement an effective diversity plan. Having a senior management team with vast diversity knowledge will allow them to start educating your employees on the advantages of diversity. While it is important to educate all of senior management about the advantages of diversity, you may want to consider hiring someone in the position of a ‘diversity coordinator.’ If you cannot afford to hire a diversity coordinator, a diversity committee comprised of a few top management members could share the responsibility of overseeing the diversity program. Whichever method your company decides to use whether it be the coordinator or the committee they will be responsible for creating plans for implementing diversity into the workplace as well as measuring the effectiveness of these plans. Using SMART goals can help track the progress of the diversity program and make sure that it is effective. Having an educated senior management team or more specifically an educated diversity coordinator will help ensure that your employees become educated on the benefits of diversity. Once senior management is educated and a diversity plan is laid out you can evaluate how the plans are working. It is in this early phase of implementation that you can see what is and is not working for your company. It is important to evaluate what your employees think about the program and develop solutions for any problems that have arisen. Making changes early on will not be uncommon as you work out kinks in your diversity plan. Encouraging diversity is the socially responsible and ethical thing to do as an employer. You will constantly need to evaluate and make sure that diversity programs are up to date and not excluding any possible talent from your organization. Utilizing different methods of communication can help to ensure that all employee views and thoughts are considered in regards to diversity and that members are not excluded. Utilizing different methods of communication can help to identify barriers or enablers to diversity. The diversity plan is never set in stone. Utilizing an organic philosophy when deciding how to best educate your employees about diversity is important.
Creating diversity in the workplace is not only in the best interest of the minority groups, but most importantly it is in the best interest of the company. Managing diversity is necessary for companies to retain a competitive advantage in the emerging economies of the world. “If companies are to flourish in today’s ever-diversifying markets, they will have to attract, develop, coordinate, and retain a much broader base of human resources than in previous years” (Avery). Herring’s study directly states that “diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits”. The more diverse a company is the better business outcomes that they experience. If you want your company to maintain a competitive advantage you must incorporate diversity into your company as quickly and efficiently as possible.

REFERENCES
Avery, Derek R. "Support for Diversity in Organizations." Organizational Psychology Review 1 (2011): 239-52. Print.

Cox, Taylor H., Sharon A. Lobel, and Poppy Lauretta McLeod. 1991 “Effects of Ethnic Group Cultural Differences on Cooperate and Competitive Behavior on a Group Task.” Race and Society 34:827-47

Cross, Elsie Y. "Managing Diversity." The Diversity Factor 18.2 (2010). Print.

"Diversity Definition." University of Tennessee Libraries. Web. 04 Dec. 2011. <http://www.lib.utk.edu/diversity/diversity_definition.html>.

Herring, Cedric. "Does Diversity Pay?" American Sociological Review 74 (2009): 208-22. Print.

Hill, Robert J. "Incorporating Queers." Advances in Developing Human Resources 11 (2008): 37-47. Print.

Madera, Juan M. "A Strategy for Diversity Training." Journal of Hospitality and Tourism Research 35 (2010): 469-76. Print.

Minter, Steve. "Finding the Business Case for Diversity." Industry Week 260.1 (2011): 13. Print.

Peluso, Barb. "Diversity." Personal interview. 26 Nov. 2011.

Tepper, Bennett. "Predictors of Abusive Supervision." Academy of Management Journal 54.2 (2011): 279-94. Print.

FIGURE 1: