Staffing a Diverse Workforce - Principles of Management

As we learned in the opening paragraphs to this, Google is putting a lot of effort into hiring more people so it can offer new products and services and, more generally, fulfill its strategic mandate. Yet Google’s recruitment binge also includes the objective of maintaining a diverse workforce.

One consultant helped Google find more female engineers by tracking down all women who graduated from the top 50 universities in the world with a graduate degree in physics, math, or computer science. The consultant then personally telephoned thousands of these women to assess their interest in a job with Google.

Lockheed Martin, which has made workforce diversity a corporate strategy, also emphasizes recruitment of specific groups. However, the aerospace company goes further by evaluating each of its business units on how well they have implemented the company’s diversity principles. Units ranked at Level 1 in Lockheed Martin’s “diversity maturity model” do nothing to promote diversity.

Level 2 units have recruitment and mentoring programs in place, mainly aimed at hiring college and university students with diverse backgrounds. Work units ranked at Level 3 have a comprehensive staffing strategy with a full talent pipeline; employees know their training and career options; and teams are built around diverse skills and knowledge. Level 4 units extend the diversity pipeline to employees moving into leadership positions; also, these units ensure that knowledge flows from veterans to new hires.

Work units with the highest ranking (Level 5) in Lockheed Martin’s diversity maturity model have an inclusive workforce approach to recruitment. They also have industry-leading staff development, a mentoring process that is “embedded in the culture,” and a diverse workforce that provides a competitive advantage in winning business.

SURFACE-LEVEL AND DEEP-LEVEL DIVERSITY

Google and Lockheed Martin are model employers that reflect the increasing diversity of people living in the United States as well as in many other countries. Workforce diversity refers to differences in the demographic, cultural, and personal characteristics of employees. Diversity occurs when organizations adopt an inclusive corporate culture —that is, they respect each employee’s uniqueness and view this individuality as a source of sustained competitive advantage. Workforce diversity takes many forms.

Surface-level diversity includes observable demographic or physiological differences in people, such as their race, ethnicity, gender, age, and physical disabilities. This is the most obvious form of diversity, and it has changed considerably in the United States over the past few decades.

People with non-Caucasian or Hispanic origin represent one-third of the American population, and this proportion is projected to increase substantially over the next few decades. The Hispanic population recently replaced African Americans as the second largest ethnic group. Within the next 50 years one in four Americans will be Hispanic, 14 percent will be African American, and 8 percent will be of Asian descent.

By 2060 non-Hispanic Caucasians will be a minority. Meanwhile, women now account for nearly half of the paid workforce in the United States—more than double the participation rate a few decades ago. Gender-based shifts continue to occur within many occupations. For example, the percentage of women enrolled in medical schools has jumped from 9 percent in 1970 to almost 50 percent today.

Surface-level diversity receives the most attention because it is the most obvious and easiest to measure. However, managers also need to consider deep-level diversity , representing differences in the psychological characteristics of employees, including personalities, beliefs, values, and attitudes. We can’t directly see deep-level diversity, but it is evident in a person’s decisions, statements, and actions.

This deep-level diversity is derived to some extent from surface-level diversity and demographic characteristics that lie just below the surface. Religion and geographic location, for example, influence a person’s personal values. Education and work experience shape a person’s beliefs and attitudes on a variety of issues. An individual’s personal wealth (income), parental status, and other factors influence personal needs and preferences.

One illustration of deep-level diversity is the different attitudes and expectations held by employees across generational cohorts. Baby boomers —people born between 1946 and 1964—seem to expect and desire more job security and are often intent on improving their economic and social status. In contrast, Generation-X employees—those born between 1965 and 1979—expect less job security and are motivated more by workplace flexibility, the opportunity to learn (particularly new technology), and working in an egalitarian and “fun” organization.

Meanwhile some observers suggest that Generation-Y employees (those born after 1979) are noticeably self-confident, optimistic, multitasking, and more independent than even Gen-X coworkers. These statements certainly don’t apply to everyone in each cohort, but they reflect the fact that different generations have different values and expectations.

IS DIVERSITY IMPORTANT?

Although companies have been under pressure for several decades to improve workforce diversity, many have made this issue a top priority. Figure below lists the top 30 companies in America for diversity. Why do these and other companies actively develop a more diverse workforce? The most widely held explanation is that diversity makes good business sense.

America’s Top 30 Companies for Diversity

America’s Top 30 Companies for Diversity

In fact, 70 percent of the 140 leading organizations in the United Kingdom say that diversity initiatives are primarily driven by the competitive advantage that diversity offers. “ Achieving excellence in diversity is one of the marks of a truly world-class company,” suggests Barclays Group chief executive Matt Barrett. “Diversity is not a ‘nice to have’ but a significant part of an answer to our business challenges.”

In support of this view, studies have found that companies with the highest representation of women on their top management teams experienced significantly better financial performance than firms with the lowest representation of women. Other research reports that teams with some forms of diversity (particularly occupational diversity) make better decisions about complex problems than do teams whose members have similar backgrounds.

Diversity also makes sense when we recognize that companies lacking diversity are restricting access to the complete pool of talent in the workforce. By employing mostly white men in top management positions, for example, an organization loses a wealth of knowledge, skills, and perspectives that people with other demographic backgrounds can offer.

“When there are a variety of different ideas from different people, you find linkages where significant innovation occurs,” says Deborah Dagit, executive director of the Diversity & Work Environment at pharmaceutical company Merck & Co. “Where you have groups of people who think similarly, there is only incremental change.”

Anecdotal evidence also suggests that a diverse workforce is more likely to understand and respond to the needs of equally diverse customers. For example, many Vietnamese customers insisted that Southern California Gas Co. field staff remove their steel-toed work boots when entering the customer’s home, yet doing so would violate safety regulations.

Some of the gas company’s Vietnamese employees found a solution: Customers would be satisfied if employees wore paper booties over the boots. Here’s another example: Executives at MONY Group discovered that none of the New York insurance firm’s employees who served the Hispanic market were Hispanic.

But the executives received a bigger surprise when they started hiring more Hispanic employees to market these products. “Once we started hiring and recruiting people from those ethnic markets, we found that our products did not relate to these people at all,” says MONY CEO Michael Roth. So Roth asked employees to revamp MONY’s products and marketing efforts so they would be more appealing to Hispanic clients.

Although workforce diversity is a sound business proposition, it is also a double-edged sword. In fact, several experts suggest that the benefits of diversity are subtle and contingent on a number of factors. The general conclusion is that most forms of diversity offer both advantages and disadvantages. As we noted earlier, diverse employees usually take longer to become a high-performing team.

Diversity is a source of conflict, which can lead to lack of information sharing and, in extreme cases, morale problems and higher turnover. In sum, diversity can make a difference to the organization’s reputation and bottom line, but we still need to untangle what types of diversity make a difference and under what circumstances their benefits surpass the problems.

Diversity as an Ethical and Legal Imperative Whether or not diversity is a business advantage, managers need to make it a priority because surface-level diversity is a moral and legal imperative. Ethically, companies that offer an inclusive workplace are, in essence, making fair and just decisions regarding employment, promotions, rewards, and so on. Fairness is a well-established influence on employee loyalty and satisfaction.

“Diversity is about fairness; we use the term inclusive meritocracy ,” says Ann M. Limberg, president of Bank of America New Jersey. “What it does for our workforce is build trust and assures that individual differences are valued.” This perception of fairness extends to the organization’s public reputation. Verizon Communications is a good example. Minorities make up 30 percent of Verizon’s workforce of 200,000 and 18 percent of top management positions. Women represent 43 percent of its workforce and 32 percent of top management.

This inclusive culture has made Verizon the top company in America for diversity (see Figure above ); the company has also won awards from numerous organizations representing Hispanics, African Americans, gays and lesbians, people with disabilities, and other groups.

U.S. Federal Equal Employment Opportunity Laws

U.S. Federal Equal Employment Opportunity Laws

In contrast, firms that fail to represent the diversity of people in the relevant labor force are unfairly discriminating against those who are significantly underrepresented.

Employment discrimination occurs when some people have a lower probability of being hired, promoted, financially rewarded, or receiving valuable training and development opportunities due to non–job-related demographic characteristics. U.S. federal legislation over the past four decades explicitly prohibits companies from unfairly discriminating against job applicants, employees, and other stakeholders.

The most important legislation is listed in Figure above. Basically, these laws and related court cases say that employers must not unfairly disadvantage people based on their age, race, gender, religion, or other factors identified in the legislation. Notice that our definition of workforce diversity and the concept of an inclusive corporate culture extend to forms of diversity beyond these legal categories.

Companies can legally discriminate on the basis of gender or other identifiable categories if they are bona fide occupational qualifications, meaning that these characteristics are necessary to perform the job. It’s acceptable for a senior citizen home to employ only women for bathing female residents, for example.

However, these exceptions are rare and closely monitored by government authorities. For the most part, managers need to carefully consider whether any of their decisions and actions unfairly limit the opportunities and benefits that some employees and job candidates receive compared to others in identifiable groups.

Without due diligence to maintain a diverse workforce, an organization could be forced to pay large settlements and face great embarrassment. This recently occurred at Morgan Stanley, which paid $54 million to female staff members after a court ruled that the investment firm paid them at lower rates and promoted them less often than their male counterparts without justification.

A few years earlier, Coca-Cola paid out more than $200 million in racial and gender discrimination lawsuit settlements. Meanwhile the number of age discrimination cases is growing (nearly 18,000 per year) with a median award of $266,000 in recent years. Figure below identifies the percentage of discrimination charges that individuals have recently filed with the Equal Employment Opportunities Commission

Individual Discrimination Charges Filed with the Equal Employment Opportunity Commission 2005

Individual Discrimination Charges Filed with the Equal Employment Opportunity Commission 2005

These employment discrimination complaints apply to a host of corporate actions, but they have been most pertinent to the three staffing activities that we describe in the remainder of this: recruitment, selection, and training and development.


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