OCW047: Diversity in Organizations

The Importance of Organizational Diversity

In the modern global market, diversity is essential to generating innovative ideas, understanding local markets, and acquiring talent.

Learning Objectives

Identify the advantages and challenges inherent in employing diversity within organizations

Key Takeaways

Key Points

  • The business case for diversity is driven by the view that diversity brings substantial potential benefits that outweigh the organizational drawbacks and costs incurred.
  • Diversity leads to a deeper level of innovation and creativity, the ability to localize to new markets, and the ability to be adaptable through access to top-level talent pools and rapid decision -making.
  • In a global marketplace, organizations must be careful to adhere to all diversity-related laws and regulations. They must also be wary of mismanaging localization, ensuring that they maintain an ethical and culturally-sensitive integration with new regions.

Key Terms

  • discrimination: Distinct treatment of an individual or group to their disadvantage; treatment or consideration based on class or category rather than individual merit; partiality; prejudice; bigotry.
  • groupthink: A process of reasoning or decision-making by a group, especially one characterized by uncritical acceptance of or conformity to a perceived majority view.

There are many arguments for diversity in business, including the availability of talent, the enhancing of interpersonal innovation, risk avoidance, and appealing to a global customer base. The business case for diversity is driven by the view that diversity brings substantial potential benefits, such as better decision making, improved problem solving, and greater creativity and innovation, which lead to enhanced product development and more successful marketing to different types of customers.


Globalizing and non-globalizing countries’ GDP growth: As noted in the chart above, globalizing organizations capture significantly better revenues in modern markets. “Nonglobalizing” countries averaged around 1.5% GDP growth in the 1990s, while globalizing countries averaged around 5% GDP growth.

Arguments for Diversity


It is widely noted that diverse teams lead to more innovative and effective ideas and implementation. The logic behind this is relatively simple. Innovative thinking inherently requires individuals to go outside of the normal paradigms of operation, utilizing diverse perspectives to craft new and unique conclusions. A group of similar individuals with similar skills are much less likely to stumble across a series of new ideas that may lead to innovative progress. Indeed, similarity breeds groupthink, which diminishes creativity.


Some theorize that, in a global marketplace, a company that employs a diverse workforce is better able to understand the demographics of the global consumer-marketplace it serves, and is therefore better equipped to thrive in that marketplace than a company that has a more limited range of employee demographics. With the emerging markets across the globe demonstrating substantial GDP and market growth, organizations need local talent to enter the marketplace and communicate effectively. Individuals from a certain region will have a deep awareness of the needs in that region, as well as a similar culture, enabling them to add considerable value to the organizational development of strategy.


Finally, organizations must be technologically and culturally adaptable in the modern economy. This is crucial to reacting to competitive dynamics quickly and staying ahead of industry trends. Diversity enables unique thinking and improved decision making through a deeper and more comprehensive worldview. Diversity also enables hiring of various individuals with diverse skill sets, creating a larger talent pool. The value of this, particularly at the managerial level, is enormous. Staying quick on one’s feet (as an organization, that is) by leveraging the strength of diversity is critical to capturing opportunities and dodging external threats.

Mismanaging Diversity

While diversity has clear benefits from an organizational perspective, the threat in diversity comes from mismanagement. Due to the legal framework surrounding diversity in the workplace, the underlying threat to mismanaging diversity arises through neglect of relevant rules and regulations. Equity of pay for all employees, as well as ethical hiring practices that do not give preference one candidate over another for discriminatory reasons, are absolutely essential for managers and human resource professionals to understand. The legal ramifications of missteps in this particular arena can have high fiscal and branding costs.

The Inclusive Workplace

Corporate cultures that display characteristics of global awareness and inclusion capture critical benefits of workplace diversity.

Learning Objectives

Identify how corporate culture can enable inclusion internally

Key Takeaways

Key Points

  • Organizational culture is the collective behavior of an organization ‘s members and the meaning attached to that behavior. Inclusive cultures demonstrate organizational practices and goals in which those having different backgrounds are welcomed and treated equally in the organization.
  • Inclusive cultures are focused on values that empower open-mindedness, promote healthy conflict, value new perspectives, and avoid judgmental attitudes.
  • Creating an inclusive culture means not only stating cultural components the organization wishes to emphasize, but also working towards an ideal level of open and inclusive behavior.
  • There are a number of paradigms underlined by experts in diversity management that demonstrate the linear movement from acceptance of diversity to active integration of inclusion with the corporate culture.

Key Terms

  • multiculturalism: The characteristics of a society, city, or organization that has many different ethnic or national cultures mingling freely; political or social policies that support or encourage such coexistence.
  • inclusion: The act of including someone or something in a group, set, or total.
  • culture: The beliefs, values, behavior, and material objects that constitute a people’s way of life.

Corporate culture is the collective behavior of people who are part of an organization and the meanings that these people attach to their actions. Organizational culture affects the way people and groups interact with each other internally, as well as with clients and other stakeholders. Enabling an inclusive culture is highly advantageous in capturing the value of diversity.

Characteristics of Inclusion

Inclusive cultures are focused on values that empower open-mindedness, promote healthy conflict, value new perspectives, and avoid judgmental attitudes. The primary threats to an inclusive culture are groupthink, discrimination, stereotyping, and defensiveness.


Inclusive cultures: Inclusive cultures accommodate a variety of perspectives.

An inclusive culture may include a variety of tangible elements, such as acceptance and appreciation of diversity, regard for and fair treatment of each employee, respect for each employee’s contribution to the company, and equal opportunity for each employee to realize his or her full potential within the company. An organization may also adhere to a policy of multiculturalism, integrating diversity into the mission and vision statements and various other internal policies.

Paradigms of Diversity Management

With this in mind, the question of how to integrate these concepts into the organization’s culture is the primary concern for management. Creating an inclusive culture means not only stating support for it via various corporate-wide outlets, but also working towards an ideal level of open and inclusive behavior. Culture is a matter of organizational behavior because it is inherently about how people act (mostly subconsciously), and thus requires a great deal of energy and effort to alter.

The following paradigms are a result of extensive academic research by experts in diversity. The list below can be seen as a linear progression in achieving inclusion, the first being the simplest and least effective and the last being the most complex and most effective:

  • Resistance paradigm: In this phase, there is a natural cultural resistance to change and equity across diverse groups. This paradigm requires extensive managerial efforts to overhaul, and corporate policies must be put into place to create a structure for corporate inclusion.
  • Discrimination-and-fairness paradigm: In this phase, the organization focuses simply on adherence to social and legal expectations. The diversity team and inclusion culture primarily come out of human resource and legal professionals fulfilling minimum requirements, so they are still fairly weak.
  • Access-and-legitimacy paradigm: At this phase, management has successfully elevated the culture from acceptance to active inclusion. Now the organization is looking at the overall benefits derived through diversity and utilizing them to capture maximum competitiveness.
  • Learning-and-effectiveness paradigm: In this final stage, management has successfully integrated inclusion in a way that is proactive and learning-based. Groups are designed to not only capture the innovative and creative aspects of diversity, but also to share diverse skill sets and grow in efficacy through the learning process.

Cultural Intelligence

Cultural intelligence is the ability to display intercultural competence within a given group through adaptability and knowledge.

Learning Objectives

Analyze the key components inherent in developing strong cultural competence as a manager in a diverse global economy

Key Takeaways

Key Points

  • The components of cultural intelligence, from a general perspective, can be described in terms of linguistics, culture (religion, holidays, social norms, etc.), and geography (or ethnicity).
  • Intercultural competence highlights the importance of grasping the varying facets of cultural identity to effectively understand other cultures.
  • It is useful to apply the components of cultural intelligence to varying theoretical frameworks, such as Hofstede’s theory. Hofstede notes six measurable variables that can be applied across all cultures to illustrate predispositions.
  • By combining cultural-intelligence frameworks with organizational objectives and strategy, managers are given strong resources to approach the global economy.

Key Terms

  • Intercultural Competence: The ability to communicate effectively with people of other cultures.
  • cultural quotient: A measurement (similar to IQ) of cultural intelligence.
  • crowdsourcing: Delegating a task to a large, diffuse group, usually without substantial monetary compensation.

Diversity in a rapidly globalizing economy is a central field within organizational behavior and managerial development, underlining the critical importance of deriving synergy through cultural intelligence.

Defining Cultural Intelligence

The concept of cultural intelligence is exactly what it sounds like—the ability to display intercultural competence within a given group through adaptability and knowledge. Studying the components of culture, the theories pertaining to cultural dimensions and competencies, and the current initiatives in promoting these concepts are all powerful resources for managers involved in foreign assignments.

Components of Cultural Intelligence

The components of cultural intelligence, from a general perspective, can be described in terms of linguistics, culture (religion, holidays, social norms, etc.), and geography (or ethnicity). As a result, individuals interested in developing their cultural quotient (CQ) are tasked with studying each of these facets of cultural intelligence in order to accurately recognize the beliefs, values, and behaviors of the culture in which they are immersed.

An interesting perspective on cultural intelligence is well represented in the intercultural-competence diagram, which highlights the way that each segment of cultural knowledge can create synergy when applied to the whole of cultural intelligence, where overlapping generates the highest potential CQ.


Intercultural competence: This diagram illustrates the three factors that constitute an effectively intercultural understanding for management: Regional Expertise, Language Proficiency, and Cross-Cultural Competence.

Cultural Intelligence and Cultural Framework

With these components in mind, it is useful to apply them to varying theoretical frameworks designed to illuminate the cultural dimensions and value differences across the globe.

Hofstede’s theory of cultural dimensions is particularly interesting, as it allows for a direct quantification of specific cultural values in order to measure and benchmark cultural norms in a relative and meaningful way. Hofstede’s theory was designed in the 1960s and 1970s, and has remained a relevant perspective in international business, international politics, and cross-cultural psychology. His theory notes six specific variables to measure:

  • Power distance index (PDI): Simply put, this measures the level of acceptance of authority naturally present in a culture. Less powerful members must accept leadership just as more powerful individuals must bear the responsibility of leading.
  • Individualism (IDV) vs. collectivism:Just as it sounds, this measurement denotes the way in which cultures tend towards group work to accomplish tasks versus individual and more independent contributions.
  • Uncertainty avoidance index (UAI): Tolerance for uncertainty and ambiguity is a critical element of a society’s ability to react to certain management styles and situations, providing an important measurement for understanding how much micromanagement may be useful.
  • Masculinity vs. femininity: Somewhat less clear than the other factors, this identifies specific gender roles and measures the ways in which cultures reflect these roles. This is a highly debatable measurement because it innately stereotypes.
  • Long-term orientation:Perhaps most critical of all to businesses is the concept of a longer- or shorter-term focus, particularly as it pertains to objectives. Understanding cultural predispositions in this regard assists in goal setting and understanding projected timelines.
  • Indulgence vs. restraint: The ability of individuals within a given culture to control their desires. This is relevant to consumption, self-control, and frugality.

These theoretical variables help in analyzing what is currently being done in pursuit of higher CQ, as well as what challenges lay ahead for international managers. Understanding linguistics, cultural norms, and varying values will allow for higher localization and efficiency within global businesses.

Trends in Organizational Diversity

To capitalize on ethical and economic benefits, businesses are promoting increased diversity in the workplace.

Learning Objectives

Analyze the social and legislative trends that define the trajectory towards higher levels of diversity and equality in the workplace

Key Takeaways

Key Points

  • Diversity in the workplace creates both ethical and economic value, resulting in trends towards a more equal-opportunity workplace.
  • In the 1960s, the United States implemented affirmative-action policies to enforce equal opportunity in the workplace.
  • Following the implementation of various affirmative-action policies, social justice developed as an ethical norm (as opposed to a legal stipulation). This development resulted in more inclusive measures for a larger variety of groups.
  • Empirical evidence of the trend toward diversity is well illustrated by gender wage gaps between males and females, which have been consistently narrowing since the early 1970s.
  • In addition to its ethical bases, diversity in an increasingly global marketplace is substantially more effective and productive, allowing for higher levels of synergy.

Key Terms

  • affirmative action: Advantages for traditionally discriminated against minority groups, with the aim of creating a more equal society through preferential access to education, employment, health care, social welfare.
  • Homogeneous: Having a uniform make up, or the same composition throughout.
  • Diversity: The state of being different; achieving variability.

Diversity within the workplace is a broad topic, incorporating both the need for social justice and the high potential value of employing a workforce diverse enough to compete in an increasingly global economic environment.

As a result, the workplace has undergone a number of trends that promote diversity and minimize group biases, as the ethical and economic importance of diversity is well-established. Analyzing trends in equality and value in diversity is useful for managers seeking to incorporate both.

Equality of Opportunity

Affirmative Action

The early stages of pursuing equality in the workplace arose in the 1960s, most notably with the concept of affirmative action. Affirmative action essentially establishes legal quotas—set by the U.S. government—for the number or percentage of representation by minority populations in a company’s hiring practices.

Minority populations are generally defined according to race, ethnicity, or gender. One difficulty with affirmative action is that it can encourage employers to fill quotas rather than avoid bias, potentially motivating some employers to hire specifically by race, ethnicity, or gender; hiring based upon any of these characteristics is illegal.

Social Justice

As a result of this criticism, the equal-opportunity movement evolved towards a model based more on social justice. This perspective still promotes the active seeking out of diversity in the workplace, but does so primarily based on the intrinsic value of employees with different backgrounds and skill sets.

The social-justice trend also meant a shift from a more limited viewpoint of what constituted a “minority” towards a more comprehensive one that places age, physical ability, and sexual orientation alongside traditional categories of race and gender. The social justice model of diversity is distinct from the older affirmative action in that it focuses less on employing minorities and more on the value of a diverse workforce.

Gender differences offer a strong statistical example of this trend, as male and female wage equality has been consistently trending towards equilibrium. Wage equality shows distinct improvement as a result of equal-opportunity ethics, a trend that supporters of equality hope continues toward equilibrium.


Gender wage trend: This chart illustrates that while gender wage inequality is diminishing, further efforts are necessary to promote parity.

Value of Diversity

The ethics of diversity in the workplace are rightly emphasized. The natural value achieved through varying perspectives in the workplace complements social justice well. Organizations that lack a culture inclusive of any and all potential groups generally have lower productivity and higher turnover. Promoting an environment conducive to a global and internationalized economy through diverse hiring and management practices potentially results in increased productivity.

A homogeneous workforce has a much lower capacity to achieve synergy. Upper management, recognizing the strategic value of diversity, continues to pursue the knowledge and skills necessary for a truly inclusive workplace.

Source: Management