The increase in globalization has increased interaction between people from different backgrounds, beliefs, and cultures than ever before. Organizations no longer exist in an insular marketplace and consist of a global economy with intense competition. For this reason, organizations have adopted workplace diversity among their stakeholders to maximize the opportunities provided by globalization. Diversity in the workplace ensures new perspectives and voices in the strategy dialogues helping organizations stimulate larger creative decisions alternatives and understand and address the needs of a demographically diverse customer base. Thus, through diverse human capital, corporations gain superior financial performance and competitive advantages over their competitors in the market. According to a study by Slater, Weigand, & Zwirlein (2008), a comparison between financial performances of Top 50 Companies for Diversity and a matched sample, organizations committed to diversity on average outperform their peers. Thus, a company’s commitment to embracing diversity in the workplace is a crucial factor in its success and competitiveness in the globalized world.
However, despite increasing competitive advantages through increased productivity, workplace diversity has been associated with resistance among employees and adverse team outcomes. Weighing the benefits and challenges of adopting diversity, organizations have committed themselves to create a diverse workforce that will increase their competitive advantage and financial superiority in the market. Organizations committed to diversity in the workplace gain competitive advantages by reaping the benefits of a diverse workforce such as improved decision quality, connection with consumers, innovation, and different perspectives leading to more substantial financial gain over their peers. However, effective mitigation of a diverse workplace’s adverse outcomes determines whether the cost of diversity will outweigh its benefits.
Companies with diverse workplaces outperform their peers due to increased competitive advantage by their human resource capital. According to Barney (1991), one powerful source of competitive advantage is a company’s resources. Organizational resources such as organizational processes, assets, knowledge, information, and capabilities a company use to gain effectiveness and efficiency. On the other hand, these resources can be classified as organizational, human, and physical capital resources. However, resources need to be unique and valuable for companies to have a sustained competitive advantage. According to Wright, Dunford, and Snell (2001), when employees are better matched to a company’s strategic needs or possess valuable skills, human capital becomes a source of competitive advantage. Through improving decision quality at a strategic level, increased connection with customers, and enhanced innovation, a diverse capital becomes a source of competitive advantage.
Diversity in the workforce results in decisions quality improvement in all levels of organizational structure. At the boardroom level, differences in backgrounds and perspectives ensure that each member represents a diverse overview leading to a broader consideration of problems and more effective decision-making. Diversity enhances strategic innovation at the top management level through better decision-making to meet organizational goals and objectives. According to Dalton (2005), a significant number of studies have indicated that diverse top management teams produce better outcomes compared to homogenous teams. A diverse workforce also has access to more information due to communication and social contacts with people from different backgrounds, enhancing their performance. Thus, by introducing diverse perspectives and voices into strategy dialogue and implementation, organizations gain competitive financial advantage by creating opportunities in unserved markets and gaining new perspectives on customer needs and their capabilities.
According to the 2016 Canadian Census, 22.1% of the total population identified as a visible minority and could account for a third of the national population by 2031 (Curve Communications, 2016) and (Statistics Canada, 2006). Moreover, the purchasing power of the visible minorities in Canada is over $300 billion. Legitimacy, power, and urgency are crucial criteria in the identification of key stakeholders. Their purchasing power and increasing numbers make the visible majority an enormous marketing opportunity for Canadian companies. According to Schuefel and Istria (2005), when there is a similar perspective between prospective customers and sale and marketing teams in an organization, it increases the chance of a consumer selecting the company’s product over the competitors.’ Being members of the same group inclines consumers to do business with those they consider similar due to familiarity and interest. A close match between customer demographics and employees increases customer preference satisfaction since they understand the dynamics of consumer preference. Also, a diverse workforce can attract and retain consumers due to their social ties. Hence, by enhancing the connection with the visible minority and the majority in Canada, a diverse workforce creates a competitive advantage and financial superiority.
Innovation usually involves the use of old ideas in new places, ways, and combinations and is not entirely original creation. Innovation is promoted in a diverse company due to the greater diversity of ideas. According to Johansson (2004), diverse workforces can be rich sources of the organization since innovations happen at the intersection of numerous disciplines, fields, activities, cultures, and people. When heterogeneous teams share ideas from different perspectives and backgrounds, a company gains new ways to take advantage of the existing markets, new unserved markets to venture into, and new combinations of its resources. In this way, through a multicultural voice and perspective, organizations can identify and develop their new strengths, weakness, threats, and opportunities. Through participation, minority opinions encourage divergent and creative thoughts, which expresses as innovation. Thus, a diverse workforce as innovators has competitively valuable skills that increase an organization’s competitive edge.
However, it is essential to note that there are costs associated with diversity in the workplace. According to Weiliang et al. (2012), although organizations with diverse workforce show exceptional performances, the performance is highly dependent on the organizational climate. A homogenous group has a unified culture and similar world views due to share perceptions reducing cultural barriers to social associations. Thus, diversity decreases cohesion in the group, increases the group’s cost of communication and reduces incentives for cooperation. Moreover, with decreased conflict and increased cooperation and satisfaction, there are lower rates of turnover in homogenous teams than heterogeneous groups. However, Slater, Weigand, & Zwirlein (2008) asserts that when an organization makes a superficial commitment to diversity that the cost of diversity outweighs its benefits. Thus organization’s top management should deeply ingrain the value of diversity into the organizational culture to produce proper standards for constructive and productive behavior by all employees.
Companies should commit to creating diversity in the workplace to gain increased competitive advantage and financial superiority over their competitors. A diverse workforce enhances the competitive valuable skills and variation in employee types and skills to match a company’s strategic needs. Diversity in the workforce ensures that through improvement in the quality of decisions, better innovations, and more connection with consumers, organizations remain successful and competitive in the globalized market. However, diversity has considerable potential costs such as employee resistance and adverse outcomes compared to homogeneity, which outweighs its benefits. Only through a genuine commitment to promoting diversity in the workplace can organizations reap the benefits of diversity.
References
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Dalton, C. (2005). The face of diversity is more than skin deep. Business Horizons, 49(2), 91−95.
Johansson, F. (2004). Masters of the multicultural.Harvard Business Review, 83(10), 18−19
Schueffel, P., & Istria, C. (2005). Winning through diversity. European Business Forum, 20, 41−44 Statistics Canada. (2006). The Daily, Tuesday, March 9, 2010. Study: Projections of the diversity of the Canadian population. Www150.statcan.gc.ca. Retrieved April 14, 2021, from https://www150.statcan.gc.ca/n1/daily-quotidien/100309/dq100309a-eng.htm.
Slater, S. F., Weigand, R. A., & Zwirlein, T. J. (2008). The business case for commitment to diversity. Business horizons, 51(3), 201-209.
Weiliang, E.C., Mun, L.K., Chern, T.S., Fong, T.S., & Yuan, Y.P. (2012). The effects of workforce diversity towards the employee’s performance in an organization. Faculty of Business and Finance. Malaysia: University Tunku.
Wright, P., Dunford, B., & Snell, S. (2001). Human resources and the resource-based view of the firm. Journal of Management, 27(6), 701−721.
