Empowering Women Worldwide

Diversity and its effects in organizations

Minna Liikanen, University teacher, University of Jyvaskyla School of Business and Economics JSBE, Finland, minna.t.liikanen@jyu.fi

Anna-Maija Lamsa, Professor, Vice Dean, University of Jyvaskyla School of Business and Economics JSBE, Finland, anna-maija.lamsa@jyu.fi

To meet multiple and complex demands in contemporary work life, organizations need to attract and retain women and other minorities. Workforce diversity has become an inseparable part of today’s organizational life. For example, it has been reported by McKinsey Global Institutethat India could add up significantly its gross domestic product in the forthcoming years, just providing equal opportunities and more employment opportunities to women (see Lamsa et al. 2020, p.1). Companies, which operate in international business,sayoften that employees with a foreign background can guarantee success and growth in international markets because these employees know the habits, norms and cultures of the markets. As a result, businesses are increasingly developing their diversity management strategies and practices. Broadly said, these strategies and practices refer to management philosophy that aims to recognize and value workforce heterogeneity in organizations (Ozbilgin & Tatli 2008, p.2)

We argue in this blog that it is important for both researchers and practitioners to understand diversity as a phenomenon as well as its effects at different organizational levels – from the level of the entire organization to the levels of teams and individual employees. According to Ozbilgin & Tati (2008), two different directions have emerged in discussions concerning diversity and its management. In one hand, the topic is seen important because of its concerns over social and workplace inequalities. On the other hand, the topic is regarded as a crucial method for increasing organizational competitiveness and performance. In this blog, our focus is on the latter aspect, and we do not think that the effects of diversity are necessarily positive as often stressed in consultancy literature. Despite much research has been carried out on diversity in organizations for more than three decades, the understanding of whether diversity yields benefits or challenges to organizations has remained far from conclusive.

To date, diversity has been defined in various ways in the organizational literature. For instance, it has been understood as differences among group of individuals in terms of demographic attributes that are salient (i.e. surface-level diversity such as gender, age), and as differences in non-demographic attributes that are less salient (i.e. deep-level diversity such as diversity in experiences) (see e.g., Janssens & Zanoni 2005; Williams & O’Reilly 1998). During the past two decades, one of the dominant definitions for diversity in the organizational literature has been that of Harrison’s and Klein’s (2007), according to which diversity can be understood as “the distribution of differences among the members of a unit with respect to a common attribute, X, such as tenure, ethnicity, conscientiousness, task attitude, or pay” (p. 1200).

Since the 1980s and early 1990s to date, diversity and its effects in organizations have been much studied, especially due to increased participation of females in the workforce and international migration. In the early 1990s, some of the organizational researchers presented value-in diversity arguments for diversity (also referred as the business case arguments for diversity) (Bassett-Jones 2005), according to which diversity can have various positive effects for organizations(Cox & Blake 1991).In particular, employees who differed from each other in terms of demographic attributes, such as gender and ethnicity, were assumed to bring in various informational resources into organizations, including knowledge, skills, and perspectives(e.g., Mannix & Neale 2005; van Knippenberg & Schippers 2007). The diverse employees were also expected tohave access to the informational resources available in their networks with their own social groups outside the organizations (e.g., Cox & Blake 1991; Williams & O’Reilly 1998, 86). For instance, Saxena (2014) concluded, based on a literature analysis, that workforce diversity if managed properly can increase the productivity of an organization.

In the same vein, argument that highlights the positive effects of diversity in organizations was presented in the research on diverse teams in organizations. Especially the proponents of information and decision-making theory argued that diversity among groups of individuals, such as in teams, can promote creativity, decision-making and problem-solving activities due to the presence of the team and group members’ informational resources (e.g., Bassett-Jones 2005; Williams & O’Reilly 1998).Drawing on these arguments, some researchers emphasized diversity as phenomenon that requires effective diversity management (see e.g., Cox & Blake 1991; Guillaume et al., 2014).However, it is noteworthy that the arguments advocating the more positive effects of diversity for organizations have also been subject to criticism. For instance, they have been criticized due to considering diversity among employees as instrumental value rather than valuing diversity in itself (cf. Olsen & Martins 2012).

Despite diversity has been proposed to have various positive effects in organizations, and some studies have demonstrated, indeed, that it can yield positive effects such as creativity in organizations (e.g., McLeod et al., 1996; Stahl et al., 2010), it also has been theorized and found to have various negative effects with in organizations. For instance, in diverse teams and work groups, diversity has been found to result in conflicts (Bounce et al., 2016), communicational challenges, weakened social integration(e.g., Mannix & Neale 2005; Stahl et al., 2010), and ineffective performance (e.g., Earley & Mosakowski 2000).

Some of the dominant theories in the research on diverse teams in organizations suggest, in turn, that the members of diverse teams can exhibit interpersonal attraction towards those team members, who are perceived as similar (similarity-attraction theory). This idea is also embedded in the notion of homophile in the field of gender studies (Ibarra 1992). The notion refers to the phenomenon that people prefer to cooperate with people similar to themselves in respect to various attributes such as gender. This is said to be a reason why many women have problems in career, because men, who are the majority in management, tend to prefer other men for example in networking and career decisions (Ibarra 1992).

The members of diverse teams and groups have also been argued to hold tendency to form in-groups and out-groups based on the perceived similarities (social-categorization theory) (Williams & O’Reilly 1998). Much in line with thisargument studies have shown that not only can diversity have negative consequences for organizations and in their units such as teams, but also for the individual employees, who may experience discrimination (e.g., van Laer & Janssens 2011). Considering these contradictory effects, it is not surprising that several authors have ended up concluding that diversity is a double-edged sword for organizations (see e.g., Stahl et al., 2010).

In the light of these controversies in the research on diversity in organizations what becomes intriguing, is the question of how can organizations benefit from diversity while avoiding the possible challenges relating to it? Previous research suggests that the degree to which an organization’s diversity management policies and procedures are effective, as well as the selected leadership stylecan further influence, whether an organization ends up benefitting from diversity (Guillaume et al., 2014). Some of the literature on diversity in organizations suggests, in turn, that whether or not an organization ends up benefitting from diversity depends on the selected approach towards diversity and the practices through which diversity is managed(Olsen & Martins 2012).Moreover, the composition of teams and work groups, not only in terms of diversity in demographic attributes, but also in terms of the manner in which the members’ informational resources are shared in a team, has been proposed to further influence whether diversity yields positive effects on organizations, such as creativity (Bodla et al., 2018).

Ely & Thomas (2001) suggest that the so-called integration-and-learning perspective provides direction needed to achieve sustained benefits from diversity. This perspective connects diversity with work processes and practices in a way that stresses diversity as beneficial resource for learning and change. Moreover, Ely & Thomas say that work practices and processes need to be designed so that they facilitate constructive intergroup conflict and exploration of diverse views.

Considering that diversity has become reality in contemporary organizations and yet, it has been found been found to have both positive and negative effects on organizations, it can be concluded that it is seminal for organizations to actively pay attention to diversity. For instance, it can be worthwhile to consider an organization’s overall approach towards diversity, alike to the policies, practices (e.g. career counseling, mentoring) as well as compositions of groups and teams. By so doing, it may become possible for an organization to pursue the potential benefits of diversity and to avoid its potential disadvantages, and ultimately: to contribute to inclusion and well-being of all the members of an organization.


This blog was produced in the European Commission Erasmus+ Capacity Building program (Rainbow project number 598453-EPP-1-2018-1-AT-EPPKA2CBHE-JPA). We gratefully acknowledge this support.


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