WHY IS DIVERSITY MANAGEMENT OF INCREASING FOCUS WITHIN THE FIELD OF HRM? CRITICALLY ANALYSE DIVERSITY MANAGEMENT ISSUES IN A COUNTRY OF YOUR CHOICE (UK)
Diversity management in the last couple of years has evolved from being a discretionary choice to a business imperative across many organizations and sectors (Besler and Sezerel, 2012 p.625). In previous decades, diversity management may have been seen as an alternative option for firms to establish a favorable public image by adhering to the moral principles of inclusion in the workplace setting. However, as of the latest HRM thinking, diversity management could be a valuable contributor to organizational performance (Kirton, 2013 p.21). The reason behind using tentative language throughout the entire paper is simple. Whilst many organizations within and beyond the UK have embraced the concept of diversity and inclusion in the workplace, the exact correlation between diversity and business performance is yet to be explored in its entirety (Robertson, Holmes, and Perry, 2016 p.3). Nevertheless, there is still a valuable opportunity to provide a theory-driven, but at the same time pragmatic discussion on the different reasons diversity management is now of primary focus among HR managers and leaders to consider workplace differences as a source of opportunity. The essay is divided into two parts. In the first part, the conceptual pillars of diversity management and inclusion are critically analyzed. Drawing upon key authors in the field and the potential reasons diversity has gained prominent attention in HR discussions, the essay establishes the leading reasons proactive HR managers and leaders shall not discount the benefits of workplace diversity. Then, the second part revisits the critical tenets of diversity management in the context of the UK to investigate contemporary diversity issues. In the last section, the essay summarises the main points and the practitioner relevance of diversity management research.
Diversity Management – Current Approaches, Methods, and The Business Case Behind Diversity Management
Diversity management and the recognition of the importance of not segregating/discriminating people based on attributes that do not correlate with actual performance is a concept developed in the mid-20th century. One of the landmark decisions involved President Truman’s Executive Order 9981 to curb discrimination in the US armed forces (Okihiro, 2014 p.331). Accordingly, color, race, religion, and national origin cannot constitute the basis for staffing decisions. Almost twenty years later, the Civil Rights Act (1964) explicitly banned any form of discrimination in the workplace. At that time, firms’ and staffing professionals’ emphasis was mostly placed on mere compliance with the law Civil Rights Act 1964 (Okihiro, 2014 p.336). Even though regulatory compliance continues to be one of the fundamental triggers of the transformations of HR activities, progressive organizations started to embrace diversity and inclusion beyond the narrow view of compliance-based anti-discrimination practices in the workplace (Özbilgin, Tatli and Jonsen, 2015 p.62).
Before advancing the discussion further, it is essential to define the terms diversity and inclusion. While the two terms are often used interchangeably in practitioner discussions, there are fundamental differences (Ferdman and Deane, 2014 p.206). Diversity refers to those characteristics that differentiate different members of the population. Depending on unique national, institutional, and cultural contexts, diversity usually encompasses many characteristics. These characteristics include age, gender, sexuality, religious orientation, disability, political views, and other factors that individuals may represent with varying degrees of explicitness (Ferdman and Deane, 2014 p.206). Inclusion refers to a series of organizational practices and a mindset that position these differences as a source of value and as an opportunity to combine different viewpoints to attain superior performance and decisional outcomes (Ferdman and Deane, 2014 p.206).
Two dominant views on diversity and inclusion exist. The social justice perspective rests on arguments that everyone maintains and exercises inalienable rights to access employment and receive fair treatment at work (Rhodes, 2017 p.76). In most parts of the world, employment regulations habitually focus on supporting this notion. Therefore, there is a strong moral and regulatory underpinning of the proactive management of diversity. However, passive compliance with the law does not necessarily enable organizations to outperform rival firms and maximize staffing efficiency through diversity policies to drive value (Deloitte, 2014 par.1). As more governments, predominantly in the western hemisphere, have turned to stringent regulations to curb unfair discrimination, such shifts have also contributed to the intensification of the dialogues around diversity and inclusion. For the most part of the essay, the business case of diversity is positioned as the central theme to articulate the importance of planned and strategic approaches to diversity management.
One of the key drivers behind diversity and inclusion management research rest on the hypothesized link between diversity and organizational performance. Diversity literature from the last 10-20 years can be organized into three main strands (Banfield and Kay, 2012 p.142). These strands encompass people issues, market competitiveness, and corporate reputation/image management. Each of these dimensions represents highly topical reference points for developing and shaping HR strategies as per internal and external demands for diversity and inclusion. A substantial volume of research papers specifically looked at the different ways diversity improves work morale and staffing effectiveness (see Guilaume, Dawson and Woods, 2013 p.134). At the very beginning of the employee lifecycle, hiring practices attuned to diversity management and inclusion best practices enable organizations to substantially expand the talent pool. Thus, diversity management leads to high-quality hiring decisions. If diversity is fully integrated into the organizational culture and practices, improvements in team performance, creativity, and innovation are other realizable benefits. Accordingly, deliberate organizational efforts to seek diverse talents bolster organizational competencies and improve retention rates (Mumford, 2012 p.298). These are two particularly important aspects in knowledge-intensive industries requiring highly-skilled talents.
Externally, diversity management enhances corporate reputation and CSR (Corporate Social Responsibility) to better manage stakeholder relationships, particularly with talents seeking employment and customers prioritizing socially responsible organizations (Hansen and Seierstad, 2016 p.193). Hansen and Seierstad (2016 p.193) signaled that the effective communication and practice of diversity management could be a valuable source of differentiation in labor markets through employer branding to position organizations as attractive employers for diverse talents. That being said, organizations must refrain from portraying one’ ideal candidate’, as it would deter a certain group of talents from applying. Flexible work practices are also a relevant topic for HR managers seeking to embrace diversity management. A rigid insistence on fixed work arrangements may also exclude certain, otherwise highly skilled talents from the talent pool (Hansen and Seierstad, 2016 p.195). Many employers report staffing shortages and substantial difficulties in filling vacant positions. However, deviations from the nine-to-five schedule and the provision of more flexible terms of employment can also be a viable route for firms to perceive the business benefits of inclusive hiring and staffing practices (Özbilgin, Tatli and Jonsen, 2015 p.310). Beyond the explicit communication of inclusive workplace practices, it is also important to produce recruitment materials (e.g. ranging from neutral job descriptions to visuals) reflective of organizational diversity. These solid reasons behind treating diversity management as a strategically important issue support the notion that beyond the social justice perspective of diversity, inclusive work practices harbor plenty of valuable business opportunities.
In the last few years, many reports and empirical papers disclosed possibly positive correlations between diversity and company financial performance. For instance, McKinsey (2015 par.1) examined the influence of gender equality/gender representation in executive boards on company performance. Findings showed that companies in the top quartile for gender diversity are likely to have financial returns above the industry/national average. Moreover, the analysis disclosed that every 10% increase in gender diversity resulted in a 3.5 percentage-point increase in EBIT (Earnings Before Interest and Taxes) in UK firms (McKinsey, 2015 par.12).
The performance-enhancing mechanism of diversity has also enjoyed prominent contemporary research interest to explore the competitive advantage implications of workplace diversity. A diverse workforce offers companies an in-depth understanding of consumer needs and preferences through enhanced innovation, creativity and problem-solving (Marquis, 2008 p.3). Contrary to mostly homogenous work teams exposed to the risk of groupthink and other distorting effects resulting from the lack of diversity, a workforce representing multiple priorities is a significant performance enabler in a volatile business environment. In other words, diverse work teams benefit from a broader base of experience and insights. Diverse decision inputs (that may otherwise remain omitted in a homogenous team) present another stream of opportunities for firms to outpace competitors. For instance, a large customer brand could immensely benefit from inputs from diverse employees to better cater to different (diverse) customer segments (Marquis, 2008 p.3).
Beyond the above, another reason diversity management discussions gained traction among academics and business professionals is the challenge of implementing successful diversity strategies (Cañas and Sondak, 2008 p.28). Portraying diversity as a universal solution to staffing problems and declining competitiveness would be misleading for many reasons. Particularly in conservative organizations, the introduction of diversity and inclusion practices can be seen as a significant disruption of existing practices and structures (Thomas, 2007 p.1). Some employees may indeed show openness to diversity programs. However, if diversity management alters existing power configurations, resistance and resentment towards changes are common obstacles to organizational transformation (Thomas, 2007 p.1). Thus, diversity management presents a complex change scenario for many organizations to lessen resistance to inculcate an inclusive organizational mindset. At the beginning of diversity initiatives, conflicts may inexorably arise. In many cases, performance may temporarily decline, since the inclusion of multiple perspectives in decision-making situations inevitably leads to conflicting arguments and slower decision-making (Thomas, 2007 p.3). Therefore, on the short- and medium-term horizon, the proclaimed financial and other benefits of diversity may not be fully captured. In order to enable firms to minimize the time spent on the transition phase, it is important to provide a range of developmental and training opportunities for employees to improve awareness and sensitivity.
Whilst limitations inherent to the essay do not allow for a comprehensive examination of the barriers to effective diversity programs, there are quite a few commonly reported issues (Dobbin, 2020 par.4). First, companies often tend to over-emphasize the moral and compliance sides of diversity management, to the detriment of recognizing and embracing the business case behind diversity. Second, diversity management initiatives are mostly delivered in static, ‘off the shelf’ training sessions without extending the idea to all HR activities (including but not limited to hiring, promotion, talent development) (Dobbin, 2020 par.5). Third, despite the clear suggestion in diversity management literature, organizations rarely follow up on diversity training activities to assess the extent to which training materials were applied to practice. Overall, diversity management harbors countless opportunities for firms to remain resilient to changes in the business environment. However, as evinced by the analysis of academic and practitioner sources, diversity management is a multidimensional construct that does not automatically deliver benefits to firms without the adjustment of attitudes and processes.
Diversity Management Issues in the UK
Similar to other regions of the world with a developed institutional/legal environment, UK companies must adhere to a series of regulations to prevent intended and/or unintended forms of discrimination in the workplace. The UK legislation covers disability, age, race, religion, gender, and sexual orientation as the main protected characteristics (UK GOV, 2010 par.1). Accordingly, employers cannot (explicitly) base decisions on any of these protected characteristics. These decisions encompass promotions, dismissals, pay, recruitment, and the provision of training for career development. In this regard, the Equality Act (2010) is the most relevant piece of legislation to ensure all members of the working population have an equal chance of application and career promotions in the organization. Thus (based on the narrow interpretation of diversity management as a compliance mechanism), the UK law explicitly bans all HR activities and decisions that may unfairly discriminate against employees in the workplace. In more practical terms, UK employers must be willing to accept reasonable adjustments in work practices to accommodate a diverse group of employees (e.g. employees with disabilities) and to insist on fair, and equitable protocols within the organization.
In light of the above, there is a stable foundation for all UK-based firms to sustain inclusive workplaces. However, laws and regulations only set the minimum, threshold standards. Adherence to these standards is unlikely to be conducive for organizations to experience a substantial return on diversity management (CIPD, 2019 par.1). The UK is known for its diverse population, and as the country attracts a significant number of foreign professionals, the instrumentality of a planned approach to diversity management is crucial. According to Diversity UK (2018 par.1), about 14% of the UK population belonged to an ethnic group, a figure estimated to be above 40% in the London metropolitan area. Looking at these figures, most companies, regardless of the industries served, would eventually face the issue of diversity and the demand for HR strategies to ensure an inclusive work experience for diverse talents.
Without cultural and structural changes, organizations indeed forfeit the numerous benefits of a diverse workforce. Many UK firms externally articulate support for diversity and inclusion, yet actual figures portray a different reality of progress. A recent report by Louise (2020 par.2) exposes UK companies’ disappointing experience with diversity management, as the majority of employees envision further options in the workplace to improve diversity and inclusion. On a slightly more positive note, close to 80% of employees perceive diversity as an important aspect of work, so internal resistance to diversity management may have declined in recent years (Louise, 2020 par.3). Less than half of the respondents expressed overall satisfaction with organizational approaches to diversity. These figures were outstandingly high among BAME (Black, Asian, Minority, Ethnic) communities. Another report by Diversity UK (2018 par.3) suggests that whereas employees/candidates from BAME backgrounds tend to have at least equal (but in many cases, higher) qualifications than members of the white ethnic groups, BAME talents continue to remain under-represented at all levels of the corporate hierarchy. The rising proportion of the BAME community in the UK population serves another business rationale to abolish stigmas and biased staffing decisions (Diversity UK, 2018 par.6).
The forms of cultural and ethnic diversity are the most observable indicators of organizational openness to diversity. Nevertheless, diversity and inclusion policies shall also reach other disenfranchised and unduly discriminated members of the society. Similar to the fair representation of employees belonging to one or more minority groups, UK organizations have also invested substantial efforts into reducing different forms of (implicit) gender discrimination (e.g. the gender pay gap and female professionals’ representation in company boards/executive management teams). Regrettably, progress in this area has also been substandard. As per the CIPD’s (2020 par.5) estimates, female professionals on average earn 17.3% less than male professionals in similar positions.
Since 2017, the UK government requires all private and public sector organizations employing 250 or more workers to publicly report the gender pay gap, presumably to delegate more attention to a protracted equality issue in the UK labor market (GOV.UK, 2020 par.3). The mandatory reporting requirement alone may be ineffective to prompt organizational responses to abolish the gender pay gap and the occupational segregation both horizontally and vertically. For some organizations and a small group of shareholders, such public disclosure of inequality may prompt stakeholder activism. However, the gender pay gap disclosure requirement so far has not induced notable changes in gender inequality in the workplace, despite the growing pressure from investors for a more diverse board of directors (Hinks, 2020 par.8). One possible option to improve gender diversity in organizations (in addition to the promotion of gender inequality at all levels of the organization) involves the introduction of flexible working conditions for female professionals (Syed and Özbilgin, 2019 p.152). Flexible/family-friendly work policies could incentivize more female talents to build careers without having to face the exclusive choice between career and family. Referring back to the case of cultural/ethnic diversity, the exclusion of female talents from the talent pool can also hinder company performance (Chapelle and Humphrel, 2014 p.711).
To conclude, diversity management has indeed evolved into one of the most widely discoursed domains of HRM. Parallel to the intensified dialogue on diversity and inclusion in the workplace, it appears that only a small segment of corporations have fully embraced diversity. The two main aspects of diversity management (social justice and the business case) were critically described in the first part of the essay. For practicing managers, it is essential to possess a balanced and in-depth understanding of both aspects. Nevertheless, it is of paramount importance for HR managers and leaders to present and articulate diversity initiatives’ potential influence on company bottom-line performance. Diversity management is neither a tool to deceptively brand organizations (in labor markets) nor a universal solution to staffing difficulties. Successful diversity management requires structural, procedural, and cultural changes in corporations. The second half of the essay focused on diversity issues in the UK. Similar to sources in the theoretical overview section of the essay, legal compliance does not in isolation unleash the diversity-induced performance benefits in organizations. Finally, managing a diverse workforce is seldom without challenges. Yet, as evinced by multiple sources, the organizational gains from a diverse workforce clearly outweigh the initial difficulties of managing a diverse workforce.
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