Diversity management in the new-economy company

Kevin Savio Marc Coutinho and José Luis Silvestre. Centre for Diversity. Instituto de Empresa

1 January 2005

Firms today face management challenges, such as adapting to social changes, which will provide new competitive advantages. First of a series.

Interest in matters related to what has come to be called “diversity” is on the rise. There are debates and opinions to suit everyone on globalization, cultural plurality and immigration. We are living in a period of change from a traditional, stable model to another that is yet unclear. From the business point of view, challenges inspired by this change are huge.

The company, as a player in society, has been seeking satisfactory solutions to women’s matters for decades, as well as to questions of equal opportunity and respect for minorities. The assumption of quota or non-discrimination policies in the company has set the trend for business reality over the last 20 years.

From an external point of view, diversity is focused within image campaigns aimed at improving the company’s reputation as part of its Corporate Social Reputation (CSR), and in response to demands of external or internal stakeholders. However, in an uncertain and increasingly competitive world, where profit margins fall, services come together and technological advantages rapidly grow obsolete, it appears that creativity and innovation, efficient management of human capital, the struggle to attract talent, to retain and get the most out of employees is the only sustainable competitive advantage left.

William B. Harrison, CEO of JPMorganChase & Co, summed it up: “JP Morgan Chase needs the widest possible talent, all kinds of backgrounds and experiences. That requires a special environment, one that encourages the contribution of each person, and is open to new ways of thinking. Our success depends on enabling and challenging each other to contribute our best in an environment that is inclusive, open, flexible, fair and courageous.”

Diversity management seems to be linked to business strategy as a tool for improving human capital and getting the most out of employees. Most people agree that working with the best is best practice, but reality proves things are otherwise. Barriers still prevent certain groups from making a contribution. Business reality continues to configure a consistent profile, especially in management structure.

Clues for companies

Women hold an active position in the world economy, representing 40 percent of the global labor force. Yet the figure falls to 30 percent in management posts, and to a mere 5 percent in positions of responsibility. This is what Morrison, White and Van Velsor called the “glass ceiling” in 1992. Minorities do not fare much better. Their inclusion in the workforce involves more complexity in management, and can be counterproductive to motivating the traditional group , as the reference group (1) is watered down (2).

Faced with a traditional model, which in some cases is showing signs of exhaustion, new vitalizing realities are appearing which the company must understand and integrate without renouncing its configuration or raison d’être. On one hand firms need to open up new ways of understanding and conceiving the world and management, and must find new sap for regeneration and complementation.

This will provide the impulse necessary to stay in the race. On the other, they need to access new market niches, expand internationally, acquire a global dimension and incorporate the best possible talent. Companies demand creativity, initiative and leadership, and cannot afford to restrict their vision because of sex, race, culture or religion. Yet at the same time, companies want to conserve employees’ identification, increase loyalty and consolidate their own, global corporate culture.

Darwin said those who survive weren’t the best, they were only those who best adapted to change. Companies must react if they do not wish to be left behind.

Firms must incorporate different players, outlooks and cultures without dispersing their essence. They must establish new bonds with stakeholders who require more, in an environment that is increasingly competitive, and where constant pressure demands positive results. In short, companies must find the formula for turning diversity management into a tool for gaining competitive advantage.

In the coming months, we shall look at each of the themes affecting gender, culture, race, religion, sexual orientation, disability and diversity management at the work post. This series will examine the challenges facing firms in this decisive step towards transformation.

(1) Charles O’Reilly. Increasing heterogeneity in the workforce has more negative effects on white males. Researchers Report. Stanford, March 1995
(2) This phenomenon is known in psychology as “the attraction paradigm.” Byrne, D. (1971): The Attraction Paradigm, New York Academic Press

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