Critical review of literature of the impact of workforce diversity (specifically age, gender, and ethnic diversity) on organizational competitiveness
Ms. Anju Verma
Assistant Professor, Delhi University, Delhi
*Corresponding Author E-mail: anjuvermasrcc@gmail.com
ABSTRACT:
With organizations competing at the global level and demographic trends changing the landscape of the markets, workforce diversity has been heralded as the channel to cultivate success. Focusing on the relevance of workforce diversity, this article tries to investigate different dimensions and specifically explore the inherent tensions faced when discussing the impact of age, gender and ethnic diversity on organizational competitiveness. Based on existing literature and previous researches, a theoretical framework is constructed which suggests that gender and ethnic diversity increases the skills and talent among employees thus positively affecting the company’s performance while a moderately positive relationship exists between age diversity and performance of employees. However, a great scope was found to understand these diversities and their relationship with organizational competitiveness.
KEYWORDS: Workforce diversity, ethnic diversity, organizational competitiveness.
INTRODUCTION:
With the philosophy of workforce diversity gaining much popularity owing to rocketed globalization, organizations have now started investing their significant resources, time and energy into developing diversity missions, programs and strategies. By focusing on the concept of ‘difference’ as a key principle of diversity, many researchers and practitioners have emphasised that greater diversity and equality can positively impact organizational outcomes, including performance. Different business cases of diversity also underpins the idea that a diverse workforce, if properly managed, can be a valuable asset for organizations and increase its competitiveness.
LITERATURE REVIEW:
Wambui, et al. (2013) in his study has argued that diversity has become an important issue for organizations today because of globalization, migration, initiatives for social justice and other developments. Thomas and Ely (1996) mentioned in their study that the presence of diversity leads to many advantages such as increased profitability, learning, creativity, flexibility, organizational and individual growth, and the ability to adjust rapidly and successfully to market changes. Thus, it can be said that diversity has the potential of yielding greater productivity, innovation, creativity, improved attitudes, global understanding, new solutions to diverse problems, greater agility, better market insight, improved customer loyalty, retention, greater organizational effectiveness and competitive advantages. In the words of Henry and Evans (2007), it is impossible for any organization to survive without workforce diversity. Hence, managers must critically evaluate its benefits and put in place the strategies and conditions that would enhance the workforce diversity and make the organization internally and externally competitive.
Childs (2005) also argued that in today’s world, any organization can be dynamic and profitable, only if, they have a borderless perspective and a basic duty to guarantee that workforce diversity strategies forms part of everyday business activities and corporate practices. He also mentioned that to be successful, global companies must have a futuristic viewpoint and workforce diversity plays a key role in that process.
Workforce Diversity as a concept:
Existing literature has highlighted different definitions of workforce diversity in narrow and broad sense. The narrow definition of diversity may include cultural factors such as gender, age, colour, race, physical ability, ethnicity, etc. The broader definition of diversity comprises age, religion, disability, sexual orientation, national origin, values, education, language, lifestyle, beliefs, physical appearance, ethnic culture and economic status.
Wentling and Palma-Rivas (2000) has defined workforce diversity as co-existence of employees from various socio-cultural backgrounds within the company. According to Robinson and Dechant (1997), some organizations follows the traditional definition given by Equal Employment Opportunity Commission (EEOC) and consider only the differences in gender, racio-ethnicity, and age as diversity. Others employ broader definitions and include different physical abilities, qualities, and sexual orientation in workforce diversity. Many others focus on the heterogeneity of views, attitudes, perspectives, and backgrounds among group members. Finally, some organizations have broadened their definition of diversity even further. They consider people from different hierarchical levels, functions, and backgrounds as part of their workforce diversity.
Kossek and Lobel (1996) said that the new sources of diversity have emerged from within the organization such as employees from non-traditional lines of business, or a subsidiary with a distinctive culture.
According to Ferris, Frink, and Galang (1993) the notion of workforce diversity is different for different organizations. Some consider diversity as a problem, or a challenge that hampers organizational effectiveness. Others view diversity as an opportunity to expand the perspectives, ideas, opinions and creativity and enhance their organizational effectiveness.
Dimensions of Workforce Diversity:
Many scholars have described different dimensions of diversity. Some have divided these dimensions into two categories primary and secondary dimensions and some have divided into three categories primary, secondary and tertiary dimensions.
Primary dimensions include the in-born characteristics of the person, which cannot be changed or altered. Griggs and Louw (1995). However, secondary dimensions are those, which can be changed during the life of the person like religion, marital status, level of education etc. Coats, Goodwin, and Bangs (2000).
Loden and Rosener (1991) defined diversity as that which differentiates one group of people from another on the basis of primary and secondary dimensions.
· Primary dimensions of diversity, exerts primary influences on people’s identities, and includes gender, age, ethnicity, race, sexual orientation, mental, physical abilities and characteristics.
· Secondary dimensions of diversity are less visible and adds to the primary dimensions of diversity. They exert a variable influence on people’s identity and includes educational background, religion, geographic location, language, family status, work style, work experience, organisational role and level, income and communication style.
Rijamampianina and Carmichael (2005), added a third, tertiary dimension, to Primary, secondary dimensions of diversity. He says that assumptions, beliefs, feelings, values, group norms, attitudes, and perceptions are the nucleus of an individual’s identity and must be included in the dimensions of diversity.
Workforce Diversity and Organizational Competitiveness:
In order to gain and maintain competitive edge, organizations need diverse workforce who can serve their clients in the best possible manner, generates diverse ideas and help organization outthink the competition. Homogenous employees cross-fertilise the same old ideas, giving the same results. Thus, a culture of heterogeneous employees is necessary to enhance creative thinking and innovation.
Konrad (2003) has outlined three primary arguments in the business case for diversity. First, Increasing competition to get the best talent is one of the reason why organizations have started embracing diversity in workforce. Second, Organizations have realized that to cater to diverse set of customers they should have diverse workforce. A third argument is that diversity unleashes creativity, innovation, and improved problem solving, which in turn enhances the competitiveness of the organization.
Henry and Evans (2007) has argued that diversity unpacks heterogeneity that should be nurtured, cultivated and appreciated so as to increase the effectiveness in this competitive world. It means fostering an environment of acceptance and understanding, to create a workplace that accept and respect the differences and see the unique values in their co-workers. Many Researchers have argued that aligning diversity with the mission, business of the organization increases satisfaction, and retention, improves competitiveness, productivity; increases responsiveness of employees thereby enriching an organizations human capital. Thus, management of diverse workforce in order to increase organizational competitiveness has gained a lot of attention of corporate leaders, human resource managers and management consultants. Barak (2017).
Various empirical research, theory, and the best practices of organizations with clear diversity initiatives tells about the steps organizations can take to reap the benefits of workforce diversity. These steps include senior management commitment, accountability, thorough needs assessment, well-defined strategy, team-building and group process training, establishment of metrics and evaluation the effectiveness of diversity initiatives.
Many benefits of workforce diversity have been noted in the literature. At the individual level, when negative diversity- related barriers are removed, the performance of the employees is enhanced. At the group level, creativity, problem solving, cohesiveness and communication is enhanced. At the organization level, performance, competitiveness are improved and enhanced as firms are able to better mirror and adapt to diverse markets. It also leads to improved recruitment with better and diverse workforce. Kossek and Lobel (1996).
Bartz, et al. (1990) has said that the organizations, throughout the world, now constructively addresses the diversity reflected in their workforce. Greater diversity not only results in better products delivered in a more timely manner, it also improves the morale and satisfaction of employees, while increasing the number of employees who reach their full performance potential. Cox and Blake (1991) also argued that the potential benefits of diversity includes better decision making, higher creativity, innovation, increased competitiveness, greater success in marketing and better distribution of economic opportunity.
Forbes (2017) has mentioned these key findings based on the results of a survey and one-on-one interviews with senior executives related to workforce diversity on their web page. 1. Diversity is a key driver and critical component of innovation and success at the global level 2. It is essential for companies that want to attract and retain top talent. 3. Senior management is responsible for the success of company’s diversity or inclusion efforts.
Six arguments of workforce diversity proposed by Cox and Blake (1991) can contribute to creating competitive advantage and increasing competitiveness. The cost argument suggests that organizations that value diversity generally have higher levels of productivity and lower levels of turnover and absenteeism direct impacting the costs of the firm. The resource acquisition argument suggests that organizations who manage diversity effectively become good places for work and are better able to attract qualified and talented employees from all segments of the society. Thus, making the organization more competitive. The marketing argument suggests that organizations with diverse workforce are better able to understand and cater to different market segments. The creativity argument suggests that heterogeneity of employees promotes creativity and innovation. The problem-solving argument suggests that heterogeneity in decision and problem-solving work groups produces better decisions through a wider range of perspectives and more critical analysis of issues. Finally, the systems flexibility argument suggests that flexibility enables the organization to better respond to changes in the internal and external environment.
Thomas and Ely (1996) mentioned in their article in Harvard Business Review Periodical that a more diverse workforce will not only increase organizational effectiveness. It will also lift morale, bring greater access to new market segments, and enhance productivity. Cox T. (1993), Patrick and Kumar (2012) has argued that diversity help organizations nurture creativity and innovation thereby helping in tapping the hidden capacity for growth and improved competitiveness. Okoro and Washington (2012) says that given the age of globalization and knowledge economy, organizations will be successful only to the extent they are able to embrace, encourage, respect, appreciate and value diversity.
The organizations with diverse workforce reap advantage of the strengths, talents, and differences and develop their employees to their full potential by eliminating communication barriers, increasing productivity, facilitating innovation, better problem solving and service to diverse customers and taking advantage of the opportunity to enhance their future growth and development. The literature by Marquis, et al. (2008) also suggests that workforce diversity positively affects a company’s bottom line by increasing the skill sets and talent among employees.
The studies by Yang and Konrad (2011) and Marquis, et al. (2008) on the similar lines says that diversity helps in reducing the cost of the firm and promoting personal development, communication, teamwork, intergroup interactions, and eventually higher levels of job satisfaction.
Above literature review, suggests that diverse opinions, perspectives and values yield organizational benefits and personal growth, hence workforce diversity and its management must be the top priority while forming the strategies for the organization. A positive, diverse and motivating work environment increases satisfaction, productivity and retention. In addition, the broader perspective of diversity facilitates innovation and provides clients and customers with increased value. Thus, it can be said that an organization's success and competitiveness depends upon its ability to embrace diversity and realize its benefits.
Age diversity and Organizational Competitiveness:
While age diversity has turned out to be an integral part of many organizations, it was indiscreetly absent in the organizations until the turn of the millennium. Stein, Rocco, and Goldenetz, (2000). While many scholars argue that age diversity facilitates organizational performance when it is managed in constructive and integrative ways, Others’ say it negatively influences the level of commitment and engagement with the organization which subsequently affect their individual contributions to work, overall performance and competitiveness of the organization. Gitonga, Kamaara, and Orwa (2016). Graen (2003) mentions in his paper that firms are not adequately employing the talents of old workers owing to false beliefs and assumptions that they are expensive, more inclined to health issues, cannot conform to new technological and workplace changes, perform ineffectively and result in decreased yield on training investments as opposed to the younger employees.
The study by Hamilton, Nickerson, and Owan (2012) demonstrated that groups with more age diversity were less gainful and productive. This result is unvarying with Kulik and Roberson (2017) who says that with more age diversity organizations tend to be less profitable. However, Childs (2005) found no distinct relationship between age diversity and work performance. Rizwan et al. (2016) investigated that age diversity has a negative effect on the performance of employees working in the banking industry in Pakistan. Results of the study by Kumar and Singh, (2017) revealed that there is a moderately positive relationship between age diversity and employees performance of private sector bank employees in Rohtak. The findings by Kunze, Boehm, and Bruch (2011) demonstrated that age diversity results in emergence of an age discrimination climate, which negatively impacts overall organization’s performance. Duncan (2003) has given his arguments against recruiting older workers, on account of higher employment costs in his study.
Yet, some diversity scholars argue that age-diverse workforce displays diverse set of knowledge, values, and preferences. Their opinions, mind-sets and perspectives are different. Richard and Shelor (2002). Thus, in a team, the larger pool of knowledge and problem-solving abilities leads to improved performance if managed efficiently. Backes-Gellner and Veen, (2013) He said that employees of different age groups have different characteristics and have different effects on productivity. Young employees are flexible, innovative, risk-taking and adapt to environmental changes more easily as opposed to older employees. However, old employees can be considered as reservoirs of knowledge for effective transfer of skill. Succession planning is also more effective in age diverse organizations. Thus, a combination of young and old set of workers can help in increase innovation, productivity, competitiveness as compared to having homogeneous workers.
The present studies on age diversity and competitiveness shows a more theoretical emphasis on negative predictions. Organizations very rarely undertake initiatives to increase age diversity. Most believe in hiring employees at a young age and retaining them till their retirement. However, as suggested by the researchers there is a need for new paradigms and approaches to study age diversity more comprehensively at the workplaces.
Gender diversity and Organizational Competitiveness:
As stated by Gitonga, Kamaara, and Orwa (2016), with changing times the strengths, inherent capabilities of different genders have gained the attention of managers and top management at the work places. During the past decade, sustained focus on the number of women in top management has led to changes in company reporting and existence of gender-balanced workforce in the organization.
Eagly and Wood (1991), McMillan-Capehart (2006) and Frink, et al. (2003) have outlined the positive effect of diverse gender groups on performance as compared to the performance of same gender groups. However, According to Graen (2003), the studies investigated a negative impact on team performance when the sample included more males and no effect when more female were there in the sample. Kumari, et al. (2013) concluded that an organization’s performance may decline with an extensive level of gender diversity, however, it can gain competitive advantage over competitors through adequate level of gender diversity. Childs, (2005) has shown a reverse relationship, with respectably gender heterogeneous teams performing better than gender homogeneous management teams. Likewise, Frink, et al. (2003), Rizwan et al. (2016) in their studies reveal an upturned connection between gender, ethnicity and educational background and the performance of employees.
Several researchers studying workforce diversity drew the conclusion that gender diversity in the top management can positively affect organization performance. Carter, Simkins, and Simpson, (2003) Dwyer, Richard, and Chadwick (2003) have however reported negative relationship between women in top management and organization performance.
Gender differences may be helpful in providing insights into the diverse needs of both male and female customers. Researchers also argue that men and women have different cognitive abilities that can enhance overall team coherence, creativity, and innovation at work.
A mix of gender has varied capabilities that can be a source of harmonious relationships and positive attitudes within the organization. It also promotes inclusion of diverse ideas, mind-sets that further leads to enhanced team performance.
Ethnic diversity and Organizational Competitiveness:
Alesina and Ferrara, (2003) has described Ethnic diversity as differences in languages, religions, race and cultures, Frink, et al. (2003), Graen (2003) have concluded that ethnically different work groups lead to more innovativeness and advancement at work. Kulik and Roberson (2017) in his study inferred a positive effect of ethnic diversity on sales, performance, creativity and innovation. However, Choi and Rainey, (2009) comprehended no connection between ethnic diversity, performance of employees and profitability. Hoogendoorn and Praag (2012) has stated a different perspective altogether. He concluded that large ethnic diversity has positive impact on performance.
Oghene and Ehimare (2011) empirically explored that a more ethnical workgroup brings diverse set of ideas and knowledge that leads to more learning opportunities, creativity and innovation at work. Alesina and Ferrara, (2003) All in all, an influential source of heterogeneity may be ethnic diversity in the organization. While a significant number of studies have explored the effect of ethnic diversity at individual and group level, Ethnically diverse teams working in relatively homogeneous organizations experience performance deficits. E.Jackson, Joshi, and Erhardt (2003).
According to Ostergaard, Timmermans, and Kristinsson (2011) study, ethnic diversity up to a certain level can be positive for the organization due to broadened viewpoints and perspectives but a very high degree of ethnic diversity might be dangerous as it can lead to social categorization further resulting in conflicts and cliques among the employees.
Many private firms have manifested this kind of diversity because differences in cultural characteristics can predict team scores, resulting in increased problem solving and team performance. Watson, Johnson, and Zgourides (2002).
As concluded by Richard, Murthi, and Ismail (2007) and other researchers, little empirical support exists for findings concerning the positive impact of ethnic diversity on organizational outcomes thus leaving the further scope for research in this area.
Theoretical framework of Age, Gender and Ethnic Diversity’s relationship with Organizational competitiveness
CONCLUSION:
Reviewed literature supports multidimensional aspects of workforce diversity on Organizational competitiveness. It also demonstrates that different diversity elements (age, gender, ethnicity) could influence and make a contribution to organizational competitiveness by affecting productivity, performance and job satisfaction through improved communication, attitude, creativity and innovative skills of employees. Various studies have shown a positive relationship between Gender, ethnic diversity and Organizational competitiveness. The researches relating to the effect of age diversity on organizational competitiveness have derived mixed conclusions. However, the existing literature suffers from inadequate data, little innovation in methodology, and insufficient attention to empirical connections. Many of the existing studies present conflicting and inconclusive findings. Thus, there was found a greater scope to understand the potential effects of workforce diversity on performance and organizational competitiveness.
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Received on 08.07.2019 Modified on 08.09.2019
Accepted on 11.12.2019 © A&V Publications All right reserved
Asian Journal of Management. 2020; 11(1):125-130.
DOI: 10.5958/2321-5763.2020.00020.7