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Bridging the Research-Practice Gap: Diversity Climate Predicts Performance

In 1994, Taylor Cox introduced the interactional model of cultural diversity (IMCD), which predicted that diversity climate affects employees’ attitudes and performance and thereby influences firm performance.

Although this model has received considerable attention and has affected practice, research on the model has been lacking. Patrick McKay and his colleagues, Derek Avery and Mark Morris, have published a study on the link between diversity climate and store performance in a 2009 Personnel Psychology article.

McKay and his colleagues rely on previous work when defining diversity climate as “employees’ shared perceptions of the degree to which a firm is thought to utilize fair employee policies and socially integrate underrepresented employees into the work setting.” The logic of the IMCD is that employees, who feel valued, because of the existence of a positive diversity climate, will have a favorable opinion of their employer and will be motivated to perform well. Although this effect may be particularly strong for employees who belong to subordinated groups — such as women and racioethnic minorities — the impact of diversity climate should apply to all employees.

McKay and his colleagues further argue that the effect of diversity climate on performance should be particularly strong when both subordinates and managers think the organization has a positive diversity climate, because both will work hard for the firm and managers will fully implement the fair and unbiased policies and procedures that underlie the positive diversity climate.

To test these predictions, the researchers obtained data from 56,337 subordinates and 3,449 managers who worked at 654 stores of a large retailer. They obtained ratings of diversity climate from the managers and subordinates in the fall of 2005. They then used these diversity climate ratings, averaged across all subordinates and managers in each store, to predict the percentage change in total store sales from the previous year, as of January 2006. Their analyses appropriately controlled for other potential influences, such as subordinate and manager job tenure, percent of female and minority subordinates, region, and store size.

The results confirmed their predictions. Annual growth in sales was positively related to both manager and subordinate ratings of diversity climate. Furthermore, growth in store sales was especially strong when subordinates and managers agreed that the store had a positive diversity climate. It is important to note that this positive effect was found after controlling for employee gender and racioethnicity, so the results apply to the average employee — ignoring demographic status. As the IMCD model suggests, a positive diversity climate makes a difference for everyone.

This study focused on sales, because sales are of key importance to the retailer being studied, but the results may well generalize to outcomes of importance to other organizations, such as graduation rates for institutions of higher education. This study is important for practitioners in part because it enables them to use empirical evidence, rather than anecdotes, to argue for the business case for diversity.

Reviews of work on the diversity-organizational performance relation have been inconclusive: some research shows that organizational diversity is associated with positive results and increased performance, but other work finds that diversity results in tension, conflict and lowered performance. These ambiguous results can stimulate opposition to diversity initiatives. The present study provides a more nuanced understanding of the diversity-performance relation. Implicit in McKay’s study is that the relation between workplace diversity and performance is not simply positive or negative. What matters is how managers and workers perceive the diversity climate.

Thus, practitioners can argue that it is important for organizational leaders to implement policies and procedures that will establish a positive diversity climate that is apparent to all employees — managers and subordinates alike. While this research is a valuable addition to the growing body of work confirming the link between positive diversity climates (inclusive organizations) and performance, more needs to be done.

Perhaps most obviously, work is needed on exactly how an organization can establish a positive diversity climate, and in particular on the impact of senior leadership involvement. In addition, more research is needed to help practitioners sell the business case for diversity to their internal and external clients. Studies extending this diversity climate hypothesis to team and individual performance would be of particular value to practitioners; because practitioners must often focus on how to help their clients create and lead inclusive and high-performing teams.

Making the business case for leadership involvement in leading and managing diverse work forces is central to their success, as is an understanding of what that involvement should entail.

— David A. Kravitz is a professor of management at George Mason University. Dr. Renée Yuengling is a workplace diversity consultant in Washington, D.C.

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