Cultural Diversity in the Work Place

How Diversity at Work Makes More Money for You

Four architects examining plans at table in office
Diversity in age, race, and gender strengthens a team. Photo: Thomas Barwick/Getty Images

Definition: Cultural diversity is when differences in race, ethnicity, age, ability, language, nationality, socioeconomic status, gender, religion or sexual orientation are represented within a community. The community can be a country, region, city, neighborhood, company or school. The group is culturally diverse if a wide variety of groups are represented. Cultural diversity has become a hot-button issue when applied to the workplace.

Why does cultural diversity matter? It can benefit a workplace. People with different backgrounds have different interpretations of events. They contribute unique perspectives. That allows the group to look at problems from all angles and create innovative results.

For diversity to bring strength, it must be valued and integrated into company practices and philosophy. This takes time and a commitment to celebrate diversity. It requires the willingness to be open-minded and non-judgmental about the value of differences.

Without that commitment, cultural diversity can weaken a group. Differences in interpretation of events can lead to miscommunication. If not addressed, awkwardness and hostilities arise. Prejudices will worsen that effect. People can jump to conclusions and misinterpret behaviors.

Economic Benefits

When it works, diversity increases profits. Each year, DiversityInc selects the 50 most diverse companies.

The 43 that were public corporations were 24 percent more profitable than the S&P 500. They made up just 7 percent of the Fortune 500 but generated 22 percent of its total revenue.

How does diversity drive profitability? The European Union Commission studied 200 companies in 2003. It found three areas where diversity mattered:

  1. Marketing – Having a diverse workforce builds trust in your brand with a diverse target market.
  2. Operations – Valuing diversity cuts costs by reducing turnover and absenteeism. It also avoids legal expenses. How? It enhances employee engagement by showing the company understands and respects different cultures. Valuing diversity also gives the company freedom to go after the most talented people, regardless of differences.
  3. Innovation –  Diversity within a product development team is very powerful. When it's in sync with diverse target markets, the team creates new products that satisfy the markets' needs. That's because a diverse workforce better understands diverse markets. For example, Daimler/Chrysler found the best mix for a product development team was heterogeneous. It was 50:50 male/female. It had a gradual age distribution rather than peaks. No more than half of any team was any one ethnic group or nationality.  

For the individual, it literally pays to be on a diverse team. Wharton Business School Research found that members of successful diverse teams earn more.

Embracing diversity also cuts down on legal costs. That's because it's illegal for employers to discriminate against employees based on their cultural diversity.

The Equal Employment Opportunity Commission promotes equal opportunity and handles complaints about workplace discrimination. Federal laws prohibit workplace discrimination in six areas. These are age, disability, national origin, race, religion and gender. 

How to Manage Diversity

Stereotypes can create destructive communication. Team members may be prejudiced against each other. It may take longer for the teams to perform, but it's worth it. Once the team bonds, the diversity makes it more innovative and raises performance. Result? Higher salaries, bonuses and even stock options for everyone on the team. 

Wharton Business School consultant Pamela Tudor found the key to managing diversity. Members of the team must be dedicated to a shared goal. She found that this commitment to a common goal overcame any diversity issues.

Diverse teams must be supported by departments that unite employees around the shared goal. This is more likely in growth-oriented companies. They know they must embrace diversity to fuel the innovation that is their competitive advantage

Examples

Johnson and Johnson is No. 5 on DiversityInc's top 50 list. It has 58 percent of its operations outside the United States. Its nine-member board of directors is diverse. It contains two African-Americans and two women. There are four women, an African-American and a Hispanic in its 13-member executive team. Half of the top 10 percent highest-paid employees are women. The company also offers great benefits to same-sex domestic partners. J&J was ranked as the 17th most LGBT-friendly company by GlassDoor. (Source: “Top 50 List,” DiversityInc.)

Google has 80 percent of the global search market share. It covers more than 200 countries. Its mission is to “Facilitate access to information for the entire world, and in every language.” There are 4,000 languages.

Fortunately, Google can reach 99.3 percent of internet users with only 40 languages. The most popular languages are Mandarin Chinese (882 million), Spanish (325 million) and English (312 million). It launched the 40-Language Initiative to accomplish this. It was successful because it truly valued the diversity in different countries. It realized it must speak the language to reach the market. That includes understanding the cultural differences inherent in the language. Google's diversity motto is “Never judge a search engine by its interface.” That's Googlese for “Never judge a people by their appearance.” In addition, Google was ranked as the third-most LGBT-friendly company by GlassDoor in 2014.

Why Diversity Is Growing

Emerging global trends are driving the growing economic power of a diverse workforce. In just 30 years, whites will be the minority in the United States. Babies being born now will belong to the first post-white generation in America.

China and India combined provide one-third of the global workforce. Since 2000, 1 million IT jobs were outsourced to India. Why? Both countries are obsessed with educating their people. In 1990, China had 610,000 college graduates. In 2010, this grew to 5 million. The No. 1 supercomputer in the world is in Tianjin, China. China's economic growth is designed to create a prosperous middle class and avoid revolutions.  (Source: "A New Business Imperative: Managing the 21st Century Workforce," Kronos Inc. July 2005.)

In the $913 billion African American market, buying power is up 55 percent, while the population increased just 10 percent. Why? Today, over 80 percent of African Americans have completed high school or college. That's up from 62 percent in 1990. Similarly, the Hispanic market has $980 billion in buying power. (Sources: "African-Americans Revealed," BET Networks. "Hispanic Buying Power to Reach $1.3 Trillion," Multicultural Digital Media News.)

The buying power of the LGBT market is $830 billion as of 2015.  A Syracuse University study found that gay household income was $65,000, higher than the U.S. median of $40,800.  Why? Again, education. Ninety percent were college grads. How well a company values diversity is important to this group. When job hunting, 90 percent consider how a company treats its LGBT employees and whether they sponsor LGBT events. (Source: "Understanding the Multi-Billion Dollar LGBT Market," Florida State University, April 20, 2015.)

The buying power of Gen X (born 1965-80) and Millennials (born 1981-2000) is $1 trillion. They grew up in a diverse society and celebrate it. For them, valuing diversity is assumed. In 2015, 73 percent of Millennials supported gay marriage. (Source: "Most Young Americans Overwhelmingly Support Gay Marriage," Boston Globe,