UGBA105:
Organizational Behavior
Professor Jim Lincoln
Week 12: Lecture
Managing Diversity
Class business
• Tuesday:
– Black caucus groups at Xerox case and video
2
Managing Diversity
• The U. S. workforce is the most diverse in
the world and growing more so
• Globalization demands better management
of diversity
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What are the dimensions of
workforce diversity?
Race, ethnicity, language, gender, sexual
orientation, household/family structure,
pregnancy, childcare, disability, HIV,
religion, age, drugs/alcohol, region,
religion, nationality, immigration status,
part-time, temporaries, subcontract
employees
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The diverse US workforce
• African-, Hispanic-, and Asian-Americans account
for more than 25% of the U. S. workforce and for
60% of net labor force growth
• Nearly half the US workforce is women
– 43% in 2002, down from 47% in 2000
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Has commitment to diversity
management declined?
• “Lean and mean” trend has eliminated
diversity programs
• “Angry white male” backlash and political
debate over affirmative action (Props. 187
& 209)
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Maybe it’s no longer a problem?
– “Paired testing” research shows discrimination
against minorities and women in hiring
– Ongoing corporate scandals (Salomon Smith
Barney, Coca Cola, Astra USA, Mitsubishi
Motors, Texaco, Wal-Mart, Morgan Stanley)
– Employee surveys show diversity still a concern
– Underrepresentation of women and minorities in
top jobs
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Debate at Harvard:
Are there “innate” gender differences in
math and science ability?
"We adults may think very different things about boys and girls, and treat them
accordingly, but when we measure their capacities, they're remarkably alike," said
Elizabeth Spelke, a professor of psychology at Harvard. She and her colleagues study
basic spatial, quantitative and numerical abilities in children ranging from 5 months
through 7 years.
"It's hard for me to get excited about small differences in biology when the evidence
shows that women in science are still discriminated against every stage of the way."
In a recent experiment Princeton students were asked to evaluate two highly qualified
candidates for an engineering job - one with more education, the other with more work
experience. They picked the more educated candidate 75 percent of the time.
But when the candidates were designated as male or female, and the educated candidate
bore a female name, suddenly she was preferred only 48 percent of the time.
New York Times, 1-24-05
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Chancellor Birgeneau takes on Prop 209
“Instead of ensuring nondiscrimination, Proposition 209 has created an
environment that many students of color view as discriminatory. That's
because minority representation has dropped appallingly, and where there
should be camaraderie across cultural lines, I have seen too much alienation,
mistrust and division.”
“I believe that at Berkeley we are … missing out on exceptional African
American, Latino and Native American students who can not only succeed
here, but whose participation can improve the education the university offers
all its students.”
“Minority inclusion is a public good, not a private benefit. … the single most
important skill that a 21st century student must master is "intercultural
competence" — the ability, best learned via experience with and appreciation
of other cultures, to navigate successfully in today's globalized society. .”
As the current chancellor, I feel a moral obligation to address the issue of
inclusion head-on. Ultimately it is a fight for the soul of this institution.
Inclusion is about leadership and excellence, principles that California and
its leading public university have long represented and might again.
Los Angeles Times Op-Ed Piece, 3/27/05
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The underrepresentation of
women and minorities at the top
• Women comprise:
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15.7 percent of Fortune 500 corporate officers
7.9 percent of the Fortune 500’s highest titles
5.2 percent of the Fortune 500’s top earners
1.6% (8) of the CEOs of Fortune 500 companies
24% of Fortune 1000 board directorships
• Less than 9% of managers in Fortune 1000 firms are
people of color, compared with 21% of the workforce
overall
– Four Fortune 500 firms have African-American CEO’s
• Merrill Lynch, AOL Time Warner, Fannie Mae, & Maytag
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Why the low representation of women
in corporate leadership positions?
What Women Executives Say What CEO’s Say
• Males stereotyping and
• Lack of significant general
preconceptions (83%)
experience (82%)
• Exclusion from informal
• Women not in pipeline long
networks (49%)
enough (64%)
• Lack of significant general • Male stereotyping and
management or line
preconceptions (25%)
experience (47%)
• Inhospitable corporate culture
• Inhospitable corporate culture (18%)
(35%)
• Exclusion from informal
• Women not in pipeline long
networks (5%)
enough (29%)
Source: 1996 Catalyst 11survey
The roots of diversity problems
• Individual-level
• Organization-level
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Why do people discriminate?
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Why do organizations discriminate?
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Organizational culture
• Content of corporate culture glorifies white maleness
– ”Macho” industry cultures: construction, air traffic controller,
energy, securities, military, heavy industry, sales
– “Country club” leadership and culture (old Chase Manhattan)
– “Good old boy” small town—P&G-- or Southern cultures-Coke)
• Culture strength
– Too strong culture (homogeneity, stringent screening/socialization)
– Too weak culture (lack of transcendent values & community,
negative politics)
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Strong culture and homogeneity at P&G
Few corporate cultures are as dominant as the
"Procter Way." "It's such a strong culture, they
really want sameness," says Ms. Beck, who later
worked as a brand manager for Dunkin Donuts
and as a vice president for Burger King. "The way
women think and the way we do business has
some inherently different qualities to it," Ms. Beck
says. "In retrospect, there was a gender aspect to
[P&G's culture] that was not intentional, but was
very, very real.“
WSJ, 9/9/98
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Does diversity reduce trust?
A bleak picture of the corrosive effects of ethnic diversity has been revealed in
research by Harvard University political scientist Robert Putnam. His research
shows that the more diverse a community is, the less likely its inhabitants are to
trust anyone - from their next-door neighbour to the mayor.
“In the presence of diversity, we hunker down. We act like turtles. The effect of
diversity is worse than had been imagined. And it's not just that we don't trust
people who are not like us. In diverse communities, we don't trust people who do
look like us."
Prof Putnam found trust was lowest in Los Angeles, "the most diverse human
habitation in human history", but his findings also held for rural South Dakota,
where "diversity means inviting Swedes to a Norwegians' picnic".
When the data were adjusted for class, income and other factors, they showed
that the more people of different races lived in the same community, the greater
the loss of trust. "They don't trust the local mayor, they don't trust the local
paper, they don't trust other people and they don't trust institutions," said Prof
Putnam. "The only thing there's more of is protest marches and TV-watching?”
Financial Times, 10/9/06
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Culture and branding:
Abercrombie’s preppy image leads to
discrimination in hiring
Some retail chains (e.g., the Gap or Benetton), pride themselves
on hiring attractive people from many backgrounds and races.
Abercrombie and Fitch's "classic American" look is blond, blueeyed and preppy.
The company says it does not discriminate. But in a recent
lawsuit Hispanic, Asian and black job applicants maintained
otherwise. Plaintiffs said that when they applied for jobs, store
managers steered them to the stockroom, not to the sales floor.
New York Times, July 13, 2003
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Organization & job design causes
Vertical and horizontal differentiation segregates and isolates
women and minorities
– Physical nature of job tasks exclude women, aged, disabled
– Jobs with ambiguous goals/skill requirements prompt selection on
personalistic criteria (“tall, good hair, right accent, smooth style”)
– Exclusion of women/minorities from “pipeline” or fast-track jobs
• E.g., women in HR
– Segregation of women/minorities by job, department, and level
makes them vulnerable to:
• Downsizing
• Pay discrimination
– Less perceived inequity when job and skill differences coincide with
demographics
By contrast, “flat,” flexible organizational designs mingle
people via teamwork and networks. They also have more
and faster paths to the top but fewer high-level positions 19
Why manage diversity?
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History of diversity management:
ignore differences & demand
assimilation
• Taylorism: dumb-down the job. Reduce the
worker to set of hands
• Melting pot idea: (“English-only”)
– “Tossed salad” as today’s metaphor
Neither of these is an option in today’s economy
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The melting pot ideal
“...Alongside our famous individualism, there's another
ingredient in the American saga, a belief that we are all
connected as one people.... It is that fundamental belief—I
am my brother's keeper, I am my sister's keeper—that
makes this country work. It's what allows us to pursue our
individual dreams, yet still come together as a single
American family: ‘E pluribus unum’; out of many, one....
There's not a black America and a white America and a
Latino America and an Asian America; there's the United
States of America.”
Illinois Senator Barak Obama’s keynote address to the Democratic
National Convention, July 2004
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The U. S. has the world’s toughest
anti-discrimination regulations
• Equal Pay Act of 1963
• Civil Rights Act of 1964. Title VII prohibits discrimination in hiring.
• Executive Order # 11246, 1965: mandated affirmative action for
federal contractors
• 1967 Age Discrimination in Employment Act; amendments in 1978
• Equal Employment Opportunity Act of 1972
• Rehabilitation Act of 1973
• Americans with disabilities act; July, 1990
• Family and medical leave act of 1993
No federal law specifically outlaws workplace
discrimination on the basis of sexual orientation in the
private sector
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High-profile discrimination lawsuits
• Sexual discrimination/harassment litigation
settlements
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Mitsubishi Motors, 1990: $34M
Astra USA, 1996: $10M
Salomon Smith Barney, 1998 $15M
Morgan Stanley $54M
• Racial discrimination litigation settlements
– Denny’s, 1994, $54M
– Texaco, 1996: $176M
– Coca Cola, 1999: $192M
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Wal-Mart in trouble
Wal-Mart, ranked number one on Fortune’s
prestigious "America’s Most Admired
Companies" list for 2003, is appealing a
court judgment against it in the largest
class-action sex-discrimination lawsuit in
U.S. history, with 1.5M plaintiffs.
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Solutions:
Toward better diversity management
• People and culture change
– Recruitment
– Training & socialization
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Restructuring
Politics and networks
Leadership change
Incentives
External stakeholder pressure
– PR & reputation
– Corporate governance change
Beware of slap-on, window-dressing solutions!!
– Towers-Perrin’s “customized” program
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Making the business case for diversity
In many companies, diversity is still viewed as something that has
only a tenuous impact on the bottom line... But rather than
creating a business case for diversity, which is what they should
be doing, many diversity officers are moralizing the issue. They
are still attempting to advance diversity because it's the right
thing to do, because it makes for good corporate citizenship.
But, says Kenneth Sole, a Durham, N.H.-based management
consultant, "This approach involves scrutinizing, chastising, and
.. punishing people. When people feel preached to, they are not
motivated to change their behavior."
Moralizing diversity, he adds, guarantees that people in diversity
leadership will become devalued and held in low esteem.
The Conference Board: “Do companies truly value their diversity
directors”(2006)
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Good diversity management helps
the bottom line
Annualized stock market return for the 100 companies
which rated lowest in equal employment opportunities
issues, average 7.9 percent, compared to 18.3 percent for
the 100 companies that rated highest in their equal
employment opportunities.
Source: Convenant Investment Management
Also, firms that received U. S. Department of Labor
awards for their success in implementing voluntary
affirmative action policies are rewarded with a boost in
their share price within 10 days of the announcement.
Source: "Competitiveness Through Management
of Diversity: Effects on Stock Price Valuation."
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Women and minorities as consumers
• Women account for nearly half of the nation's workforce,
college graduates, and talent pool. They make over 85
percent of consumer purchases and influencing over 95
percent.
• Likewise, racial and ethnic minorities, now spending in
excess of a trillion dollars annually, account for 30 percent
of consumers and 34 percent of the labor force. By 2050,
these minorities will account for almost 50 percent of U.S.
consumers and workers.
Source: Calvert Online 2004
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Recruiting
• Widen recruiting network
• Use minority recruiters
• Practice affirmative action
• Consider non-traditional criteria
• More fast track; less reliance on seniority and hiring
through conventional pipelines
• Bias-free testing and screening
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Training and socialization
• Training: better understanding of other
cultures and styles, regulations.
• Sensitivity groups/role playing
– Downside: villifying white males
• Mentoring programs
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Retructuring and job redesign
• Standard job redesign
– Job rotation to expand contactds & experience
– Empower lower level people
– Convert to teams
• Customize job requirements (flextime, “Mommy
track,” disability)
• Appoint diversity managers (> half of F500 firms
have them).
• Create diversity councils & task forces (Honeywell)
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Politics and networks
• Self-help and advocacy groups (e.g., Xerox
black caucus; GE women’s network)
• Appoint diversity “champions”
• Create diversity-oriented newsletters and
email lists
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Select leaders for commitment to diversity:
GE’s diversity management improved under CEO
Jeffrey Immelt
Of GE's top 173 officers, 13.3% are now
women, up from the 4.5% of six years ago
(the Jack Welch era).
Business Week, July 28, 2003
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Incentives and benefits
• Tie managerial compensation and
promotion to progress in meeting diversity
goals (Colgate, GE Capital)
• “Family friendly” policies (family leave,
on-site childcare, domestic partner benefits)
– New mandated benefits and anti-discrimination
rules for domestic partners
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Executive bonuses tied to diversity
goals at Wal-Mart
Wal-Mart CEO Lee Scott, speaking at the company's
annual meeting with analysts in Fayetteville, Ark., said the
bonuses, including his own, would be cut by up to 7.5%
this year and 15% next year if the company doesn't
promote women and minorities in proportion to the
number that apply for management positions. "If 50% of
the people applying for the job of store manager are
women, we will work to make sure that 50% of the people
receiving those jobs are women," Mr. Scott said.
WSJ 6/4/04
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Tracking & rewarding diversity
progress at Ryder
Ryder System, Inc. Ryder, a logistics, supply-chain, and
transportation giant, runs an extensive diversity program
for its 30,000 employees. Ryder measures the return on its
program by tracking litigation costs and the number of
women and members of minority groups hired and
promoted in key jobs throughout the company.
"Since the initiation of these programs, litigation costs have
dropped dramatically," says Gerri Rocker, director of
corporate diversity for the Miami-based company. The
company uses a scorecard for each business unit that
includes a diversity component, with specific targets for
hiring and promoting women and people of color. Senior
leadership bonuses are tied to meeting these targets.
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Reputational effects:
Fortune’s top 10 companies for minorities
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Advantica
Fannie Mae
MacDonald’s
Southern California Edison
Sempra Energy
Xerox
Silicon Graphics
SBC Communications
Lucent Technologies
Bell South
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Corporate governance reform and
stakeholder pressure
In May of 2003, Calvert Funds became the
first investor to propose model language for
nominating and corporate governance
committees that assures diversity among
boards of directors. This charter provides a
vehicle for companies to implement their
commitment to an independent and diverse
board.
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Diversity takeaways
• Effective management of diversity is a huge
challenge with no easy solutions
• But there are many things companies can
and should do
• And doing nothing is not an option
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