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Chapter 11

I ndi vi dua l s, Te a m s, an d Org ani z ati ona l B en e f i ts of Ma nag i ng Di v ersi t y An Evidence-Based Perspective Eddy S. Ng and Jacqueline Stephenson

One of the most salient trends of the twenty-first century is the increasing diversity in the workforce as a result of worker immigration. Immigrants make up a significant percent of the workforce in Australia (32.8%), Canada (22.4%), New Zealand (21.9%), the United States (13.3%), the United Kingdom (8.7%), and other Organisation for Economic Co-operation and Development (OECD) nations (Belot and Hatton 2012). Despite the promise of a competitive advantage, employers are grappling with how best to manage diversity to enhance organization performance (Kochan et al. 2003; Jayne and Dipboye 2004; Kearney and Gerbert 2009). Researchers have touted that workforce diversity, when properly managed, improves business performance because of a greater utilization of talents, and also because firms can reach out to a broader and more diverse customer base (Cox and Blake 1991; Robinson and Dechant 1997). Others, however, are sceptical of this claim, pointing to the contingent and short-term nature of the ‘business case’, and the inability to quantify the benefits of workforce diversity (Dickens 1999; Noon 2007). The findings from studies documenting the direct effects of workforce diversity on performance have been mixed and inconclusive (van Dick et al. 2008; Pitts and Wise 2010). This chapter attempts to reconcile the seemingly contradictory studies by adopting an evidence-based approach to investigate the benefits of diversity at the individual, team, and organization levels. We first provide a brief commentary on the definitions of diversity in the workplace. We then review existing theoretical frameworks on the proposed benefits of diversity. Next, we examine existing empirical evidence on the benefits of managing diversity at the individual, team, and organizational levels, based on existing studies that have been published in this domain. We also document how, when, and under what conditions diversity enhances performance at the

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individual, team, and organization levels. Where possible, we identify the policies and practices that are effective at promoting a more diverse workforce, and also those that can enhance the benefits of diversity.

Definitions of Diversity Diversity, in its most basic form, refers to differences among people, which includes attributes that may be used to differentiate one person from another (Williams and O’Reilley 1998). Examples of such differences include, but are not limited to, age, gender, race, ethnicity, (dis)ability, sexual orientation, religion, social class, education/ function, national origin, and language (see Kossek, Lobel, and Brown 2005). There are many typologies which have been used to classify people together as distinct groups, the most common being cultural differences (Richard 2000; Shore et al. 2009), physical differences, including appearance and (dis)ability (Woodhams and Danieli 2000; Olkin 2002; McLaughlin, Bell, and Stringer 2004; James 2007), and inherent differences (e.g. age and race) (see Andrevski et al. 2014; Bohm et al. 2011; Stone and Tetrick 2013). These differences may also be grouped into two primary categories: surface-level and deep-level diversity (Harrison, Price, and Bell 1998). Surface-level diversity attributes encompass age, race, and sex (see Tajfel and Turner 1986; Phillips, Northcraft, and Neale 2006), while deep-level attributes include one’s personality, values, beliefs, attitudes, and mental models (see Bell 2007). For the purpose of this chapter, we will focus on gender and racial diversity, since they are more prevalent and present significant challenges to organizations and employers in light of an influx of women into the labour market, and worker immigration (Burke and Ng 2006), although logically and theoretically, other forms of diversity, such as age, nationality, and the others identified here, would also apply. We also use the terms ethnic diversity, racial diversity, and cultural diversity interchangeably.

Theoretical Frameworks The term ‘managing diversity’ (MD) was popularized by Thomas (1990) to refer to management practices that aim to harness the benefits of a heterogeneous workforce. It includes espousing an official policy on diversity, active recruitment of minority group members, training and development of minority employees, examination compensation for fairness, and holding management accountable for diversity goals (Ng 2008). Managing diversity is also differentiated from affirmative action (AA), in that it is a voluntary corporate approach to dealing with increasing heterogeneity in the workplace, rather than being mandated by the government (Ng and Burke, 2005). As a result,

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managing diversity is seen as less controversial than AA, since there is no quota or numerical targets to fulfil (Ng and Burke, 2005). Multiple theoretical perspectives have been advanced on the benefits of managing diversity. Thomas (1990) first suggests that AA is outmoded, as the emphasis in recent years is for managers to tap into the potential capacities of everyone. This perspective is seen as more inclusive than AA because everyone, including the white male majority, is encouraged to contribute to their fullest potential to maximize organizational effectiveness. Thomas (1990) argues that managing diversity is better than AA because it focuses on leveraging on the benefits of diversity rather than trying to gain the same level of efficiency as a homogeneous workforce. As a result, employers can gain a competitive advantage when everyone in the workforce performs to his or her own potential. Following Thomas (1990), Cox (1993) proposes that individual differences among diverse employees can serve to enhance creativity and improve problem-solving in workgroups. According to the ‘value-in-diversity’ hypothesis, workforce diversity when properly managed, can lead to group and organizational processes that enhance overall firm performance. The benefits which may be realized by firms include attracting talent from across different cultural groups, greater marketing success, and better retention of employees, thus also contributing to cost savings for employers. The value-in-diversity hypothesis has been the catalyst in promulgating the business case for diversity, and has also spawned numerous studies in both experimental and field studies (which will be discussed in the section titled ‘Effect of Diversity on Group and Team Performance’). Thomas and Ely (1996, also see Ely and Thomas 2001)  propose three paradigms for managing diversity, which are related to organizational performance. Under the ‘discrimination and fairness’ perspective, the goal for diversifying the workforce is to increase the underrepresentation of minority groups with little to no connection to work outcomes. In the past, this has been the predominant approach for firms when dealing with an increasingly diverse workforce. Under the ‘access and legitimacy’ perspective, firms are actively managing diversity, but only to access the marketplace and gain legitimacy with diverse customers. However, according to Thomas and Ely (1996), this perspective is short term in focus and utilizes the benefits of diversity at the margins. Employers do not incorporate the value of diversity into the core functions of the firm. The third paradigm, ‘integration and learning’ is about infusing diversity into organizational processes and using diversity as a resource for organizational change and renewal. This approach is seen as more enduring because it links diversity to work processes. Thomas and Ely’s three paradigms for managing diversity have also been widely cited in academic literature (Mannix and Neale 2005; Carroll and Shabana 2010; Zanoni et al. 2010; Shore et al. 2011; Guillame et al. 2013). Apart from Cox’s (1993) value in-diversity hypothesis and Thomas and Ely’s (1996) paradigms for managing diversity, other theoretical perspectives document the impact of workforce diversity on performance. Richard (2000), drawing on Barney’s (1991)

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resource-based theory, argues that workforce diversity can be a strategic advantage when firms are able to capitalize on the value of its diverse workforce, and to create a diverse workplace that is rare and difficult to imitate. Ortlieb and Sieben (2013) similarly propose a typology for managing diversity based on resource-based theory, to take advantage of the human capital among diverse group members. In this view, workforce diversity is seen as an economic resource that can provide firms with a competitive advantage, and under the right conditions. Stakeholder theory argues that diversity should be a concern for managers and firms because of instrumental and normative reasons (Berman et al. 1999). Under the instrumental perspective, employers manage diversity because of the economic benefits that accrue to the firm. In the normative view, firms should manage diversity out of a moral obligation because it is the right thing to do. The stakeholder perspective considers the ‘treatment of women and minorities’ as employees and stakeholders who can affect a firm’s social and corporate performance (Agle, Mitchell, and Sonnenfeld 1999). Firms gain legitimacy with investors and customers when employees are treated fairly and equitably, thus leading to greater firm profitability (Donaldson and Preston 1995). Research in corporate governance has documented that the presence of women on corporate boards leads to greater monitoring of firm behaviour and, consequently, better firm performance (Campbell and Mínguez-Vera 2008; Bernardi, Bosco, and Columb 2009; Boulouta 2013). Likewise, studies conducted in the public sector have found that having women in government leads to lower corruption (Sung 2012). Although a majority of studies have focused on the gender-ethical orientation link, other dimensions of diversity such as culture and nationality have also been linked to greater firm ethical orientation and performance (Ben-Amar et al. 2013; Hafsi and Turgut 2013). It is likely that the greater diversity of viewpoints and constructive conflicts that arise from diverse group members may lead to better decision-making (de Wit, Greer, and Jehn 2012). Suffice to say, firms with diverse boards also benefit from enhanced firm reputation as they gain legitimacy with customers and investors (Bear, Rahman, and Post 2010). Our review of the major theoretical frameworks suggests that workforce diversity has the potential to provide organizations with a source of competitive advantage. However, in order to realize this potential, employers and managers will need to proactively manage the differences arising from a diverse workforce (Cox and Blake 1991). As Thomas (1990) noted, the goal is to harness the benefits of diversity beyond what can be accomplished by a homogeneous workforce. Furthermore, employers that are able to infuse diversity into core organizational processes will reap greater benefits than those who simply utilize them at the margins (Ely and Thomas 2001). When firms hire from a diverse workforce, they also gain diverse viewpoints leading to more ethical decision-making. Firms also benefit from enhanced reputation for social responsibility and gain legitimacy with customers, resulting in overall improved performance. Given the promise on the benefits of a diverse workforce, the following sections review how managing diversity can benefit individuals, teams, and organizations.

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Benefits of Managing Diversity on Individuals Literature on diversity management (DM) has focused on improving individual and group effectiveness to improve overall firm performance.1 However, comparatively little research has been undertaken to examine how diversity programmes affect individual outcomes. On this basis, we document how DM can assist individuals in attaining individual career goals, and consequently contribute to their career outcomes and satisfaction.

Equal Employment Opportunity and Affirmative Action One focus of managing diversity in organizations is to increase the representation of minority group members to achieve a demographically diverse workforce (Thomas and Ely 1996; Ely and Thomas 2001). In this regard, public policies such as equal employment opportunity (EEO) and AA are useful and effective instruments to increase the number of women and minority groups in the workforce. EEO refers to regulations prohibiting employers from using an individual’s immutable characteristics as their criteria for making employment decisions (Holzer and Neumark 2006), while AA refers to situations where preference is given to individuals if they are members, , of an underrepresented group for employment (see Brown, Langer, and Stewart 2012). Although EEO and AA programmes are often differentiated from managing diversity, in reality they are a part of a firm’s broader efforts to manage diversity (Mighty 1996). For example, Canadian firms which have to comply with AA often refer to it as DM (Ng 2005). In general, EEO and AA are legally mandated, while DM represents voluntary efforts to manage diversity by the employers (Agocs and Burr 1996). Studies have shown that AA practices do affect the employment outcomes for women and minorities. For example, Konrad and Linnehan (1995) found that, in the American manufacturing and service sector, AA is associated with positive employment outcomes for women and minorities. Likewise, Holzer and Neumark (2000) reported that AA increased employers’ use of targeted human resource (HR) practices, to hire more women and minorities into organizations. Furthermore, Ng and Burke (2010) found that senior management (e.g. CEOs) are more likely to pay attention to and commit to managing diversity when they are required to comply with AA mandates. In Canada,

1

DM includes a range of diversity practices, such as diversity policy statements, active recruitment, training and development, compensation, management accountability, and community support, all of which are considered to be essential in the advancement of women and minorities (Konrad and Linnehan, 1995).

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the threat of fines and negative publicity may also compel employers to increase the number of women and minority group members (Taggar, Jain, and Gunderson 1997). Moreover, there has been suggestion that when AA is replaced by a meritocracy-based policy, as in the case of California in 1996, employment of women and minorities dropped sharply as a result (Myers 2007). The effectiveness of AA policies in increasing the employment of women and minorities has been documented in Australia (French and Strachan 2007), Canada (Haq and Ng 2010), New Zealand (Edgar 2001; Hyman 2008), India (Saha 2012), and South Africa (Horwitz and Jain 2011), although at varying levels of success in different countries, and for different groups.

Career Advancement and Pay Equity EEO and AA programmes have been instrumental in advancing and promoting the careers of women and minority groups. Kurtulus (2012) reported that AA has been responsible for the increasing share of women and minorities in high-paying occupations over a thirty-one-year period in the US. Similarly, women assumed greater executive roles in government and exercised as much influence as men in the US public sector as a result of AA (Dolan 2004). Therefore, it should be no surprise that organizations that have to comply with AA see the strongest effects in the number of women and minorities in management. When the different types of AA programmes are considered, firms that assign accountabilities for diversity to managers (e.g. setting goals and timetables, assessing progress) were found to be more effective than programmes that address managerial bias or social isolation of minorities (Kalev, Kelly, and Dobbin 2006). Additionally, Hakim (2006) credits AA for the progress of women’s career advancement. Although the occurrence of women (and minorities) in senior and executive-level positions is still rare, due to limited experience (resulting in part from a lack of mid-level managerial experience), AA programmes ensure that women (and minorities) gain the experience necessary for assuming senior positions in the future. In other words, increasing the number of women and minorities in the pipeline will inevitably lead to increases in female and minority representation in management and senior-level positions. Countries such as Norway, which mandates the number of women on corporate boards (quotas) also reported more women in management (Matsa and Miller 2011, 2013). Many jurisdictions, such as Canada and Europe, put in place pay equity or equal pay policy as a part of their AA legislation (Rubery and Fagan 1994; Singh and Peng 2010). Pay equity essentially requires that employers pay women and men the same wages for performing the same job, while equal pay dictates that employers pay women the same as men for performing work of comparable worth or value. Pay equity policy has been largely responsible for pay increases for women, especially in the public sector, and for narrowing the pay gap. According to Singh and Peng (2010), the wage gap decreased from 38 per cent to 29 per cent, from 1988 to 2008 (twenty-year period) in Canada.

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Career Satisfaction Career satisfaction relates to an individual’s career attainment in terms of goals, progression, income, and development. In Canada, Yap and colleagues (2010) found that racial minorities in managerial and professional jobs reported lower satisfaction than whites because their human capital is frequently undervalued and underutilized. This finding is not surprising, given that minority employees’ qualifications and work experience, particularly among immigrants, are often devalued or discounted when they are acquired abroad (Esses et al. 2007). When individuals are dissatisfied with their careers, on account of prejudice and discrimination, they are more likely to report lower job satisfaction, have less commitment to their work, perform more poorly, and be more likely to engage in withdrawal behaviours (e.g. absenteeism and turnover) (Hughes and Dodge 1997; McKay et  al. 2007; McKay, Avery, and Morris 2008; Antecol and Cobb-Clark 2009). In this regard, EEO and AA programmes may be helpful in promoting perceptions of justice and in creating a more inclusive climate among women and minorities at the individual level. Likewise, AA in the public sector moderates minority employees’ job satisfaction, which in turn lowers turnover intentions (Choi 2009). Furthermore, an appreciation of diversity can lead to employee well-being (e.g. less stress and a better work/life balance), and a greater commitment to their team members (Lehmann-Willenbrock, Lei, and Kauffeld 2012). Thus, there is evidence to suggest that AA programmes promote minority employees’ career satisfaction and individual work performance (Gonzalez and DeNisi 2009; Triana, Garcia, and Colela 2010). In sum, DM practices such as EEO and AA programmes are responsible for ensuring the representation of women and racial minorities. When managers are held accountable for diversity goals, minorities are also more likely to be promoted into management. This is important, because they gain the experience and acquire management experience necessary for promotion to senior management levels. DM through pay equity legislation is also responsible for reducing the pay gap between women and men.

Impact of Managing Diversity on Team and Group Outcomes When individuals feel valued, they are more likely to be committed to the team and to the organizations for which they work (Hopkins, Hopkins, and Mallette 2001). Therefore, it should come as no surprise that women and minorities value employer efforts to manage diversity in the workplace (Kossek and Zonia 1993). On this basis, firms that are able to manage the diversity in terms of communication, cohesion, and intra-group conflict will stand to gain from the benefits from diversity. However, the context and conditions in which diverse work groups are required to perform also have

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an impact on overall group processes and team performance (see Jehn and Bezrukova 2004; Joshi and Roh 2009).

Effect of Diversity on Group and Team Performance Research findings on the effects of workgroup diversity have related to team performance, despite the value-in-diversity arguments. In a laboratory study in the US, Watson, Kumar, and Michaelsen (1993) reported that homogeneous workgroups outperformed culturally diverse workgroups on problem-solving and idea generation at the initial stages of the task. However, performance differences disappeared after seventeen weeks when diverse workgroups were able to work out their communication challenges. However, it is unclear if diverse teams were able to outperform homogeneous teams over a longer period of time, although Ng and Tung (1998) did find diverse workgroups outperformed homogenous workgroups in a field study involving multicultural bank branches across different financial measures. In a subsequent study, based on a US sample, Watson, Johnson, and Merritt (1998) reported that team orientation vis-à-vis self-orientation predicted team performance, with diverse teams outperforming homogeneous teams initially and homogenous teams outperforming diverse teams subsequently. Thus, findings on realizing the gains from the value-in-diversity hypothesis at the group and team level remain largely mixed and contingent upon a number of factors.

Diversity Beliefs A number of other studies have shown that the processes and dynamics within diverse workgroups can affect their performance. Van Dick and colleagues (2008) reported that when individual team members believe that diversity is good for achieving team goals (i.e. pro-diversity beliefs), they are more likely to identify as a group, share information with each other, and intend to stay as a group. Groups that hold pro-diversity beliefs also performed better, although groups that hold pro-similarity beliefs (i.e. preferring group members who are demographically similar) did not have poorer performance (Homan et  al. 2007). Foldy (2004) suggests that individual beliefs about diversity may moderate the relationship between team diversity and performance. Van Knippenberg, van Ginkel, and Homan (2013) similarly propose that diversity mindsets (mental beliefs about diversity), moderate the diversity–performance link. Based on these studies, there is evidence to suggest that positive beliefs about diversity, which promotes diverse team efficacy, may be key to unlocking the performance of diverse workgroups.

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Task Types The types of tasks required of diverse workgroups also appear to have an effect on their team performance. Accordingly, diversity is expected to provide teams with greater creativity and innovation, but diverse teams also suffer from poorer communication, a lack of cohesion, and intra-group conflicts. Nouri and colleagues (2013) reported that team diversity was beneficial for creative-type tasks (e.g. idea generation) when tight coordination and shared understanding among team members are relatively less important. In another study, Woehr, Arciniega, and Polling (2013) reported similar observations, and concluded that less diversity in teams is suited for tasks with process outcomes, since there is more team cohesion and less conflict. Furthermore, the benefits of diversity (e.g. creativity) accrue to teams with highly interdependent outcomes and low longevity, since they are more likely to avoid groupthink (Schippers et al. 2003). In this regard, team performance is highly dependent on the types of tasks and outcomes that are expected of teams with diverse and homogeneous team members.

Levels of Diversity Additionally, the composition of diverse teams also affects the outcomes of diverse workgroups. Richard, Kochan, and McMillan-Capehart (2002) propose that the relationship between diversity and performance is curvilinear. The curvilinear relationship represents the tension that exists between the positive and negative effects of diversity. As the level of diversity increases, the benefits that accrue to groups also increase. As an example, Konrad, Kramer, and Erkut (2008) found that having three women on corporate boards appears to be most helpful to realize the gains from diversity (one or two female directors are tokens and less effective). Once the optimal level of diversity has been attained, groups will begin experiencing diminishing returns from diversity. Drawing from societal-level studies, when a neighbourhood becomes increasingly more diverse, citizens reported that their interactions with dissimilar others occur less often and they also have less trust for each other (Putnam 2007; Stolle, Soroka, and Johnston 2008). In this instance, the benefits from diversity may be eroded by weakening relationships and trusts among diverse group members, as is often documented in social network studies (McFadyen and Canella 2004; Chen and Gable 2013).

Diversity Fault Lines Diversity in teams may also create fault lines, which are ‘hypothetical dividing lines that may split a group into subgroups based on one or more [demographic] attributes’ (Lau and Murnighan 1998: 328). In other words, members in diverse groups divide themselves into homogeneous subgroups, which can threaten the gains from diversity. Strong fault lines increase the potential for dissensus with demographically dissimilar others, which

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could lead to ‘behavioural disintegration’ (Li and Hambrick 2005:800). Members from this smaller subgroup may also receive less internal support and experience more opinion suppression, leading to reduced confidence and effectiveness (Lau and Murnighan 1998). Meyer and Schermuly (2012) reported that pro-diversity beliefs, task motivation, and communication about task information help lessen the fault-line strength. Likewise, Sawyer, Houlette, and Yeagley (2006) found that diverse cross-cutting teams (where race crosses job functions), and team members not pre-disposed to pre-task discussions (which facilitated necessary discussions) outperformed homogeneous teams. The fault line may be diminished when no clear subgroups exist, or weakened when members are required to interact with each other more extensively prior to task.

Top Management Teams A critical area for examining group or team diversity is within top management teams (TMTs), as top executives make decisions that directly impact firm performance (Homberg and Bui 2013). Studies have shown that various dimensions of diversity on corporate boards lead to greater degree of internationalization (Kaczmarek and Ruigrok, 2013), greater product diversification (Hutzschenreuter and Horstkotte 2013), greater innovation (Mihalache et  al. 2012), and overall firm performance (Nielsen and Nielsen, 2013). Group processes such as fault lines also affect TMTs. For example, task-related diversity lessens the fault-line strength, while demographic diversity (i.e. race) strengthens TMT fault lines (Hutzschenreuter and Horstkotte 2013). The presence of women also contributes to the informational and social diversity on TMTs, which leads to firm performance, particularly for innovative firms (Dezso and Ross 2012). In sum, diversity at the team or group level has the potential to benefit organizations. However, the types of task, a belief in (the benefits of) diversity, and the composition of the teams are all crucial in realizing the potentials from team diversity. In this regard, it is crucial for managers and team leaders to create teams with three or more minority group members (or women), and to weaken any potential fault lines (by having greater diversity). Firms also benefit when TMTs are diverse.

Impact of Diversity on Organizational Outcomes The impact of diversity at the organizational level receives the most attention in research studies, since top executives are most likely to pay attention to the instrumental benefits derived from a diverse workforce (Ng and Wyrick 2011). Despite the impetus to manage diversity at the individual and group or team levels, evidence on

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the diversity–organizational performance link has not yet been conclusively established, as evidenced by the conflicting findings from empirical research (Shore et al. 2009; Roberge and van Dick 2010). This is likely because the ability of a firm to capitalize on its diverse workforce is dependent on a host of factors, such as a firm’s strategic orientation, TMT diversity, and firm leadership, as well as policies and practices that are related to DM.

Strategic Orientation Richard (2000) reported that the link between workforce diversity and firm performance is contingent upon a firm’s strategic orientation. Workforce diversity contributed to employee productivity, return on equity, and market performance, but only for firms with a growth orientation. In another study, conducted in the US, Richard and colleagues (2003) reported that employee diversity enhanced the performance of firms that are pursuing an innovative strategy. Diversity in TMTs similarly affected the innovation outcomes and firm performance for firms with an innovative orientation (Mihalache et al. 2012). Taken together, these findings suggest that firms pursing growth and innovation strategies are more likely to be able to capitalize on the gains from diversity, particularly when creativity and innovation, as well as access to the market, are considered to be essential for firm success.

Leadership Although workforce diversity, when properly managed, is expected to lead to improved firm performance (Cox 1993), the role of leaders and managers in capitalizing on those benefits cannot be underestimated. Ayoko and Konrad (2012) demonstrate that effective leadership could reduce task and relationship conflicts in diverse teams, which are related to morale and group performance. Likewise, Muchiri and Ayoko (2013) found that transformational leadership style plays a moderating role in eliciting greater organizational citizenship behaviour and productivity among women in diverse work units. Ng and Sears (2012) similarly reported that transformational leaders, and transactional leaders with relatively high age or social values, are related to the number of diversity practices implemented in a firm (also see Ng (2008) on other individual characteristics that are hypothesized to predict CEO motivation to manage diversity). The number of diversity practices haven been found to be related to the employment outcomes for women and minorities (Konrad and Linnehan 1995). CEOs are more likely to be motivated to manage diversity when they see an instrumental link to workforce diversity. Researchers have variously attempted to document the relationship between workforce diversity and firm financial returns (Weigand 2007), as well as stock prices (Wright et al. 1995), to establish the diversity–financial success link, with positive results

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Diversity-Related Policies and Practices Research has also shown that DM practices contribute to firm performance above and beyond high performance work systems (Armstrong et al. 2010). In the US public sector, diversity policies and practices enhanced the performance of government agencies (Choi and Rainey 2010). Western-based multinational corporations (MNCs) were more likely to adopt strategic HR management practices that promote a diverse workforce than Eastern-based (e.g. Indian and Chinese) firms, given the link to firm financial performance (Cooke and Saini 2010). As we mentioned in the section titled Equal Employment Opportunity and Affirmative Action, Konrad and Linnehan (1995) reported that HR policies and practices must specifically target women and minorities in order for them to be effective. Kalev, Kelly, and Dobbin (2006) found creating accountability to be crucial for ensuring representation of women and minorities in management. Likewise, Ng and Sears (2010) found bias-free selection to have the greatest influence on the promotion of minorities into management ranks, because of the possibility of adverse impact in selection practices. Thus, in order for firms to capitalize on the benefits of diversity, the ‘right’ context-dependent HR policies and practices must be in place, to ensure that the potential advantages associated with workforce diversity are maximized, while the potential disadvantages are minimized. In sum, having the right leaders (e.g. CEOs) and strategic orientation (e.g. growth- or innovative-oriented firms) are helpful for organizations to reap the benefits of a diverse workforce. Furthermore, the right HR management practices can reduce adverse impact and increase the number of minorities in management. Taken together, DM has the potential to contribute to overall firm performance.

Conclusion Although the benefits of workforce diversity are promising for organizations and employers, research on its direct effect on individual, team, and organizational performance have not been conclusively established. This chapter reviews existing research and documented how, when, and under what conditions diversity enhances performance at the individual, team, and organization levels. We also identify several policies and practices which are effective when promoting a more diverse workforce, as well as those that enhance the benefits of diversity. Our review suggests that the positive effects of diversity on performance at all levels are present, but they are established only under the appropriate conditions. According to the resource-based view, firms must be able to create a diverse workforce in order to capitalize on its benefits. In this regard, EEO and AA programmes appear helpful in increasing the employment of women and minorities. When individuals feel valued and are treated fairly, they are also more likely to perform on the job, report greater career satisfaction, and contribute to a firm’s success. At the team level, an understanding of

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group-level processes and dynamics is key to ensuring that communication barriers, cohesion, and intra-group conflicts arising out of diversity are minimized. Holding pro-diversity (or pro-similarity) beliefs, types of team tasks, group composition, the levels of diversity, as well as team fault lines, individually and jointly contribute to, or distract from, team performance. These processes also have an impact in the TMTs, with firm performance consequences. At the organizational level, firm strategy and leadership are crucial for firms to capitalize on the benefits of employee diversity. Employers must also have HR policies and practices that are inclusive to encourage everyone to contribute to their fullest potential. A number of such types of practices have already been identified in multiple studies referenced in this chapter. As workforce diversity becomes an imperative with the emergence of globalization and worker immigration, we surmise that organizations which pay attention to issues of diversity will reap the potential benefits that are associated with it. In closing, we suggest a few avenues for future research to extend our knowledge on the benefits that can be derived from a diverse workforce. First, based on our review, the impetus for managing diversity appears to be driven by the business case. Therefore, it remains unclear if organizations and employers will devote resources to manage diversity in the absence of instrumental benefits. On this basis, we suggest that future research on managing diversity be extended to the public service and non-profit sectors. The findings could inform researchers and practitioners on other potential benefits that could be realized from managing a diverse workforce across different organizations and settings. Second, while it is evident that senior leadership commitment is crucial for an organization’s diversity efforts, it is unlikely that the leaders themselves will be responsible for implementing an organization’s diversity strategies. Thus, greater research attention should be focused on the individual (e.g. AA officer) who is charged with managing diversity. In this regard, it is important to study the role and characteristics of the AA officer, in order for diversity programmes to be successfully implemented. Furthermore, the relationship between an organization’s leader and the AA officer (e.g. direct reporting relationship) should also be explored. Third, there has been suggestion that the relationship between diversity and performance is curvilinear (Richard et al. 2002). In other words, increasing levels of diversity is will bring about diminishing marginal benefits to team and group performance. However, it is unclear what level of diversity is optimal for work teams, and comparatively little research has been conducted in this area. Thus, it would be fruitful to investigate the levels of diversity that would be associated with maximum team performance.

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