UGBA105: UGBA105: Organizational BehaviorOrganizational Behavior

Professor Jim LincolnProfessor Jim Lincoln

Week 12: LectureWeek 12: Lecture

Managing DiversityManaging Diversity

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Class businessClass business

• Tuesday:– Black caucus groups at Xerox case and video

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Managing DiversityManaging 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 What are the dimensions of workforce diversity?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 workforceThe 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 Has commitment to diversity management declined?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?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:Debate at Harvard:Are there “innate” gender differences in Are there “innate” gender differences in

math and science ability?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 209Chancellor 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 The underrepresentation of women and minorities at the topwomen and minorities at the top

• Women comprise:– 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 Why the low representation of women in corporate leadership positions?in corporate leadership positions?

What Women Executives SayWhat Women Executives Say• Males stereotyping and Males stereotyping and

preconceptions (83%)preconceptions (83%)• Exclusion from informal networks Exclusion from informal networks

(49%)(49%)• Lack of significant general Lack of significant general

management or line experience management or line experience (47%)(47%)

• Inhospitable corporate culture (35%)Inhospitable corporate culture (35%)• Women not in pipeline long enough Women not in pipeline long enough

(29%)(29%)

What CEO’s Say

• Lack of significant general experience (82%)

• Women not in pipeline long enough (64%)

• Male stereotyping and preconceptions (25%)

• Inhospitable corporate culture (18%)

• Exclusion from informal networks (5%)

Source: 1996 Catalyst survey

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The roots of diversity problemsThe roots of diversity problems

• Individual-level

• Organization-level

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Why do people discriminate?Why do people discriminate?

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Why do organizations discriminate?Why do organizations discriminate?

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Organizational cultureOrganizational 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&GStrong 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? 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:Culture and branding:Abercrombie’s preppy image leads toAbercrombie’s preppy image leads to

discrimination in hiring 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, blue-eyed 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 causesOrganization & job design causesVertical and horizontal differentiation segregates and isolates Vertical and horizontal differentiation segregates and isolates

women and minoritieswomen and minorities

– Physical nature of job tasks exclude women, aged, disabledPhysical nature of job tasks exclude women, aged, disabled– Jobs with ambiguous goals/skill requirements prompt selection on Jobs with ambiguous goals/skill requirements prompt selection on

personalistic criteria (“tall, good hair, right accent, smooth style”) personalistic criteria (“tall, good hair, right accent, smooth style”) – Exclusion of women/minorities from “pipeline” or fast-track jobsExclusion of women/minorities from “pipeline” or fast-track jobs

• E.g., women in HRE.g., women in HR– Segregation of women/minorities by job, department, and level Segregation of women/minorities by job, department, and level

makes them vulnerable to: makes them vulnerable to: • DownsizingDownsizing• Pay discriminationPay discrimination

– Less perceived inequity when job and skill differences coincide with Less perceived inequity when job and skill differences coincide with demographicsdemographics

By contrast, “flat,” flexible organizational designs mingle By contrast, “flat,” flexible organizational designs mingle people via teamwork and networks. They also have more people via teamwork and networks. They also have more and faster paths to the top and faster paths to the top butbut fewer high-level positions fewer high-level positions

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Why manage diversity? Why manage diversity?

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History of diversity management: History of diversity management: ignore differences & demand ignore differences & demand

assimilationassimilation

• 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 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 The U. S. has the world’s toughest anti-discrimination regulationsanti-discrimination regulations

• Equal Pay Act of 1963Equal Pay Act of 1963• Civil Rights Act of 1964. Title VII prohibits discrimination in hiring.Civil Rights Act of 1964. Title VII prohibits discrimination in hiring.• Executive Order # 11246, 1965: mandated affirmative action for Executive Order # 11246, 1965: mandated affirmative action for

federal contractorsfederal contractors• 1967 Age Discrimination in Employment Act; amendments in 19781967 Age Discrimination in Employment Act; amendments in 1978• Equal Employment Opportunity Act of 1972 Equal Employment Opportunity Act of 1972 • Rehabilitation Act of 1973Rehabilitation Act of 1973• Americans with disabilities act; July, 1990Americans with disabilities act; July, 1990 • Family and medical leave act of 1993Family and medical leave act of 1993

No federal law specifically outlaws workplace No federal law specifically outlaws workplace discrimination on the basis of sexual orientation in the discrimination on the basis of sexual orientation in the private sectorprivate sector

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High-profile discrimination lawsuitsHigh-profile discrimination lawsuits

• Sexual discrimination/harassment litigation Sexual discrimination/harassment litigation settlementssettlements– Mitsubishi Motors, 1990: $34MMitsubishi Motors, 1990: $34M– Astra USA, 1996: $10MAstra USA, 1996: $10M– Salomon Smith Barney, 1998 $15MSalomon Smith Barney, 1998 $15M– Morgan Stanley $54MMorgan Stanley $54M

• Racial discrimination litigation settlementsRacial discrimination litigation settlements– Denny’s, 1994, $54MDenny’s, 1994, $54M– Texaco, 1996: $176MTexaco, 1996: $176M– Coca Cola, 1999: $192MCoca Cola, 1999: $192M

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Wal-Mart in troubleWal-Mart in trouble

Wal-Mart, ranked number one on Wal-Mart, ranked number one on FortuneFortune’s ’s prestigious "America’s Most Admired prestigious "America’s Most Admired Companies" list for 2003, is appealing a Companies" list for 2003, is appealing a court judgment against it in the largest court judgment against it in the largest class-action sex-discrimination lawsuit in class-action sex-discrimination lawsuit in U.S. history, with 1.5M plaintiffs. U.S. history, with 1.5M plaintiffs.

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Solutions: Solutions: Toward better diversity managementToward better diversity management

• People and culture change– Recruitment– Training & socialization

• 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 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 Good diversity management helps the bottom linethe 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 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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RecruitingRecruiting

• 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 socializationTraining 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 redesignRetructuring 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 networksPolitics 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:Select leaders for commitment to diversity:GE’s diversity management improved under CEO GE’s diversity management improved under CEO

Jeffrey ImmeltJeffrey 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 benefitsIncentives 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 Executive bonuses tied to diversity goals at Wal-Martgoals 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 Tracking & rewarding diversity progress at Ryderprogress 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:Reputational effects:Fortune’s top 10 companies for minoritiesFortune’s top 10 companies for minorities

• 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 Corporate governance reform and stakeholder pressurestakeholder 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 takeawaysDiversity 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