People Operations | Management

Why Diversity and Multiculturalism?

While there may be no “money fairy,” diversity has proven to result in higher profits for companies. Just Another Shot – Fairies!! – CC BY-NC-ND 2.0; Wikimedia Commons – public domain.

When many people look at diversity and multiculturalism, they think that someone’s gender, skin color, or social class shouldn’t matter. So diversity can help us with policies to prevent discrimination, while multiculturalism can help us gain a deeper understanding of the differences between people. Hopefully, over time, rather than look at diversity as attaining numerical goals or complying with the law, we can combine the concepts to create better workplaces. Although many books discuss laws relating to diversity, not many actually describe why diversity is necessary in the workplace. Here are a few main reasons:

  1. It is the law.
  2. We can better serve customers by offering a broader range of services, such as being able to speak a variety of languages and understanding other cultures.
  3. We can better communicate with one another (saving time and money) and customers.
  4. With a multicultural perspective, we can create better ideas and solutions.

Fortune 500 Focus

Hilton is one of the most recognized names in the hotel industry. Hilton employs 130,000 people in 3,750 hotels in 84 countries. The hotel chain, with some locations franchised, focuses on diversity and inclusion as part of its operations. First, it has a director of global diversity and inclusion, who plays a key role in executing the Hilton global diversity and inclusion efforts, which are focused on culture, talent, workplace, and marketplace diversity strategies. Each Hilton brand must establish its own diversity performance goals and initiatives, which are monitored by the diversity council. The diversity council is made up of the company board of directors, the CEO, and vice president of human resources. At any given time, Hilton has thirty or more diversity initiatives in place (Forsythe, 2005), which are managed by the diversity council.


Hilton has created several diversity programs within the communities in which the hotels operate. For example, Hilton was one of the first hotel chains to develop an outreach program to educate minority and female entrepreneurs for franchise investments. One part of the program includes invitation-only seminars that discuss what it takes to be a successful hotel owner. Hilton says its diversity seminars are driven by the fact that it wants employees to reflect the diversity of the customers.


In addition to the outreach program, Hilton partners with historically black colleges and universities for recruiting, which creates an effective tie to jobs once students graduate. It has developed a supplier tracking system, so it knows the total number of supplier payments made and how many of those suppliers are female or minorities. William A. Holland, the vice president for workforce planning and analysis says, “It takes leadership to make diversity work, and our diversity initiative comes from the highest levels of our organization” (Forsythe, 2005)

Promoting a multicultural work environment isn’t just the law. Through a diverse work environment and multicultural understanding, organizations can attain greater profitability. A study by Cedric Herring called Does Diversity Pay? (Herring, 2006) reveals that diversity does, in fact, pay. The study found those businesses with greater racial diversity reporter higher sales revenues, more customers, larger market shares, and greater relative profits than those with more homogeneous workforces. Other research on the topic by Scott Page, the author of The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Page, 2007) ended up with similar results. Page found that people from varied backgrounds are more effective at working together than those who are from similar backgrounds, because they offer different approaches and perspectives in the development of solutions. Often people believe that diversity is about checking a box or only providing window dressing to gain more customers, but this isn’t the case. As put by Eric Foss, chairperson and CEO of Pepsi Beverages Company, “It’s not a fad. It’s not an idea of the month. It’s central and it’s linked very directly to business strategy” (Holstein, 2009). A study by the late Roy Adler of Pepperdine University shows similar results. His 19-year study of 215 Fortune 500 companies shows a strong correlation between female executives and high profitability (Adler). Another study, conducted by Project Equality, found that companies that rated low on equal opportunity issues earned 7.9 percent profit, while those who rated highest with more equal opportunities resulted in 18.3 percent profit (Lauber, 2011). These numbers show that diversity and multiculturalism certainly is not a fad, but a way of doing business that better serves customers and results in higher profits.


As managers, we need to recognize this and develop policies that recognize not only the importance of diversity but the importance of nurturing multicultural understanding in the workplace. Many employees, however, may be resistant to a discussion on diversity and multiculturalism. Much of this may have to do with their own power and privilege, but some resistance may be related to the discomfort people may feel when faced with the realization that change is a necessity and the cultural makeup of the workplace is changing. Some people may feel “We’ve always done it this way” and are less willing to change to the new ways of doing things.


Perhaps one of the best diversity statements by a Fortune 500 company was made by Jose Manuel Souto, the CFO for Visa in Latin America. He says, “A diverse workforce is critical to providing the best service to our global clients, supporting our business initiatives, and creating a workplace environment that promotes respect and fairness.” National Latina Business Women Association, “Women and Minorities on Corporate Boards Still Lags Far Behind National Population


References

Adler, R., “Women in the Executive Suite Correlate to High Profits,” Glass Ceiling Research Center.

Forsythe, J., “Leading with Diversity,” New York Times, 2005, accessed July 13, 2011, http://www.nytimes.com/marketing/jobmarket/diversity/hilton.html.

Herring, C., “Does Diversity Pay? Racial Composition of Firms and the Business Case for Diversity” (paper presented at the annual meeting of the American Sociological Association, Montreal, Canada, August 11, 2006), accessed May 5, 2009, http://citation.allacademic.com/meta/p_mla_apa_research_citation/1/0/1/7/9/pages101792/p101792-1.php.


Holstein, W. J., “Diversity is Even More Important in Hard Times,” New York Times, February 13, 2009, accessed August 25, 2011, http://www.nytimes.com/2009/02/14/business/14interview.html.


Lauber, M., “Studies Show That Diversity in Workplace Is Profitable,” Project Equality, n.d., accessed July 11, 2011, http://www.villagelife.org/news/archives/diversity.html.


Page, S. E., The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Princeton, NJ: Princeton University Press, 2007).

Plaut, V. C., Kecia M. Thomas, and Matt J. Goren, “Is Multiculturalism or Color Blindness Better for Minorities?” Psychological Science 20, no. 4 (2009): 444–46.