Why the business case for diversity can backfire

Study shows many employers are sending the wrong message

Why the business case for diversity can backfire

For many organizations, diversity is a great idea because it is good for the profit statement and there is a strong business case to be made for hiring from a variety of groups.

But this could be doing more harm than good, according to a study published in the Journal of Personality and Social Psychology by the American Psychological Association (APA).

Why? By emphasizing a strict bottom-line argument, employers do not promote as much belonging within marginalized or minority groups.

“Organizations are likely doing their best: they’re coming up with explanations for why they care about diversity with good intention, we believe, but they don’t necessarily test how these messages affect members of different underrepresented groups,” says Aneeta Rattan, associate professor of organisational behaviour at the London Business School in London, UK.

Business case for diversity ‘backfires’

The study, conducted by lead author Oriane Georgeac, professor at the Yale School of Management in New Haven, Conn., employed a “machine-learning algorithm that essentially uses algorithmic approach to evaluate the language that the Fortune 500 companies put out there around diversity,” says Rattan.

It found that about 80 per cent of these large employers employed the business case for diversity, while only five per cent said they promoted diversity based on the fairness argument.

“The business case for diversity seemingly backfires: it’s detrimental for the anticipated belonging of LGBTQ+ professionals, women in STEM industries, and African-American professionals,” says Rattan.

“Justifying attention to people’s identities when evaluating their performance, that’s generally experienced in a negative way. Members of underrepresented groups really worry about being judged, not based on their merit but based on stereotypes about their identity. When the business case justifies viewing them through the lens of that identity, those worries are amplified and that’s detrimental to belonging.”

The study used five online questionnaires for those three types of candidates and asked about their feelings of belonging at organizations who offered either a business case or fairness case argument around DEI.

Perhaps surprisingly, those organizations that reported they hired more diverse workers because it was the right thing to do morally and ethically also fared poorly, according to Rattan.

“It’s interesting because that fairness case is far better than the business case but it does have a very small detrimental effect itself and it’s less than half the negative effect of the business case.”

What does seem better received by underrepresented groups is employers that simply stated they believe in diversity and don’t rationalize it in any way.

“Those might be the ones who have the right idea,” says Rattan, who also said that is something they are hoping to study further in the future. “Simply stating a commitment to diversity, with no justification, might be the best for fostering anticipated belonging among these different underrepresented groups.”

We recently asked one employer about how to create a diverse but female-centric organization.

Case for no justification?

But for another expert, these results are not surprising.

“When you focus on the business case, it actually is detrimental to underrepresented minorities: they read those kinds of statements that basically say ‘We want diversity because it’s good for a bottom line’ and it makes them feel they’re going to belong in that organization… because they’re stressing that there are benefits for the organizations in terms of performance, profit, rather than valuing diversity because you want to treat those people well, and you think it’s the right thing to do,” says Sonia Kang, associate professor of organizational behaviour and HR management at the Management University of Toronto in Mississauga, Ont.

However, the business case argument continues to be pursued, she says.

“For example, a company might say, ‘We’re having this meeting with senior managers, and we really want to get them to buy into DEI; can you come and talk about the business case?’

“That backfires because it ends up replacing this intrinsic, moral-value-based motivation with something that makes it much more externally motivated and less personal. It’s surprising to me that organizations are still doing that so, hopefully, we’ll see a movement away from that.”

This should result in a wakeup call for senior leaders who are truly sincere in their efforts to increase diversity, says Rattan.

“They’re putting out a message that they believe is a positive one, and that they believe is going to have a positive impact on their ability to recruit talent from underrepresented backgrounds.”

Fostering inclusion

Tying in DEI to profit is also the wrong way to encourage belonging within an organization, says Kang.

“Basically, commodifying it sends the message that ‘Yes, we want to bring in these underrepresented groups but only just to check this box’ and so it’s really [about] this focus on diversity, rather than on the inclusion side — actually making them feel they belong, valuing their perspectives, voices, giving them access to real resources, opportunities, power, that sort of thing,” she says.

“Underrepresented minorities have come to learn through experience that there’s a lot of companies out there that talk the talk but don’t necessarily walk the walk, and so it sends a signal to them about where their values really are and they are not valuing the people for themselves but as instrumental to their goal of making money,” she says.

Read more: One major Canadian bank recently announced new ways of making its LGBT+ employees feel more welcome.

Organizations should focus more on personal stories that show their commitment to diversity instead, says Kang.

And don’t forget to continue preaching the inclusion mantra after an employee has joined the organization — which means, for example, development training.

“I feel so much emphasis is put on selection and hiring that the other stages are forgotten about, so just thinking about the full employee lifecycle and making sure that you’re looking at those through an EDI lens as well, not just those beginning stages of getting someone into the company,” she says.


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