The business rationale for diversity management

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The Business Rationale for Diversity Management

Table of Contents

The Business Rationale for Diversity Management 1

Executive summary 2

Introduction 3

Business Rationale for Diversity Management 3

Embracing Diversity through Recruitment and Selection processes 5

Conclusion 6

References 8

The Business Rationale for Diversity Management

Executive summary

Successful firms across the globe are using diversity management as a tool for generating a competitive edge in the modern marketplace. Basically, organisations are enjoying a number of benefits when they apply diversity management. In a diversified workplace, employees are highly motivated to work and are more inclined to live longer in the organisation; thus, resulting in reduced costs. As it will be mentioned in the report, introducing different voices in the organisation with different orientations, backgrounds, perspectives and priorities can help the firm to identify business opportunities and also become successful in the markets. Diversity management objective is creating an environment wherein persons from different backgrounds are equally treated and offered equal access to resources and opportunities. Embracing diversity may lead to a wide range of backgrounds as well as mind-sets in the organisation, resulting in improved decision-making. Utilisation of particular employee recruitment and selection approaches can drive representation of minority groups at various organisational levels. When the selection system of an organisation involves assessment tools which have a high negative impact, then the system could limit representation of minority employees within the organisation and may hamper the efforts of supporting and encouraging workplace diversity. Still, utilisation of HRM toolkits that address inequality in recruitment and selection can help improve diversity and creativity at the organisation. Therefore, recruitment and selection processes can be utilised to embrace diversity in the place of work.


Business globalisation and changing labour markets’ demographics have intensified interest in the areas of diversity management amongst management practitioners as well as scholars. Even though diversity has been described in terms of differences between group members, the majority of diversity management efforts view diversity from a demographic perspective, like age, gender, ethnicity and race. While scores of organisations are seeking to improve their HR diversity, a number of scholars such as D’Netto, Shen, Chelliah, and Monga (2014) and Agrawal (2012) have established that demographic diversity has both negative and positive effect on the organisational outcomes. Drawing on the similarity-attraction paradigm and social categorisation theory, some researchers have pointed out that the negative effect associated with diversity management can result in reduced cohesiveness and conflict. Others maintain that diversity improves ideas, perspectives and knowledge that can be accessed through inputs into decision-making and creative processes; hence, resulting in improved performance. The business rationale for diversity management is that it increases innovation and creativity. An organisation that has a diverse workforce also has a broader range of perspectives, heuristics and knowledge that reinforces the toolbox utilised for working and solving problems. Diversity management has been defined by Olsen and Martins (2012) as the use of HRM practices to maintain or improve the difference in human capital and to make sure the difference does not hamper the realisation of organisational objectives. The objective of the reportis to provide evidence to prove that business rationale argument for diversity management is convincing despite the limitations raised by some scholars. Another objective is to explain why recruitment and selection processes can be used to embrace diversity in the workplace.

Business Rationale for Diversity Management

Diversity management according to Bleijenbergh, Peters, and Poutsma (2010) can improve the realisation of the organisation’s strategic goals. Therefore, as a business rationale, diversity is deemed to facilitate competitive advantage by creating an improved corporate image, enhancing organisational and group performance as well as recruiting and retaining human capital. Diversity management does not just support equal opportunities; it also results in employment that is lasting and sustainable.
Through diversity management, companies benefit in a number of ways such as cost reductions because of lower turnover and absenteeism. A company with a diversified human capital can easily attract and retain talent, reduce lawsuits associated with discrimination because the environment is just and non-discriminating, and can easily market its products to a diverse customer pools. Diversity management as mentioned by Shen, Chanda, D’Netto, and Monga (2009), results in innovation and creativity as well as improved corporate image. The business rationale for diversity management maintains that policies of diversity generate a good sense of business. Diversity management is increasingly becoming part of the strategic response towards a more diversified workforce, customer base, society, and market structure. As emphasised by Shen, Chanda, D’Netto, and Monga (2009), managing workplace diversity effectively is related to improvements in revenue generation, profitability, effectiveness, and organisational performance. For instance, studies in Australia and other countries as cited by Nair and Vohra (2014) have established that companies have women leaders/managers normally deliver improved financial performance. A study in U.S. by Nair and Vohra (2014) established that racial workplace diversity is related to high sales revenue, greater relative profits, greater market share as well as more customers.

A number of companies such as Coca-Cola and Ford have been integrating diversity initiatives into their business core functions, like talent management programmes and organisational strategy. As mentioned by Shen, Chanda, D’Netto, and Monga (2009), organisations that make sure their human capital matches the profile of the people they serve are more inclined to attract a diverse customer base as well as maintain their competitive advantage. One reason for diversifying the workforce is because of the talent shortage. Presently, organisations are experiencing challenges in their effort to attract, retain and motivate so as to achieve a competitive advantage. In view of this, diversity management helps in solving this challenge since it reduces absenteeism and improves creativity. Recently, organisations have come to realise that they can best serve customers from different groups in various markets through a diverse workforce regardless of the location of the business. When operating in cultures where other languages are dominating, firms normally benefit from recruiting employees that speak those languages. A number of companies such as Ford understand the various challenges associated with diversity management so they have come up with some outreach and meeting groups that can help the company retain their competitive advantageand thevision of diversity and inclusion of Ford is to maintain diversity and inclusion environment. At Ford, different outreach and meeting groups were created with the aim addressing the diversity challenges and helping employees through the everyday activities at the workplace as well as their individual lives. Some of the groups include Disabled Employees (FEDA) that aims to make sure that employees who are disabled enjoy comfortable and flexible working environment by giving them access to the required networking tools and resources. Employee Resource Groups (ERGs): This group is a joint corporate-sponsored Employee resource group. It provides a support network and contributes to employee’s professional development. Other groups that Ford uses to promote diversity include Gay, Lesbian, Bisexual or Transgender Employees (GLOBE), Ford Asian Indian Association (FAIA); and Ford Interfaith Network (FIN) (Ford, 2015).

Embracing Diversity through Recruitment and Selection processes

Managing diversity effectively in terms of recruitment and selection ensures equal employment opportunities for applicants coming from diverse backgrounds prevent what D’Netto, Shen, Chelliah, and Monga (2014) cite as attraction–selection–attrition (A-S-A) cycle. Firms that value diverse a workforce and are successful in diversity management in recruitment and selection processes are inclined to generate an improved corporate reputation. Diversity can be embraced through recruitment and Selection processes if recruiters are from different backgrounds and are able to prove that the workplace is a diversity-friendly environment. A number of scholars such as Kalmárová (2012) have suggested numerous approaches that can be used to manage diversity during the process of recruitment and selection; demographic data analysis, anti-discrimination, as well as ensuring that members of selection panels are from different multicultural backgrounds. Undoubtedly, recruiting workers from different multicultural backgrounds is one way of promoting diversity. Therefore, diversifying the search during recruitment and selection is an effective way of maximising the talent search. It enables the organisation to get the right person for the job and may eventually result in improved business delivery, reduced costs, and enhanced corporate image. As an HRM approach, the recruitment process is one of the most valued policies at multinational companies such as Hewlett-Packard Company (HP) because it offers an environment that is free from discrimination when all employees can work together harmoniously in spite of their different multicultural backgrounds (Kalmárová, 2012).

According to Kalmárová (2012), when recruiting people, ‘barriers to entry’ such as segregated social networks often hinder potential employees from joining the organisation. To reduce such barriers, some companies such as HP have created electronic job posting that ensures information regarding available positions is disclosed to everyone in a transparent manner. Hewlett-Packard Company, as cited by Kalmárová (2012), applies the ‘open door policy’ so as to address the changing needs of their global as well as diverse human capital. Furthermore, they attract potential employees using different career fairs and institutions where it is a member such as Society of Women Engineers well as National Society of Black Engineers. In order to improve the chances of the organisation to attract diverse candidates, the company should start recruiting by networking with groups and people that can help the company attract diverse talent. As opined by Paludi (2012), when the organisation develops a diverse slate of candidates, especially for higher positions as well as those that need specialised knowledge, like information technology it can help create an organisation with diversity. Continuous networking can help an organisation build relationships, which will act as a feeder for persons that are underrepresented across different disciplines. Companies that use the screening process to include instead of excluding candidates are likely to attract talented candidates from different backgrounds.


In conclusion, the report has discussed some of the benefits associated with the diversity management, which includes improved innovation and creativity, higher productivity, better knowledge about the customers, lower costs, improved morale, improved recruitment opportunities, higher employee retention as well as improved recruitment opportunities. The business rationale for diversity management as evidenced in the report is convincing since a diverse workforce results in more creative and innovative solutions as well as higher productivity. Globalisation, as mentioned in the report, has created the need for diverse, especially for global companies. Furthermore, diversity awareness enables the company to clearly understand the needs of the global customers and also offers access to superior labour pools. Ability to access broader employment pools can enable an organisation to use recruitment and selection as a tool for promoting diversity. As evidenced by Ford, diversity management should be a factor in all straps of the HR processes. Besides, diverse people who are talented understand that a good place to work is where they are reflected by the organisational processes. The report has pointed out that when the organisation is less diverse, attracting diversity will become an uphill task.


Agrawal, V. (2012). Managing the diversified team: challenges and strategies for improving performance. Team Performance Management: An International Journal, 18(7/8), 384 — 400.

Bleijenbergh, I., Peters, P., & Poutsma, E. (2010). Diversity management beyond the business case. Equality, Diversity and Inclusion: An International Journal, 29(6), 413-421.

D’Netto, B., Shen, J., Chelliah, J., & Monga, M. (2014). Human resource diversity management practices in the Australian manufacturing sector. The International Journal of Human Resource Management, 22(9), 1243–1266.

Ford. (2015). Employee Resource Groups. Retrieved from Ford:

Kalmárová, Z. (2012). Approaches To International Resourcing And Recruitment – The Need To Attract A More Diverse Workforce: A Case Study On Hewlett-Packard. Human Resources Management & Ergonomics, 106-114.

Nair, N., & Vohra, N. (2014). Diversity and Inclusion at the Workplace: A Review of Research and Perspectives. Indian Institute of Management, Ahmedabad. Ahmedabad, Gujarat: IIMA.

Olsen, J. E., & Martins, L. L. (2012). Understanding organizational diversity management programs: A theoretical framework and directions for future research. Journal of Organizational Behavior, 33(8), 1168-1187.

Paludi, M. A. (2012). Managing Diversity in Today’s Workplace: Strategies for Employees and Employers [4 volumes]: Strategies for Employees and Employers. Santa Barbara: ABC-CLIO.

Shen, J., Chanda, A., D’Netto, B., & Monga, M. (2009). Managing Diversity through Human Resource Management: An International Perspective and Conceptual Framework. The International Journal of Human Resource Management, 20(2), 235–251.