Workplace Diversity Effect on Productivity (Benefits, Difficulties and How To Manage Diversity)

Many organizations are starting to include diversity as part of their corporate strategies seriously. Workplace diversity has become a buzzword in modern business parlance. However, people sometimes wonder if it can provide actual, tangible benefits to their businesses.

How does workplace diversity affect productivity? Workplace diversity promises to make teams more creative, innovative, productive and flexible. Diversified companies foster higher job satisfaction and financial performance. However, diversity policies also present difficulties which can derail performance. Hence, people should understand how to introduce diversity into workplaces properly.

This article deals with the main benefits of diversity on different aspects of job performance. Alongside this list is a compilation of problems that can be caused by diversity, especially with poor planning. Finally, this article discusses methods for dealing with diversity in a way that brings out maximum benefits for both the employees and the company at large.

The Pros and Cons of Workplace Diversity

We have written a detailed article, “What is diversity?Opens in a new tab.” which explains this broad concept. Workplace diversity can be in terms of multiple criteria, such as sex, age, gender, or race. Differences in these criteria are visible and are examples of surface-level diversity. However, it can also occur in terms of personalities, attitudes, and skill set. When a workplace has employees that differ based on these aspects, then it has deep-level diversity.

Both levels are essential in the workplace for various reasons. Historically, discrimination and stereotyping have barred capable people from pursuing the opportunities they want. Now that the world is starting to become more inclusive, people from all walks of life are taking the opportunity to develop their careers the way they want.

At the same time, companies now have access to a more diverse pool of talent. They now have more choices as to which people to hire as employees. In this case, both businesses and employees benefit from embracing more diversity.

The situation, however, is still far from perfectOpens in a new tab.. Only 40% of the total US workforce is female. The sex ratio is even more skewed at the chief executive level, where 73% are male. The workforce is primarily white, with only 22% being black, Asian, or Latino.

Similar conclusions are valid for deep-level diversity. Many companies only hire people who are a tight fit for their company culture, leading to employees having the same mindsets. Some corporations discourage differences in opinion, while superiors expect teams to minimize disagreements as much as possible. The result is a workplace where people think alike too much.

Companies need to embrace diversity more tightlyOpens in a new tab.. To help them, executives need to know how diversity can improve corporate performance. At the same time, they need to be aware of vulnerabilities arising from the unbridled variety. Finally, they should research the best practices for encouraging a more diverse workplace with minimal hassle.

A. Advantages of Diversity

1. Higher morale

2. More access to talent

3. Increased creativity

4. Increased flexibility

5. Better critical thinking

6. Less vulnerability to groupthink

7. Well-rounded skill sets

8. Learning opportunities through cross-training

9. Improved company reputation

10. Better delegation

11. Higher earnings

12. More satisfied employees

B. Disadvantages of Diversity

1. Higher operating costs

2. More contrasting opinions

3. Potential conflict

4. Forced interactions

5. Miscommunication

6. Entrenchment

7. Stereotyping

8. Perceived insincerity

C. Managing and Fostering Diversity

1. Hire with equal opportunities in mind.

2. Launch support programs for minority employees.

3. Encourage a more inclusive culture.

4. Use a change agent.

12 Benefits of Having a Diverse Workforce 

Many companies view the introduction of a more inclusive workforce as an act of goodwill. While correct, diversity also promises a multitude of benefitsOpens in a new tab. that can improve the bottom line of any company.

1. Higher Morale

No one likes monotony, including employees. People need variety to perform well, as shown by the rise of job programs that let workers try out different roles every few months.

The same principle applies to interpersonal relationships. If people regularly meet with the same types of people, boredom quickly ensues. Many employees appreciate getting to know another person and finding out both what they have in common and how they differ. By keeping teams filled with people that differ from each other, everyone has the chance to expand their personal and professional networks. Thus, the workplace culture becomes more exciting as people develop higher morale.

Diversity also improves employee experience. To explain this concept better, we have written a detailed article, “What is Employee Experience?Opens in a new tab.

2. More Access to Talent

As mentioned before, a lot of people missed out on opportunities in the past due to unfair stereotyping. Companies willing to look past biases will discover more people who have the right skill sets and dispositions. They will be able to invite more people to join their ranks compared to other people who aren’t as open-minded as them. In turn, people will want to work more with companies who put inclusivity as part of their core values. 

The end effect is that companies who embrace diversity will have a larger talent poolOpens in a new tab., allowing them to be more selective of whom they hire. They can set higher standards for applicants without fearing that they won’t be able to maintain enough employees. Of course, having more talented people also makes the company perform better as a whole.

3. Increased Creativity

Creativity is one trait that scales up with the number of people. Idea generation is inherently difficult due to its open nature. Any team will be more likely to get good ideas if they have more minds who can help out in brainstorming.

At the same time, diversity also matters in the creative process. Having a workforce with minds that think differently will result in higher-quality ideas than a workforce where everyone processes thoughts the same way. Having different people with varying experiences and skills helps stimulate the idea generation process. People can also cross-check each others’ ideas, ensuring that only the best ideas survive.

4. Increased Flexibility

Each person has specific strengths and weaknesses. Their skill sets allow people to excel in certain activities while hampering their progress in others. Even the most talented employees can’t be expected to perform every task flawlessly.

When a business has teams composed of people with similar skills, it becomes vulnerable to change. When the unexpected happens and a different skill set is now required, these teams won’t have anyone who can do the job correctly.

In contrast, having people with various skills can solve this problem. Each person’s strengths cover another’s weaknesses.  As long as teams act synergistically, the effects of deficiencies decline while everyone’s abilities become more prevalent. The collective skill set of the group enables them to respond in any situation, resulting in a more consistent performance even as conditions change continuously.

5. Better Critical Thinking

Individuals alone are limited in their capacity to assess their performance. People have biases such as the self-serving bias, which convinces them of their importance relative to other people. Hence, people are less likely to see their own mistakes. They usually require the assessment of other people, such as their peers or superiors.

However, assessments differ based on the perspective taken by the person making the criticism. Critical thinking relies on the ability to spot inconsistencies which someone may have missed. Hence, it’s best to have someone take up a different perspectiveOpens in a new tab. when they’re assessing someone else’s ideas. This level of checking can only occur in an environment where there are people with different viewpoints.

6. Less Vulnerability to Groupthink

Groupthink is a phenomenon that occurs due to the natural tendency to think and act similarly to others. When people assemble to form a group and are encouraged to brainstorm, each member initially has a different set of opinions. As the group formation process continues, members start to subconsciously alter their viewpoints to make them more similar to others. In many cases, the group forms a collective opinion, and members might be discouraged to raise their views or to question the prevailing idea.

Developing groupthink might seem like a good idea, but it prevents people from thinking creatively. These groups prevent members from using their lateral thought processes, even if this could lead to more productive and better ideas.

Fortunately, an excellent way to prevent groupthink is to have a group composed of individuals with different personalities and thought processes. Diversity allows each member to continue expressing their ideas. As long as there are people to manage these groups properly, they end up with ideas that are less likely to conform to norms and more likely to be useful.

7. Well-Rounded Skill Sets

Critical business projects share two characteristics. First, they are made up of complex, interconnected tasks that depend on each other. Second, they require different skills which are unlikely to be found in a single person.

For example, imagine a simple marketing campaign on Facebook. Someone has to write the copy and ensure that it presents the pertinent message towards the intended audience. Someone has to create, edit, and manage media such as pictures or videos. Another person would be in charge of operating the corporate social media page, ensuring that the content has the best chance of becoming viral. Finally, someone has to manage the entire operation, ensuring that all subtasks are finished within schedule and that resource allocation is efficient.

Even the most uncomplicated projects would require different levels of skill in various areas. If teams are too homogeneous, they will most likely fail at one or more subtasks where no one can perform well.

People can avoid this problem if a company forms teams with just the right balance of abilities. Proper management of diversityOpens in a new tab. ensures that there is at least one person who can efficiently handle each subtask.

8. Learning Opportunities Through Cross-Training

Training can easily take up a large portion of operating expenses. Hence, businesses should find and exploit unique ways to impart employees with the knowledge and skills they need to perform well.

One of the best ways of training happens on the job since people get to apply their lessons through their work immediately. For this type of training, peers play the most critical roles as they act as mentors and guides to their coworkers. Hence, the process is sometimes called cross-training.

Cross-training is only as effective as the employees themselves. In a workplace where everyone has similar skills, cross-training does not reach its full potential. Missed learning opportunities occur since no one knows anything that other people don’t know already. In contrast, a diverse workplace enables experts to emerge for each pertinent topic and allows people access to skills that they initially didn’t have.

9. Improved Company Reputation

Customers are becoming more willing to factor in ethicsOpens in a new tab. and principles into their spending behavior. Companies who behave immorally, such as by ignoring discrimination or resorting to abusive labor, stand to lose thousands of patrons. In this age of morally conscious consumerism, companies will gain direct monetary benefits if they behave ethically.

Many corporate executives treat diversity policies as a corporate social responsibility, something that a company does only to look good. They should realize that these thrusts also make their companies more palatable to their markets, potentially attracting more clients. Diversity practices also attract more talent, especially those that belong to minorities that have suffered throughout history. Promoting diversity is not only right, but it also leads to direct benefits.

10. Better Delegation

As mentioned before, diversity tends to increase morale and make teams more well-rounded. With a diverse set of talents, it becomes easier to delegate tasks.

Managers are more confident that their teams can handle anything that they can throw at them. Executives can offload heavy tasks, giving them more time and resources to dedicate towards leadership activities. LeadershipOpens in a new tab. tasks include making plans, monitoring progress, and adjusting goals.

Better delegation helps the company maximize its employees and its leaders, and it’s all thanks to workplace diversity.

11. More Satisfied Employees

Humans are social beings who derive satisfaction in social relations. Many employees find it satisfying to form bonds with other people. Satisfaction with people at work leads to smoother communication and better cooperation. As people find it easier to work with others in teams, productivity ultimately rises.

However, having people isn’t enough. The composition of the workplace also matters. People will find it more pleasing if they can regularly interact with people coming from different cultures and places in life. Employees will get to learn unique characteristics about each person, making conversations more lively.

12. Higher Earnings

Based on everything we have discussed so far, increased diversity benefits employees at both the individual and the group level. People become more satisfied in their work and are more motivated to work with others. Groups become more creative and better at coming up with unique, effective, and efficient solutions. These groups also become more adaptable to any situation that their work throws at them.

All of these factors will improve productivity, which in turn leads to higher earnings. Firms who encourage diversity stand to earn 19% moreOpens in a new tab. than others. Workplace variety can lead to tangible financial gains.

Eight Difficulties Caused by Workplace Diversity

This article has so far explored the various benefits of a diverse workplace. These advantages can help any company who wants to outpace its competition and become a dominant player.

Given all the benefits, many companies rush to make diversity a top priority in their plans. However, many of them don’t have concrete proposals that will adequately introduce variety into their workforces. Any changes in corporate culture require careful planning and monitoring, but many executives enforce diversity without much thought.

As a result, many of these plans backfire, causing psychological damage and hurting the bottom line of these companies. Their leaders don’t realize that diversity also comes with disadvantages, especially for a company that traditionally didn’t care about it in the first place.

By learning more about the harmful effects of diversity, executives can make appropriate adjustments to their policies to mitigate them. In the end, diversity should bring out more good than harm.

1. Higher Operating Costs

Perhaps the most apparent effect of diversity initiatives is that they increase expenditure. Even a simple marketing campaign promoting diversity can set companies back by hundreds of thousands of dollars. Other actions, such as hiring change agents to help influence the corporate culture, can cost even more.

Any undertaking to promote diversity will cost a significant amount of money. The costs are even more substantial for large companies who may have thousands of people to manage. For multinational companies, the prices can be even higher as prevailing local cultures may have different ways of viewing diversity.

Companies should be committed and determined if they want to promote diversity. Change is difficult, but its rewards are great.

2. More Contrasting Opinions

One effect of diversity is that teams tend to have more ideas that differ from each other. This effect is good since this gives managers more options to choose from, some of which might be brilliant.

However, contrasting opinions can also hamper decision-makingOpens in a new tab., especially for indecisive leaders. It takes more mental effort to sort through many varying alternatives and to assess their impact on the world. Sometimes, quick action is required to solve a problem, and the time needed to select the best solution is better spent by just implementing the first one that works.

Also, contrasting opinions can give rise to conflict. Parties will try to defend their ideas against detractors, leading to debates that can prolong the planning process. Again, discussions aren’t necessarily bad, but it can introduce dangerous delays, especially for projects where time is critical.

To fix this problem, teams should have a framework that allows employees to assess ideas quickly based on set criteria. Team leaders should also be decisive, willing to pick out the best option after any crucial arguments promptly.

3. Potential Conflict

When leaders bring together people who are different from each other, the potential for conflict arises. Some personalities are incompatible with each other, and highly disagreeable people may lash out at people they don’t like. This type of conflict, rooted in fundamental differences in people, can be dangerous as it prevents people from working together to form cohesive groups.

Another type of conflict involves ideas. Increased diversity means that people may use different thought processes and principles when coming up with solutions. Many different ideas usually come out of these brainstorming sessionsOpens in a new tab.. People may spend hours defending their ideas without reaching a unified stand. The consensus is harder to achieve, delaying the idea generation process.

Leaders manage these types of conflict by selecting more agreeable people who can handle differences in opinion or personality without losing their tempers. Having a formal system that deals with conflict, such as anonymous complaint channels, is also useful.

4. Forced interactions

A lot of people enjoy interacting with people different from themselves. That said, there will always be some people who prefer to socialize with others from similar backgrounds. In fact, some people might shun people based on stereotypes.

When a company implements a diversity initiative, these people might be forced to interact with people they don’t necessarily appreciate. Results vary, but they might resort to cold behavior or even downright abuse. Sometimes, forcing people to interact can fracture groups further, creating pockets of exclusivity that filter out minorities.

Nearly everyone has biases and uses stereotypes, so merely removing anyone who has unfair preferences is not enough. That said, people who express racist and discriminatory behavior should be disciplined and possibly removed.

5. Miscommunication

Diversity can also lead to conflict in another way. People use words and phrases differently based on their personalities. Interpretation of words can also vary from person to person. A harmless remark from someone might already mean an insult for another. People might misconstrue constructive criticism as hostility.

ProblemsOpens in a new tab. can further increase in multilingual environments. Meanings can degrade in translation. Even for a business that only uses a single language, non-native employees might still have trouble interpreting nuances in meaning. Jargon and other specialized terms might mean different things for people with different native languages.

As the workforce becomes more diverse, proper communication can become more difficult. Policies that set clear guidelines for discussion should be present, so that much of the disagreements don’t occur.

6. Entrenchment

EntrenchmentOpens in a new tab. is perhaps one of the most severe responses to diversity practices. Some people, regardless of how the company handles diversity, will stick to their core beliefs. For example, some managers might insist that women are inferior to men. These people may not support female-friendly policies or prevent women from accessing high-impact, high-reward roles.

This scenario is an example of entrenchment, and it is a dangerous phenomenon that can actively hurt relationships and decrease productivity. Many forms of entrenchment are covert, so companies must be vigilant in detecting early warning signs. Once entrenchment is detected, leaders must act quickly to rectify the problem and prevent further damage.

7. Stereotyping

As people interact with more diverse individuals, cases of stereotyping may increase at first. People who hold discriminatory views will initially have the opportunity to act out their beliefs due to the closer proximity of the people they target. For minorities, they might receive attacks from people despite an active diversity policy.

Eventually, cases of stereotyping will decrease as people learn to be more accepting of diversity. Until that happens, the company should actively protect victims of discrimination.

8. Perceived Insincerity

Diversity is a buzzword in modern times. Many corporations claim to support inclusive practices. However, some of them aren’t able to back up their words with action. As a result, many people start to believe that pursuing diversity is only a marketing strategy to gain more shareholders.

If a company presents itself as a diverse organization but doesn’t do enough to protect diversity, their employees might think that the company is insincere. They will lose trust in the company, potentially leading to higher attrition rates and lower productivity. Hence, firms must make sure that they can walk the talk.

Managing and Fostering Diversity

Businesses need a plan if they want to foster diversity while avoiding its pitfalls. It all boils down to diligent planning, as well as an honest assessment of the corporate culture. By following these frameworks, firms can avoid planning mistakes that can derail their chances of succeeding.

1. Hire with equal opportunities in mind

One quick way to increase diversity is to admit more peopleOpens in a new tab. from different ethnicities and groups. This method is easier said than done, however, as people from minorities face several roadblocks.

Many minorities do not have easy access to premium educational systems compared to others. They also tend to be more economically disadvantaged. The root is racism and discrimination, which bar them from opportunities such as college scholarships and high-paying jobs.

To remedy this, companies must actively reach out to minorities and encourage them to apply. Some companies award grants and scholarships. Many of them consider age, gender, and ethnicity, ensuring that workplaces stay diverse. HR departments can install checks and balances to ensure that applicants do not encounter discriminatory practices.

2. Launch support programs for minority employees

The struggles of minority employees don’t stop at the recruitment stage. In any environment, they are prone to discrimination from peers and superiors, which can slow their career advancement. The stress of being isolated and ostracized can also bear down on their mental health, sapping away their motivation and increasing their risk of developing depression or anxiety. Finally, discrimination can lead to lower job performance and productivity.

Hence, these are all reasons to introduce support programs that specialize in helping out minorities. Clear company policies on racism and discrimination should be present to encourage everyone, even top-level executives, to embrace diversity.

3. Encourage a more inclusive culture

Policies and other formal means of control are essential, but leaders should also consider the informal effects of culture. Even if a firm has strict guidelines against discrimination, they mean little if the prevailing culture actively makes people feel unwelcome.

Hence, policy changes should launch in parallel with initiatives designed to change mindsets and foster cooperation. Leaders should never take the power of cultureOpens in a new tab. for granted.

Admittedly, it’s challenging to change cultures, especially one that’s already existed for a long time. One tip is for leaders to practice what they preach. Executives should actively encourage diversity and enforce it upon their subordinates. Their relative power and influence mean that their views on diversity will eventually trickle down into the other levels of the organization.

Diversity also increases workplace inclusion. We have written a detailed article, “What is Workplace Inclusion?Opens in a new tab.” which better explores this aspect of the employee experience.

4. Use a change agent

Since change is so difficult, companies need to dedicate significant resources to further their goals. If they are serious about promoting diversity and if they feel that the corporate culture needs to change to do so, then they should use a change agentOpens in a new tab.. They can select executives who will spearhead the required changes. These people will implement programs that will help foster diversity, and they will be in charge of monitoring their progress.

Some companies dedicate teams or even an entire department and task them with all of the company’s diversity initiatives. Others rely on consultants that can guide them towards achieving a more inclusive workplace. Methods vary, but the important thing is that companies need to have people dedicated solely to managing diversity in the workplace.

Related Questions

Is workplace diversity worth pursuing? Yes. Even though it has both advantages and disadvantages, the benefits outweigh the cost. Workplace diversity has a proven effect on productivity that leads to tangible benefits. Besides, embracing it is an ethical choice to make. Companies that do good will need to make sure that their employees receive fair treatment.

Isn’t it unfair to give special attention to minorities at the expense of the majority? No. Minorities face structural barriers inherent in a society that puts them at a disadvantage. For example, men today are still employed more and paid more than women, despite all the efforts done to address this issue. Companies can help minorities reach their full potential by giving them new opportunities to compensate for the ones they’ve lost.

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Steve Todd

Steve Todd, founder of Open Sourced Workplace and is a recognized thought leader in workplace strategy and the future of work. With a passion for work from anywhere, Steve has successfully implemented transformative strategies that enhance productivity and employee satisfaction. Through Open Sourced Workplace, he fosters collaboration among HR, facilities management, technology, and real estate professionals, providing valuable insights and resources. As a speaker and contributor to various publications, Steve remains dedicated to staying at the forefront of workplace innovation, helping organizations thrive in today's dynamic work environment.

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