1

A Conceptual Model
of the Impact of Diversity

Several major workforce-related trends highlight the magnitude of cultural diversity that characterizes the workforces of organizations in the 1990s. First, the workforce in many nations of the world is becoming increasingly more diverse along such dimensions as gender, race, and nationality (Fullerton, 1987; Johnston, 1991). For example, in the United States roughly 45 percent of all net additions to the labor force in the 1990s will be non-White (half of them first-generation immigrants, mostly from Asian and Latin countries), and almost two-thirds will be female. These trends go beyond the United Slates. For example, 5 percent of the population of the Netherlands (de Vries, 1992) and 8-10 percent of the population in France are ethnic minorities (Horwitz & Forman, 1990). There are also substantial and growing non-Caucasian segments of the workforce in many parts of Italy and Germany. Moreover, the increases in representation of women in the workforce in the next decade will be greater in much of Europe—and in many of the developing nations of the world—than it will in the United States (Johnston, 1991).

Behind these workforce facts are some rather startling world population demographics. For example, it is estimated that by approximately the year 2000 a majority of public school-age children in the United States will be non-White. Further, virtually none of the traditional industrial powers of the world have a fertility rate that is great enough to replace their existing population. This means that growth of the labor forces in these nations, including that of the United States, must come from immigration or from increasing labor-force participation by groups that are presently underrepresented. In nations such as Japan, which are strongly averse to immigration, the pressure to increase work opportunities for women will be especially intense. In the United States, greater realization of the potential of racioethnic minorities and White women will be more crucial in the next decade than it has ever been before. This is especially true with regard to racioethnic minorities, because they have much higher growth rates than the White sector of the population.¹ A look at age and fertility data tells why (see Table 1.1).

Table 1.1. Fertility and Age Data.

Source: Adapted from Wall Street Journal, 1990.

Regarding the Asian American population, recent data indicate that it is growing at a rate that is ten times that of the population overall, and 70 percent of all Asians in the United States today are either first- or second-generation immigrants.

In addition to these demographic trends, organizations in the 1990s are emphasizing the importance of cross-functional teams in creating a basis for competitive advantage (Bassin, 1988; Levine, 1987; Raudsepp, 1988). Since different work functions and departments in organizations can have different cultures, this trend adds a strong element of cultural diversity to today’s workgroups in many organizations.

A third major factor emphasizing the relevance of diversity to organizations is the increasing emphasis on global marketing and multinational business operations. It is well known that understanding the effects of culture on human behavior is crucial to the business success of multinational companies. What is perhaps less well known is the extent to which business success in the 1990s is dependent on foreign markets. In the United States, many businesses, including familiar names like IBM, Exxon, Coca-Cola, Dow-Chemical, and Digital Equipment, now derive more than half their revenues from overseas markets. This trend is even beginning to extend to predominately service operations like Citicorp, which obtained 52 percent of its revenues from foreign markets in 1991 (“U.S. Corporations,” 1992).

Still another recent workforce diversity development that will impact organizations in the 1990s is the recent passage of the Americans with Disabilities Act. This legislation is expected to increase pressure to accelerate employment opportunities for the six million unemployed Americans with disabilities.

The amount of change indicated by this combination of trends and events for the cultural milieu and intergroup relations of organizations is mind-boggling. It is therefore imperative for employers, and for educational institutions seeking to prepare people for leadership in the twenty-first century, to understand the effects of this diversity on human behavior in the workplace. In view of the magnitude and importance of the challenge that cultural diversity poses to organizations in the 1990s,. several reviewers have noted that pertinent teaching and research literature on the topic seems inadequate (Nkomo, 1992; Cox & Nkomo, 1990; Alderfer & Thomas, 1988; Ilgen & Youtz, 1986).

The primary goal of this book is to address this need by providing a comprehensive text for educators, organization development specialists, and practicing managers charged with learning and teaching about cultural diversity in the workplace. A secondary goal is to stimulate thinking among faculty and doctoral students seeking to build research agendas on the effects of diversity in workgroups. As research increases, additional help will be available to practitioners seeking to meet the challenges of increasing diversity in workgroups.

In pursuing these goals, the book presents a comprehensive conceptual model that ties together learnings from theory, research, and anecdotal information on gender, racioethnicity, nationality, age, and other dimensions of diversity to create a generic model of the impact of cultural heterogeneity on work behavior and outcomes.

Throughout the book culture group or cultural group will refer to an affiliation of people who collectively share certain norms, values, or traditions that are different from those of other groups. Therefore cultural diversity means the representation, in one social system, of people with distinctly different group affiliations of cultural significance. Also, throughout the book I will be addressing diversity in the context of social systems that are characterized by a majority group and a number of minority groups. Majority group here means the largest group, while minority group means a group with fewer members represented in the social system compared to the majority group. For our purposes, majority group also signifies that members have historically held advantages in power and economic resources compared to minority group members. In most social systems one group may be identified both as larger in size and as possessing greater power and economic advantages. For example, in most large corporations in the United States, White American men of full physical capacity represent the largest, most powerful, and most economically successful group. In some cases, however, the control of power and resources is split between two or more groups rather than being identified with the largest group. An example is South Africa, in which Whites control the government and economic resources despite the fact that Blacks outnumber Whites by four to one. In the United States, organizational examples are found in industries such as insurance and banking, in which the workforce is typically 60-70 percent female but the management ranks typically have more men than women.

A Model of the Impact of Diversity

Figure 1.1 presents the Interactional Model of Cultural Diversity (IMCD), which I developed on the basis of learnings from my study of the relevant literature and my own research, consulting, and teaching experience over the past decade. There are several features of the model that I view as somewhat distinctive. First, this is a general model designed to explicate effects of diversity for many cultural configurations. Thus I believe much of what is said here is applicable to all kinds of cultural identities, including job function, religion, age, and physical ability. The book will, however, emphasize diversity that is based on racioethnicity (racially and/or ethnically distinctive within the same nationality group), gender, and nationality.

Figure 1.1. An Interactional Model of the Impact of Diversity on Individual Career Outcomes and Organizational Effetiveness.

There are several reasons for these points of emphasis. Previous research and organization development work have shown that these bases of diversity are extremely important in understanding human transactions. Also, they are group identities that are not changeable, as compared to many others (such as age, work function, and religion) that can, and often do, change over the course of a lifetime. In addition, and most important, the base of knowledge in the social sciences is more fully developed for these identities than for others that may be relevant. Thus we are in a better position to apply knowledge from social psychology and other fields to organizations if we focus initially on these identities rather than others.

A second point of distinction about this model is that it treats group identity in a more sophisticated way than past writings in the organizational literature. Whereas the traditional treatment of group identities such as racioethnicity and gender in the management literature has been to assign people to categories solely on the basis of physical identification, this model views certain effects of cultural diversity on individual and organizational outcomes as being due to both the physical and the culture identities of organization members. It also recognizes that there is variability along both of these dimensions within, as well as between, groups. For example, employees have typically been classified as Black, White, Hispanic, and so on in accordance with equal opportunity categories. This categorical treatment of racioethnicity, in placing emphasis on the physical dimension of race, largely ignores the crucial issue of the extent to which the individual identifies with the cultural traditions of the group. The importance of this distinction has been illustrated by empirical research (see Chapter Four).

Third, it should be noted that the IMCD model proposes that the impact of diversity on organizational outcomes is a complex interaction of individuals and their environment. The environment includes both intergroup and organizational forces. In this regard, the model builds on previous work on interactional research (Mischel, 1977; Chatman, 1989; O’Reilly, Chapman & Caldwell, 1991) and on the concept of embedded groups (Rice, 1969; Alderfer & Smith, 1982). This work assumes that behavior in organizations is best understood by examining the interplay between the individual and the environmental situation. Much of the previous work has emphasized the relationship between an employee and the employee’s job or occupation, while the person-organization relationship has received less attention (Chatman, 1989; Schneider, 1987; House, 1988).

In applying this previous work to effects of cultural diversity on work outcomes, I am suggesting that the environmental situation includes not only organizational factors but also a set of intergroup factors focusing on relations between the majority group and the various minority groups represented. Thus, the effects of a person’s group affiliations such as gender, race, and nationality can be analyzed on three levels: (1) individual, (2) group/intergroup, and (3) organizational. These roughly correspond to the interpersonal, group, and systemic levels of analysis advocated by embedded group theory (Alderfer & Smith, 1982; Rice, 1969). A full understanding of the impact of cultural diversity on organizations must therefore give attention to all three levels of analysis. It is also true that relations among employees of organizations occur in a broader societal context. Throughout the book, the societal context will be developed in the course of explaining the intraorganizational dynamics of diversity. For example, phenomena such as prejudice, stereotyping, and conflict between women and men in organizations will be partly explained by facts from the sociocultural history of male-female relationships in the society at large.

Logic of the Model

The model in Figure 1.1 posits that four individual-level factors (personal identity structures, prejudice, stereotyping, and personality type), three intergroup factors (cultural differences, ethnocentrism, and intergroup conflict), and four organizational context factors (organizational culture and acculturation processes, structural integration, informal integration, and institutional bias) collectively define the diversity climate of an organization.²

The diversity climate may influence individual career experiences and outcomes in organizations in two ways. Affective outcomes refer to how people feel about their work and their employer. Thus in many organizations employee morale and satisfaction are related to identity groups such as gender, racioethnicity, and so on. Second, the actual career achievement of individuals as measured by such things as job performance ratings may be related to group identities in some organizations. These individual outcomes, in turn, are expected to impact a series of first-order organizational effectiveness measures such as work quality, productivity, absenteeism, and turnover. For profit-making organizations, these first-order measures ultimately translate to second-order results such as profitability and market share. In nonprofit organizations, individual contribution is still crucial in determining the extent to which organizational goals will be achieved.

In addition to these indirect effects of group identity, certain aspects of the diversity climate are thought to impact directly on organizational performance. Specifically, the amount of diversity in both formal and informal structures of organizations will impact factors such as creativity, problem solving, and intraorganizational communications.

The terms and relationships of the model will be defined and discussed in detail in subsequent chapters of the book. First, however. Chapters Two and Three will develop further the major premise of the book, namely, that managing diversity is a critical competency for leaders in the 1990s, and that organizational capacity to manage diversity well has major implications for organizational performance.

1 Common practice is to capitalize Hispanic and Asian, while leaving Black and White lowercased. In my view, this is not only illogical but conveys the erroneous message that there is no cultural significance to the identities of Blacks and Whites. Therefore I have chosen to capitalize the names of all racioethnic groups in this book.

2 This term has been used previously by Kossek & Zonia, 1993. It is used differently here and is defined specifically to include the items specified in Figure 1.1.