Bottom line may be boosted by diversity at the top

Sep 10, 2010

Racial diversity at a corporation's top ranks may be good for business, according to new research conducted by a School of Management professor. Results from Dr. Orlando Richard's study suggest that racial diversity at the top may enhance a company's performance because such companies initiate more aggressive sales and marketing strategies.

Results from Dr. Orlando Richard’s study suggest that at the top may enhance a company’s performance because such companies initiate more aggressive sales and .

Richard is a professor of organizations, strategy and international management at UT Dallas. He and co-authors Goce Andrevski of Queens University, Walter Ferrier of the University of Kentucky and Jason Shaw of the University of Minnesota surveyed the competitive actions of 115 Fortune 1,000 companies during a three-year period for their study.

Their research paper, “Managerial Racial Diversity, Competitive and Firm Performance,” won a Best Paper Award in July from the Academy of Management.

The survey found that firms with more racially diverse leadership tend to launch more competitive actions such as new product introductions, creative advertising and promotions and sales incentives than firms with homogeneous management.

In fact, firms with highly diverse management mixes launched 71 competitive actions per year while companies with low diversity leadership introduced only 9, the research found.

Richard, a leading scholar in the area of racial diversity’s bottom-line effects, says that previous research has not successfully explained why diversity impacts company performance. The professor and his colleagues believe that racial diversity fosters greater creativity and innovation because it combines an assortment of knowledge bases and experiences.

“We illustrate how racial diversity brings the organization creative variety and alternative knowledge bases, which lead to more competitive actions and ultimately increased shareholder returns and market share. We also show that racial diversity effects are more powerful in more resource-abundant environments than resource-scare ones,” Richard said.

Unlike previous research that lumps all racial minorities into one category to compare against whites, this study defines diversity as management group representation across five racial categories: whites, blacks, Asians, American Indians and Hispanics.

“We argue that greater distribution across these categories provides more creativity and problem-solving capabilities,” Richard said.

The study also found that diversity training may be a useful human resource management tool for organizations that are concerned with managing a racially diverse organizational setting.

Richard, who teaches MBA and PhD courses in organizational behavior and human resource management at the School of Management, said he came up with the idea for the paper about five years ago. He has been conducting similar research for about 13 years and already had the racial diversity and company performance data, but asked Andrevski to collect the competitive action data for a three-year period.

A short version of the 40-page paper has been published in the Academy of Management’s Best Paper proceedings and is available to all members of the organization. It will soon be available in libraries and the general public.

“As organizations become increasingly diverse and as the representation of racial minorities in the U.S. workforce rapidly grows, practicing managers are curious as to how racial diversity will affect their bottom-line performance,” Richard said. “This study provides a more complex relationship than a simple linear relationship between racial diversity and firm performance.”

Explore further: Change 'authoritarian' football culture to produce future stars, says research

add to favorites email to friend print save as pdf

Related Stories

Recommended for you

Male-biased tweeting

18 hours ago

Today women take an active part in public life. Without a doubt, they also converse with other women. In fact, they even talk to each other about other things besides men. As banal as it sounds, this is far ...

Developing nations ride a motorcycle boom

20 hours ago

Asia's rapidly developing economies should prepare for a full-throttle increase in motorcycle numbers as average incomes increase, a new study from The Australian National University has found.

User comments : 0

More news stories

Male-biased tweeting

Today women take an active part in public life. Without a doubt, they also converse with other women. In fact, they even talk to each other about other things besides men. As banal as it sounds, this is far ...

Not just the poor live hand-to-mouth

When the economy hits the skids, government stimulus checks to the poor sometimes follow. Stimulus programs—such as those in 2001, 2008 and 2009—are designed to boost the economy quickly by getting cash ...

Archaeologists, tribe clash over Native remains

Archaeologists and Native Americans are clashing over Indian remains and artifacts that were excavated during a construction project in the San Francisco Bay Area, but then reburied at an undisclosed location.

When things get glassy, molecules go fractal

Colorful church windows, beads on a necklace and many of our favorite plastics share something in common—they all belong to a state of matter known as glasses. School children learn the difference between ...

FCC to propose pay-for-priority Internet standards

The Federal Communications Commission is set to propose new open Internet rules that would allow content companies to pay for faster delivery over the so-called "last mile" connection to people's homes.