The hidden dangers of the business case for diversity

Company websites and corporate literature are littered with commitments to diversity and explanations as to why it matters. Justifications range from diversity being a business asset as it improves performance to it simply being the right thing to do. Indeed, the clarion call for improved diversity has been adopted at the very highest levels. What is more, movements such as #MeToo and Black Lives Matter have drawn marked attention to issues of social injustice and inequality that exist in the world, ingraining issues around gender and ethnic diversity further into public consciousness.

Given that organisations’ diversity rhetoric is all around us, there has been surprisingly little consideration of the impact of what they say – until now. Our newest research (which was part of Dr. Georgeac’s PhD dissertation under the advising of Dr. Rattan and which was awarded funding support from the LBS Leadership Institute) investigates which justifications organisations use to explain their commitment to diversity, and how these justifications affect members of underrepresented groups – exactly the individuals whom companies need to attract to achieve their diversity goals.

Justifications for diversity

We observed that organisations use two broad cases to justify their commitment to diversity – the ‘fairness case’ (e.g., “We value diversity because it is the right thing to do”), and the ‘business case’, which argues that diversity is valuable because it benefits organisational performance and ultimately the bottom line. You may be familiar with business case language, which communicates that candidates from minority backgrounds offer different skills, perspectives, experiences, and working styles, and that it is precisely these “unique contributions” that drive the success of diverse companies.

We created an algorithmic model that used Artificial Intelligence to analyse what the Fortune 500 companies say about diversity (using publicly available text drawn directly from their websites). We found that business case rhetoric is far more prevalent than the fairness case for diversity. Indeed, less than five per cent of companies offered a fairness-case justification, while 78% offered a business-case justification.

The business case for diversity seems to work against organisations’ stated diversity goals

In order to find out how such statements affect potential employees’ impressions of what it would be like to work for a company, we conducted five online experiments with job seekers from three underrepresented groups – LGBTQ+ professionals, women job seekers in Science, Tech, Engineering, and Math (STEM) fields, and African American students about to enter the job market. Each group was randomly assigned to read either a business-case or fairness-case diversity statement, and answer questions about their anticipated sense of belonging, and how much they would want to work at the company. While the business case language may seem positive at first glance, our theory was that it would undermine belonging because it communicates that organizations may judge what candidates have to contribute on the basis of their race, gender, sexual orientation, or other identities, rather than based on their actual skills and experience – a stereotyping and depersonalizing experience.

Indeed, on average, reading business-case diversity statements undermined participants’ sense of belonging to the company, and this in turn negatively affected their desire to join it. In some of our studies, we documented precisely why: underrepresented groups worry more that they and their work will be judged based on stereotypes about their social identity after reading business-case justifications rather than fairness-case justifications. They also felt depersonalised – as though they would be treated as the “Black Engineer” rather than just the engineer on the team. In other words, the business case for diversity seems to work against organisations’ stated diversity goals.

No justification is the best justification

In some of our studies, we included a 3^rd condition where the company simply stated its commitment to diversity with no justification. Interestingly, we found that even fairness-case justifications for diversity performed less well than this “no case” condition, slightly raising respondents’ worry about being judged based on stereotypes about their social identity (but still, less than half as much as the business case did). There is more research to do around this, but right now the data points us to the conclusion that no justification is the best justification for companies that want to talk about their commitment to diversity, without risking the backfiring effects of the widely-prevalent business case.

Our results with majority group members were less consistent – in some studies, they did not respond differently to the business versus fairness case, but in others they showed similarly negative effects after reading the business case.

In sum, our research suggests that the most prevalent case out there – the business case for diversity – backfires if the goal is for this rhetoric to signal inclusion to members of groups underrepresented in the organisation. If prevalent business practices in any other domain – sales, marketing, finance – were shown to not just be ineffective, but to have a negative impact, we know organisations and leaders would rush to change to better practices. We hope they will do the same in this case, letting go of the business case for diversity, and instead simply stating their commitment to diversity, as a matter of fact that needs no justification.

Oriane Georgeac, LBS Ph.D. 2020, is an Assistant Professor of Organizational Behavior at Yale School of Management.

Aneeta Rattan is Associate Professor of Organisational Behaviour at London Business School