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Importance of Corporate Diversity

by Suleman
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The makeup of the US population has changed dramatically over the past 15 years and this trend is expected to continue in the foreseeable future. In 1980, the Hispanics, Asians and African Americans groups accounted for 24% of the overall US population residing and earning in the US. In 2025, they are estimated to account for 40%. The Hispanic population is projected to grow from 13% to 19% and Asians from 4% to 7% of all households by 2025.

In 1970, married Households made up 71% of all households in the US. That number dropped to 52% in 2003. Married households with children drove that drop as they went from 40% to 23%. What is most compelling about this change is the increase in Non-traditional households which have grown from 12% to 22%. This group is made up of all sorts of new family and household formations – single-parent households primarily. The number of single-parent families increased from 3 million in 1970 to 10 million in 2003, and the number of single-parent families increased from half a million to 2 million in 2003. Non-Traditional household formations also include gay and lesbian households and a newer phenomenon whereby older, single people (single parents are the drive) find long-term roommates to help alleviate the financial burdens that often come with living alone. As the number of permutations and combinations of how people lead their lives continues to grow, traditional demographics work less productively as proxies for attitudes. Therefore, truly understanding the needs and wants of consumers and building products that meet their unique circumstances becomes more and more challenging.

Importance of Corporate Diversity

2000  2010 2020
White non-Hispanic 74% 72% 68%
Black non-Hispanic 11% 11% 11%
Hispanic 10% 12% 14%
Asian non-Hispanic 5% 5% 6%

Source: http://diversity.gsfc.nasa.gov/dcprivate/diversityresources/best_practices.htm

(Workforce 2020. Hudson Institute. Indianapolis, Indiana. 1998.)

A growing concept is that companies that incorporate diversity in their workforce are more likely to innovative compared to those firms that do not. Therefore, it can be seen that diversity is now forcing firms to recruit, retain and develop employees from varying multicultural backgrounds, different ethnicities, minorities, and also from the socially disadvantageous groups in the society.

This diversity affects businesses in several ways; firms can increase their product sales as efforts by executives having diverse background can bring and bring new ideas that enhance sales; a diverse work force brings in new customers because their diverse backgrounds help in serving the customers better according to their needs, a diverse workforce questions and challenges that they think might affect the customer base because of advertisements, slogans or product contents being offensive to a particular customer group; other issues such as globalization demands it; having a diverse workforce also is supposed to increase the bottom line of the company since the company incorporating diversity is   looked upon favorably by employees, customers and also by the legal and the regulatory authorities.

Some of the benefits that organizations are experiencing as a result of work force diversity also include lower costs since firms now face lesser law suit costs by hiring the diverse workforce, which previously they tend to reject and faced lawsuits over it. The diverse work force strengthens and reinforces the culture that promotes creativity and innovation. As mentioned, diversity generally enhances the bottom line i.e. the profits, firms are also seen as favorable in stock markets thus trading at premium and are also seen as likely targets for mergers. Firms when growing in size are in dire need of new and more recruits, selecting from the diverse pool of human resources give them a broad base to select from. Diverse population has different and varying lifestyles, thus firm can use this to its own advantage by utilizing some at one time and some other when special circumstances occur.

Diversity can bring competitive advantage and therefore, companies today are focusing more on leveraging diversity to achieve their corporate objectives. Having a diverse workforce for companies mean getting more business and the benefits are expanded to all areas marketing, finance, research and development etc.

In the world, we are living today product obsolescence becomes a visible phenomenon. The companies that learn to develop and market new products are more likely to remain in the market for a longer time and for new product development organizations should harness the spreading of knowledge through out the organization i.e. collective sharing of knowledge in the organization. This collective knowledge grows and is enhanced when people having different expertise, background and experiences share it with one another. For marketers have come to realize that many new ideas for product development comes from the different subcultures especially when we talk about food and also the health care products.

These days empathetic marketing is buzz word, according to this concept, customers are likely to be served better when the person serving them has a similar background, in such circumstances sales are more likely to go up.

Corporate diversity is also important since it gives rise to employment opportunities for the people of diverse background in the economy. The women, disabled, gays and lesbians are more likely to improve the standard of living when they are employed and earning. In many countries also studies have shown that the living standards of families have increased as women and other minorities enter the workforce. This benefits the economy as a whole rather than a particular company.

Diversity helps firms compete in the global and foreign markets. This happens because hiring people who are more adaptive and understanding of the needs of the local customs and traditions help develop products that are more suited to the domestic needs.

Today, organizations’ stock prices are linked to the favorable image that the company carries. Companies that discriminate carry bad image in the face of potential employees, customers. Discriminating and biased firms are more likely to be a victim of law suits and generate a great deal of negative publicity for their own selves.

Whereas, in some countries like United States, there are laws that oblige firms to recruit diverse workforce and European Union also has anti discriminatory laws to prevent businesses from any biases.

To summarise, for a variety of purposes, we may assume why firms follow diverse staff strategies. Among these the top ranking reasons are: ethical; regulatory; and economical. The requirement for a particular organisation may differ, but why it hires a diverse staff may not be just one, but there might be many explanations for such a need. The choice to become ‘diverse’ is due to a dynamic interplay of variables, of which only one is economics, as stated. In economic terms, as a consequence of a qualitative or quantitative assessment that gains can outweigh costs and uncertainties over time, businesses are engaging in diversity policies. Companies typically review those acquisitions in reaction to the introduction of potential market prospects or because of the effect on business results of internal or external constraints. Company decisions to generate growth potential or to improve overall productivity by building up human or corporate resources reflect investments in diversity policies. The decision to invest in intangible assets is also one of the most significant drivers of productivity for firms in the new knowledge-based economy.

Because of significant shifts in the demands of consumers and the actions of competitors; the supply, efficiency and values of current and potential employees; investors’ opinions about what drives appropriate returns on investment; the effect of public policy by taxation, legislation and political pressure; and citizens’ preferences on diversity.

References:
  • Amherst, “ARE DIVERSITY BEST PRACTICES “BEST”?.” A REPORT FOR ANHEUSER-BUSCH COMPANIES, INC.
  • Sullivan, John. Available from http://ourworld.compuserve.com/homepages/gately/pp15js96.htm. Internet; accessed 10 October 2007.
  • Friedman, Hershey, and Taiwo Amo. “Workforce Diversity: The key to survival and growth.”

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