Pursuing diversity is a pressing initiative for many organizations and leaders, but implementations don’t usually live up to the lofty rhetoric and goals that accompany their introduction. These challenges are particularly apparent when an organization crafts its diversity policy from a domestic perspective and uniformly rolls it out worldwide. For example, consider a firm headquartered in New York City that creates a diversity policy largely focused on American social justice issues with minimal input from global stakeholders. The power and impact of that initiative diminishes significantly as it is transmitted abroad.
This type of dilemma inspired my case-based article, “What Does Diversity Mean in a Global Organization?,” published in the May/June 2022 edition of Harvard Business Review. In the case, the CEO of a listed toy company is selecting a candidate to lead the company’s Asia business, centered in China, an important driver for the firm’s continued growth. The successful candidate also will join the company’s board of directors. The company’s leadership and board of directors is not diverse, and there has been a push from shareholders to increase diversity.
Within this milieu, the CEO is choosing between two candidates. Both candidates are strong, but one is a white male who has spent most of his life in Greater China, and the other is an ethnically Chinese female born and raised in the West. Inspired by an actual event, the case illustrates several issues around how companies interpret diversity and implement diversity initiatives.
For example, the case compels readers to grapple with whether or not diversity changes depending on the context. At the toy company’s headquarters in Canada, the female candidate certainly satisfies diversity criteria; this might not be the case in China. Conversely, the male candidate would likely not satisfy standard diversity metrics in Canada, but in China, he might be considered to be contributing to diversity for certain demographic categories. Indeed, the male candidate spent many years of his life being the only non-Chinese person in many business situations.
Ultimately, determining which candidate contributes to diversity depends on the lens through which the candidate is viewed. As companies strive to implement diversity policies across global operations, various companies, especially those headquartered in the West, will encounter such issues. This is the reality of achieving diversity in a global context.
I have taught this case on numerous occasions to global business leaders and to MBA classes with students from around the world. I have also shared it with various organizations, including the Asia offices of Western companies. Informed by those enlightening discussions, this Advisor examines how diversity policies are constructed.
Crafting Diversity Policies
Over the last four decades, there has been a proliferation of corporate diversity policies. By one estimate, more than 95% of organizations with more than 1,000 employees have some sort of diversity program.
These initiatives are now quite visible as company websites have made room for carefully crafted diversity policies accompanied by images of an eclectic mix of employees. This part of an organization’s website often highlights various employee groups, frequently referred to as “employee resource groups” (ERGs), that cater to different demographics or interests. For instance, Intel has more than 40 such groups, which they divide between ERGs and leadership councils “organized around race, national origin, gender identity, parenthood, diverse abilities, education, faith and beliefs, and other common affinities.”
Generally, this push toward diversity has largely been prompted by a few interwoven factors. The list below is not exhaustive, and there are certainly other contributing issues to consider, but for the majority of business leaders, these three factors are a good starting point:
Righting wrongs. Diversity initiatives often emerge from a desire to address social inequalities and injustices, many of which are rooted in historical legacies that have yet to be fully addressed. The legacy of the pernicious impact of these histories is the landscape that organizations navigate, especially in the social media age. For example, from slavery to the recent Black Lives Matter movement, racism and discrimination against African Americans have been a tragic part of US history. Consequently, for many American companies, diversity policies, at least initially, focus on addressing race-based inequalities and injustices.
Stakeholder capitalism. The rise of stakeholder capitalism over the last few years has also amplified the importance of diversity for many leaders and organizations. As companies look beyond shareholders and maximizing their value, other stakeholders have emerged as critical voices. Using the power of social media, employees, customers, and the communities in which companies operate have increasingly demanded companies commit to addressing social and political issues like diversity. Additionally, some investors have emerged as keen diversity advocates. For example, BlackRock, the world’s largest asset manager, announced a goal of 30% diversity in the boards of the US companies in which it is invested. Stakeholder capitalism has heightened the importance of social and political issues on board agendas.
Competing. In a globally competitive marketplace, a company is at a disadvantage if it artificially limits the talent pool from which it hires or the customers it may serve due to discriminatory or otherwise unfair policies. Most companies claim they seek to hire the best people, but this is not feasible when discriminating against a particular gender or minority group. Companies competing for talent, customers, and capital will be better served and better positioned to win by committing to meaningful, robust diversity policies. Ultimately, as workers and customers seek authentic, purpose-driven organizations to work for and patronize, commitment to diversity will be an integral part of such decisions.
It is important to note that in addition to the factors noted above, a company’s diversity policy is generally an outcome of a particular path dependence. Path dependence is usually explained by the phrase “history matters,” but for our purposes, it can be thought of as “context matters.” For a company, the background of its founder, its industry, where it is headquartered, and when it was started are all examples of factors that can shape its pursuit of diversity initiatives. For example, a US company founded by an African American female in 2020 and headquartered in Silicon Valley will likely have a very different notion of diversity and how it should be implemented than, say, a Malaysian company founded in 1980 by a middle-aged, ethnically Chinese male who is a citizen of Malaysia and headquartered in Kuala Lumpur. Path dependence must be accounted for when transporting diversity policies across borders.
[For more from the author on this topic, see: “Moving Beyond Check-the-Box Global Diversity Policies.”]