Article: Does workforce diversity increase productivity, asks Sankar R.


Does workforce diversity increase productivity, asks Sankar R.

Should organisations aim for diversity ofthe workforce given that correlation betweenperformance and diversity is difficult to establish?
Does workforce diversity increase productivity, asks Sankar R.

To make diversity work, the unique strengths that different people possess should be identified and leveraged to the firm's advantage, in an enabling environment


True diversity consists in plurality of views and perspectives that a diverse workforce is expected to bring but can be found in less diverse environments as well


Should organisations aim for diversity of the workforce given that correlation between performance and diversity is difficult to establish?

The fostering of a diverse workforce figures prominently on the agenda of CEOs and CHROs today. An inclusive and diverse workforce is seen as a good thing in itself; unavoidable in an era of talent shortages; necessary in order to comply with laws and regulations that prevent discrimination; and contributing to enhanced organisational performance. Initially aimed at gender, diversity now encompasses colour, religion, sexual orientation, nationality and disability. Many countries have given diversity the force and imprimatur of law, with some taking recourse to affirmative action and quotas to advance the cause of minorities and women.

Organisations, on their part, have redesigned their policies and processes to promote the hiring and retention of a diverse employee set and have made their workplaces more welcoming of women and the disabled. They have instituted diversity metrics to measure how well they are doing on the diversity scale. (Here, we must understand the difference between being an “equal opportunities employer” and an employer who actively promotes diversity. The former merely says it does not discriminate on the basis of gender, colour, faith etc. The latter goes one step further and says “other things being equal, I shall privilege candidate X in the interest of having a diverse workforce”). While all of this is for the good, it must be asked whether and to what extent diversity enhances organisational performance. While there is no gainsaying that promoting diversity and inclusion is a desirable societal goal, it is by no means clear or certain that a diverse workforce necessarily performs better than a homogeneous one. (Here, the word “homogeneous” is used to describe a non-diverse workforce).

Establishing a causal link between diversity and organisational performance is fiendishly difficult even if a correlation can be found, except in cases where a direct attribution can be made as for instance where women medicos are preferred to men to serve patients of their gender or young salespersons are preferred to older ones to appeal to a predominantly youthful customer segment. Perhaps the most difficult part of the exercise would be to prove the counter-factual, namely that performance would have been worse had it not been for diversity. Quite apart from its desirability from the point of view of promoting an inclusive society, one that is free of prejudice and that affords every citizen the opportunity, regardless of gender, faith, colour or creed to achieve his or her potential, the argument for workforce diversity is premised on the assumption that it confers organisational benefits through the unique strengths, skills and talents that such diversity provides.

Deprived of the unique endowments of diversity, the performance of a less diverse workforce is assumed to suffer, in contrast. Therefore, in so far as the superior organisational performance of a diverse workforce rests on the unique strengths that different segments of the workforce bring, organisations that wish to truly benefit from diversity must first identify and then harness those unique strengths. In other words, having a diverse workforce is a necessary but not sufficient condition to make diversity work.

A diverse workforce, in and of itself, will be no more successful than a homogenous one, other things being equal, if the skills, resources, capabilities and perspectives that each diverse segment brings are not correctly identified and skilfully and capably harnessed. To give an example, diversity is not about having more women in leadership positions. It is about asking what particular skills women bring to leadership and making sure that those skills are given full play.(Note that we are talking here of skills attributable in general to gender and not the strengths of a particular woman candidate under consideration for leadership, as the latter would be taken into account in the normal process of assessment of her candidature, as indeed would be a man’s. Also note that such an approach could lead to the charge of stereotyping the workforce segment in question, in this case women). Taken to its logical conclusion, this line of argument also means that where diversity confers no distinctive strengths, an organisation is not better off being diverse. In such cases, diversity becomes a nice thing to have rather than a must thing to do. However, even in such cases, the active promotion of diversity may be the right thing to do in so far as diversity and inclusion are seen as desirable social goals, the presumption being that the aggregate costs incurred by employers in promoting diversity would be offset by the overall gains to society, assuming such costs and benefits are quantifiable. How then are we to relate diversity to organisational performance, narrowly defined as meaning accretions to shareholder value, return on investment, profitability, cash flow and so forth? Given the difficulty in establishing a causal connection, it is very unlikely that a credible study establishing such a connection exists. We should therefore stop pretending that one does. Instead, given the intrinsic worthiness of the cause, we should continue to do everything we can to welcome into our folds worthy candidates from every section of society. We might even go one step further to give a “leg up” to the disadvantaged and the underprivileged. But to make diversity work, we should identify the unique strengths that different people possess and create an enabling environment in which such strengths are leveraged to the firm’s advantage. Most importantly, we must recognise that true diversity consists in a plurality of views and perspectives which a diverse workforce can be expected to bring but which can be found in less diverse environments as well.

A diverse workforce counts for nothing if it quickly conforms to the organisation’s dominant culture, mental models and ways of thinking, behaving and acting. On the other hand, a homogeneous workforce, with no overt pretensions to diversity, can be truly diverse if the culture to which it belongs promotes openness, encourages dissent and debate and creates the soil where a “thousand flowers may bloom”.

(Sankar Ramamurthy is ED at PwC and can be contacted at

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Topics: Diversity, Strategic HR

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