Cultural Diversity in Organizations: Theory, Research and Practice

Praise For

Cultural Diversity in Organizations

"Taylor Cox has done an admirable job in analyzing the what, why, and how of valuing diversity. A must read for all who hope to benefit from the realities of a changing workforce."

— Rosalie L. Tung,

The Ming & Stella Wong Professor of International Business,

Simon Fraser University

"I have conscientiously attempted to read every book written on organizational diversity since I began to write about these issues some twenty years ago. In this context, I can honestly say that without a doubt, Cultural Diversity in Organizations is the most well thought out; the most well integrated; the most comprehensive; and the most significant academic undertaking that I am aware of on the complex and emotionally laden but critical issue of diversity. . . . Taylor Cox has made a major contribution to the field of organizational studies by providing a holistic and inclusive conceptual framework that is far in advance of any existing theory. Nowhere else am I aware of the existence of such an integrated compendium of critically important, research-based data, compiled in a manner that provides the platform for defining the issues, the stakes, and the challenges."

— Edward W. Jones, Jr.,

president, Corporate Organizational Dynamics Inc.

This is a unique yet long overdue book. I do not believe that any author has attempted to capture the enormous complexity of cultural diversity in organizations as has Taylor Cox. And he has done it well! In a readable but still systematic and objective analysis, the author helps the reader to understand diversity issues in organizations and provides ways of making it happen in an effective manner.

— Managing Diversity newsletter

"Taylor Cox offers a systematic and objective analysis that can help anyone become more proficient at developing diversity. I am impressed that Cultural Diversity in Organizations is so readable and yet so thorough—no small achievement!"

— Ann M. Morrison,

author, The New Leaders, and coauthor,

Breaking the Glass Ceiling

"Taylor Cox charts new territory in Cultural Diversity in Organizations, effectively weaving theory and research into a persuasive model for change. Concrete examples brilliantly illustrate the bottom-line impact of investing in diversity. Anyone interested in understanding the connection between multicultural diversity and organizational success will benefit from this book."

— Kim Cromwell,

diversity programs manager,

Digital Equipment Corporation

The interweaving of the scholarly, the pragmatic, and the compassionate creates a powerful statement.

— Gillian Stamp,

director,

Brunei Institute of Organization and Social Studies,

Brunei University

Taylor Cox provides a highly useful model for understanding the impact of diversity on individual and organizational outcomes and has supported it with a strong base of knowledge and expertise. He uses this model as the foundation for convincingly describing the dynamics of diverse work settings. Perhaps the most important contribution of this book is the discussion on organizational change and development, which describes a useful set of concepts and tools for creating multicultural organizations.

—Jerry I. Porras,

Fred H. Merrill Professor of

Organizational Behavior and Change

and Associate Dean for Academic Affairs,

Graduate School of Business, Stanford University

"Cultural Diversity in Organizations is an impressive contribution to advancing our thinking and understanding about the complex field of ‘diversity.’ It combines a credible conceptual framework with practical suggestions to improve business results by increasing the productivity and development of each and every employee."

— Tom White,

manager of human resources,

Exxon Research and Engineering Company

TAYLOR COX, JR.

Cultural Diversity in Organizations

Copyright © 1993, 1994 by Taylor H. Cox, Jr.

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First Edition

Hardcover print edition ISBN 978-1-881052-19-7

Paperback print edition ISBN 978-1-881052-43-2

PDF e-book ISBN 978-1-60509-870-8

IDPF e-book ISBN 978-1-60509-871-5

2010-1

Cover design: Pawlak Design. Production management: Pleasant Run Publishing Services. Compositon: WESType Publishing Services, Inc. Cover image: original quilt designed and pieced by Marilyn Merkt Felber, Berkeley, California; original mask quilting design by Laura Lee Fritz, Napa, California.

To my wife, Cynthia, with much love

Contents

Preface

Acknowledgments

Part One: Diversity and Organizational Performance

1. A Conceptual Model of the Impact of Diversity

2. Why Managing Diversity Is at the Core of Leadership Today

3. Review of Research on Diversity and Organizational Performance

Part Two: Individual-Level Factors in Understanding Diversity

4. Group Identities in the Self-Concept

5. Prejudice and Discrimination

6. Stereotyping

Part Three: Group and Intergroup Factors in Understanding Diversity

7. Cultural Differences

8. Ethnocentrism

9. Intergroup Conflict

Part Four: Organizational Context Factors in Understanding Diversity

10. Organizational Culture and Acculturation

Celia V. Harquail and Taylor Cox, Jr.

11. Structural Integration

12. Informal Integration

13. Institutional Bias

Part Five: Managing Diversity: Guidelines for Leadership

14. A Model to Guide Organization Change

15. Tools for Organization Development and Change

References

Name Index

Subject Index

Author and Contributor

Preface

In this book I have assembled learnings from ten years of teaching, research, and consulting related to the topic of cultural diversity in organizations.

My objective in creating the book was to provide a comprehensive text that would be useful as an aid for teaching, organization development, and scholarship. My primary targets are teachers and students of diversity, whether they are on university campuses or in the classrooms of business and community organizations. I also hope that Cultural Diversity in Organizations will be found useful by organizational scholars seeking to build a foundation for—or to extend—their own ideas and research directions on topics related to diversity in organizations.

Useful Features of This Book

There are several features of the book that I believe will make it especially useful to readers. One is that the book is developed around a specific conceptual model that frames the issues in a systematic way. The model represents my attempt to communicate dimensions and dynamics of diversity, which are generic issues across many types of group identities. Hence I do not have separate chapters on gender, race, age, and so on. Instead, I have attempted to integrate examples using the group identities throughout the book as various aspects of the model are discussed.

A second feature is that the book addresses the topic on three levels of analysis: the individual, the group, and the organization. I believe this multidimensional approach comes closer to capturing the enormous complexity of the topic than would be true if only one perspective were emphasized. This complexity exacts a price: it was not feasible to present a thorough discussion of all the relevant literature on each aspect of the model. Thus the book is intended to give examples of pertinent theory and research on the points raised rather than provide definitive coverage of individual topics.

Third, the book provides what I hope is a substantive and fairly comprehensive treatment of the topic, applying knowledge collected from several fields of inquiry to the organizational context. A considerable amount of relevant theory and empirical research is reviewed, which I believe makes clear that there is a base of knowledge that we can use to inform teaching, organizational interventions, and future research related to diversity in the workforce. The liberal use of references in the book is intended to aid further study of specific issues.

Overview of the Contents

Part One opens with a chapter that explains what I mean by cultural diversity and presents my conceptual model of diversity (the Interactional Model of Cultural Diversity), on which much of the book is based. Chapters Two and Three make the case for why managing diversity is among the most important management challenges of this decade. These chapters should increase the reader’s motivation to study the material presented in Parts Two through Four.

Parts Two, Three, and Four explain how gender, race, nationality, and other cultural diversity dimensions influence organizational behaviors and outcomes. I have attempted to write these segments in such a way that readers will gain important insights into the complex social and psychological phenomena that underlie diversity, as well as how they are manifested in the work setting. This dual purpose reflects my strong belief that personal and organizational excellence in working with and leading diverse groups of workers will only be achieved if we are educated about the phenomena themselves as well as their practical implications. For example, I think it is important to help people understand not just that stereotyping hinders people from working together, but also such things as what stereotyping is, why people do it, and why it is different from acknowledging and valuing differences.

A distinctive feature throughout the book (except in Part Five) is that major learning points are summarized in proposition statements at the end of each chapter. These statements might be used by teachers and workshop facilitators to frame discussion questions, class exercises, exam questions, or for other learning objectives. Also, scholars interested in research on diversity may find them useful to stimulate ideas for future research agendas.

Finally, in Part Five, two full chapters are devoted to a discussion of organization development for managing diversity. Suggestions are given for the design and implementation of organization change processes for enhancing the capability to manage diversity.

At the time of this writing, teaching, research, and organization change initiatives on cultural diversity are still in an early stage of development. More and more organization leaders are coming to realize that the potential creativity and problem-solving advantages of a culturally diverse workforce is a resource that remains grossly underutilized in most of the world. I hope that readers will share some of the excitement that I experienced in writing the book as I reflected on a future so ripe with opportunity.

Taylor Cox, Jr.

Ann Arbor, Michigan

May 1993

Acknowledgments

Many people have contributed to the development of the ideas presented in this book, and I will no doubt leave someone out who should be mentioned. My sincere apologies. I would like to thank my research assistants: Paul Bacdayan, Joycelyn Nickelson, Karen Nowak, Cheryl Middleton, Anthony Forbes, and Noel Willis. I would also like to thank Susan Jackson, Angelo DeNisi, and Ann Morrison for their reviews. Many thanks are also due to publisher Steven Piersanti and all the staff at Berrett-Koehler Publishers. I also want to acknowledge and express my appreciation to colleagues Jane Dutton, Lance Sandelands, Karl Weick, and Bob Quinn for their helpful comments on drafts of earlier manuscripts on which parts of this book are based.

Finally, my greatest appreciation is reserved for my wife, Cynthia; my children, Stephanie, Aaron, and Ty; my father, Taylor Cox, Sr.; my mother, Betty Cox; my stepmother, Edith Cox; and other members of my family who have loved and supported me over the years.

PART ONE

DIVERSITY AND

ORGANIZATIONAL PERFORMANCE

Part One presents the Interactional Model of Cultural Diversity. This model explains why the presence of cultural diversity—and its management—are logically linked to organizational performance. In addition to describing the conceptual logic on which the book is based, this part reviews research that supports the linkage of diversity to individual and organizational work outcomes.

1

A Conceptual Model

of the Impact of Diversity

Several major workforce-related trends highlight the magnitude of cultural diversity that characterizes the workforces of organizations in the 1990s. First, the workforce in many nations of the world is becoming increasingly more diverse along such dimensions as gender, race, and nationality (Fullerton, 1987; Johnston, 1991). For example, in the United States roughly 45 percent of all net additions to the labor force in the 1990s will be non-White (half of them first-generation immigrants, mostly from Asian and Latin countries), and almost two-thirds will be female. These trends go beyond the United Slates. For example, 5 percent of the population of the Netherlands (de Vries, 1992) and 8-10 percent of the population in France are ethnic minorities (Horwitz & Forman, 1990). There are also substantial and growing non-Caucasian segments of the workforce in many parts of Italy and Germany. Moreover, the increases in representation of women in the workforce in the next decade will be greater in much of Europe—and in many of the developing nations of the world—than it will in the United States (Johnston, 1991).

Behind these workforce facts are some rather startling world population demographics. For example, it is estimated that by approximately the year 2000 a majority of public school-age children in the United States will be non-White. Further, virtually none of the traditional industrial powers of the world have a fertility rate that is great enough to replace their existing population. This means that growth of the labor forces in these nations, including that of the United States, must come from immigration or from increasing labor-force participation by groups that are presently underrepresented. In nations such as Japan, which are strongly averse to immigration, the pressure to increase work opportunities for women will be especially intense. In the United States, greater realization of the potential of racioethnic minorities and White women will be more crucial in the next decade than it has ever been before. This is especially true with regard to racioethnic minorities, because they have much higher growth rates than the White sector of the population.¹ A look at age and fertility data tells why (see Table 1.1).

Table 1.1. Fertility and Age Data.

Source: Adapted from Wall Street Journal, 1990.

Regarding the Asian American population, recent data indicate that it is growing at a rate that is ten times that of the population overall, and 70 percent of all Asians in the United States today are either first- or second-generation immigrants.

In addition to these demographic trends, organizations in the 1990s are emphasizing the importance of cross-functional teams in creating a basis for competitive advantage (Bassin, 1988; Levine, 1987; Raudsepp, 1988). Since different work functions and departments in organizations can have different cultures, this trend adds a strong element of cultural diversity to today’s workgroups in many organizations.

A third major factor emphasizing the relevance of diversity to organizations is the increasing emphasis on global marketing and multinational business operations. It is well known that understanding the effects of culture on human behavior is crucial to the business success of multinational companies. What is perhaps less well known is the extent to which business success in the 1990s is dependent on foreign markets. In the United States, many businesses, including familiar names like IBM, Exxon, Coca-Cola, Dow-Chemical, and Digital Equipment, now derive more than half their revenues from overseas markets. This trend is even beginning to extend to predominately service operations like Citicorp, which obtained 52 percent of its revenues from foreign markets in 1991 (U.S. Corporations, 1992).

Still another recent workforce diversity development that will impact organizations in the 1990s is the recent passage of the Americans with Disabilities Act. This legislation is expected to increase pressure to accelerate employment opportunities for the six million unemployed Americans with disabilities.

The amount of change indicated by this combination of trends and events for the cultural milieu and intergroup relations of organizations is mind-boggling. It is therefore imperative for employers, and for educational institutions seeking to prepare people for leadership in the twenty-first century, to understand the effects of this diversity on human behavior in the workplace. In view of the magnitude and importance of the challenge that cultural diversity poses to organizations in the 1990s,. several reviewers have noted that pertinent teaching and research literature on the topic seems inadequate (Nkomo, 1992; Cox & Nkomo, 1990; Alderfer & Thomas, 1988; Ilgen & Youtz, 1986).

The primary goal of this book is to address this need by providing a comprehensive text for educators, organization development specialists, and practicing managers charged with learning and teaching about cultural diversity in the workplace. A secondary goal is to stimulate thinking among faculty and doctoral students seeking to build research agendas on the effects of diversity in workgroups. As research increases, additional help will be available to practitioners seeking to meet the challenges of increasing diversity in workgroups.

In pursuing these goals, the book presents a comprehensive conceptual model that ties together learnings from theory, research, and anecdotal information on gender, racioethnicity, nationality, age, and other dimensions of diversity to create a generic model of the impact of cultural heterogeneity on work behavior and outcomes.

Throughout the book culture group or cultural group will refer to an affiliation of people who collectively share certain norms, values, or traditions that are different from those of other groups. Therefore cultural diversity means the representation, in one social system, of people with distinctly different group affiliations of cultural significance. Also, throughout the book I will be addressing diversity in the context of social systems that are characterized by a majority group and a number of minority groups. Majority group here means the largest group, while minority group means a group with fewer members represented in the social system compared to the majority group. For our purposes, majority group also signifies that members have historically held advantages in power and economic resources compared to minority group members. In most social systems one group may be identified both as larger in size and as possessing greater power and economic advantages. For example, in most large corporations in the United States, White American men of full physical capacity represent the largest, most powerful, and most economically successful group. In some cases, however, the control of power and resources is split between two or more groups rather than being identified with the largest group. An example is South Africa, in which Whites control the government and economic resources despite the fact that Blacks outnumber Whites by four to one. In the United States, organizational examples are found in industries such as insurance and banking, in which the workforce is typically 60-70 percent female but the management ranks typically have more men than women.

A Model of the Impact of Diversity

Figure 1.1 presents the Interactional Model of Cultural Diversity (IMCD), which I developed on the basis of learnings from my study of the relevant literature and my own research, consulting, and teaching experience over the past decade. There are several features of the model that I view as somewhat distinctive. First, this is a general model designed to explicate effects of diversity for many cultural configurations. Thus I believe much of what is said here is applicable to all kinds of cultural identities, including job function, religion, age, and physical ability. The book will, however, emphasize diversity that is based on racioethnicity (racially and/or ethnically distinctive within the same nationality group), gender, and nationality.

Figure 1.1. An Interactional Model of the Impact of Diversity on Individual Career Outcomes and Organizational Effetiveness.

There are several reasons for these points of emphasis. Previous research and organization development work have shown that these bases of diversity are extremely important in understanding human transactions. Also, they are group identities that are not changeable, as compared to many others (such as age, work function, and religion) that can, and often do, change over the course of a lifetime. In addition, and most important, the base of knowledge in the social sciences is more fully developed for these identities than for others that may be relevant. Thus we are in a better position to apply knowledge from social psychology and other fields to organizations if we focus initially on these identities rather than others.

A second point of distinction about this model is that it treats group identity in a more sophisticated way than past writings in the organizational literature. Whereas the traditional treatment of group identities such as racioethnicity and gender in the management literature has been to assign people to categories solely on the basis of physical identification, this model views certain effects of cultural diversity on individual and organizational outcomes as being due to both the physical and the culture identities of organization members. It also recognizes that there is variability along both of these dimensions within, as well as between, groups. For example, employees have typically been classified as Black, White, Hispanic, and so on in accordance with equal opportunity categories. This categorical treatment of racioethnicity, in placing emphasis on the physical dimension of race, largely ignores the crucial issue of the extent to which the individual identifies with the cultural traditions of the group. The importance of this distinction has been illustrated by empirical research (see Chapter Four).

Third, it should be noted that the IMCD model proposes that the impact of diversity on organizational outcomes is a complex interaction of individuals and their environment. The environment includes both intergroup and organizational forces. In this regard, the model builds on previous work on interactional research (Mischel, 1977; Chatman, 1989; O’Reilly, Chapman & Caldwell, 1991) and on the concept of embedded groups (Rice, 1969; Alderfer & Smith, 1982). This work assumes that behavior in organizations is best understood by examining the interplay between the individual and the environmental situation. Much of the previous work has emphasized the relationship between an employee and the employee’s job or occupation, while the person-organization relationship has received less attention (Chatman, 1989; Schneider, 1987; House, 1988).

In applying this previous work to effects of cultural diversity on work outcomes, I am suggesting that the environmental situation includes not only organizational factors but also a set of intergroup factors focusing on relations between the majority group and the various minority groups represented. Thus, the effects of a person’s group affiliations such as gender, race, and nationality can be analyzed on three levels: (1) individual, (2) group/intergroup, and (3) organizational. These roughly correspond to the interpersonal, group, and systemic levels of analysis advocated by embedded group theory (Alderfer & Smith, 1982; Rice, 1969). A full understanding of the impact of cultural diversity on organizations must therefore give attention to all three levels of analysis. It is also true that relations among employees of organizations occur in a broader societal context. Throughout the book, the societal context will be developed in the course of explaining the intraorganizational dynamics of diversity. For example, phenomena such as prejudice, stereotyping, and conflict between women and men in organizations will be partly explained by facts from the sociocultural history of male-female relationships in the society at large.

Logic of the Model

The model in Figure 1.1 posits that four individual-level factors (personal identity structures, prejudice, stereotyping, and personality type), three intergroup factors (cultural differences, ethnocentrism, and intergroup conflict), and four organizational context factors (organizational culture and acculturation processes, structural integration, informal integration, and institutional bias) collectively define the diversity climate of an organization.²

The diversity climate may influence individual career experiences and outcomes in organizations in two ways. Affective outcomes refer to how people feel about their work and their employer. Thus in many organizations employee morale and satisfaction are related to identity groups such as gender, racioethnicity, and so on. Second, the actual career achievement of individuals as measured by such things as job performance ratings may be related to group identities in some organizations. These individual outcomes, in turn, are expected to impact a series of first-order organizational effectiveness measures such as work quality, productivity, absenteeism, and turnover. For profit-making organizations, these first-order measures ultimately translate to second-order results such as profitability and market share. In nonprofit organizations, individual contribution is still crucial in determining the extent to which organizational goals will be achieved.

In addition to these indirect effects of group identity, certain aspects of the diversity climate are thought to impact directly on organizational performance. Specifically, the amount of diversity in both formal and informal structures of organizations will impact factors such as creativity, problem solving, and intraorganizational communications.

The terms and relationships of the model will be defined and discussed in detail in subsequent chapters of the book. First, however. Chapters Two and Three will develop further the major premise of the book, namely, that managing diversity is a critical competency for leaders in the 1990s, and that organizational capacity to manage diversity well has major implications for organizational performance.

1 Common practice is to capitalize Hispanic and Asian, while leaving Black and White lowercased. In my view, this is not only illogical but conveys the erroneous message that there is no cultural significance to the identities of Blacks and Whites. Therefore I have chosen to capitalize the names of all racioethnic groups in this book.

2 This term has been used previously by Kossek & Zonia, 1993. It is used differently here and is defined specifically to include the items specified in Figure 1.1.

2

Why Managing Diversity Is

at the Core of Leadership Today

In Chapter One, I suggested that a series of environmental forces have combined to make managing diversity a high priority issue for contemporary organizations. By managing diversity I mean planning and implementing organizational systems and practices to manage people so that the potential advantages of diversity are maximized while its potential disadvantages are minimized. Further, I view the goal of managing diversity as maximizing the ability of all employees to contribute to organizational goals and to achieve their full potential unhindered by group identities such as gender, race, nationality, age, and departmental affiliation.

In this chapter, I wish to develop more thoroughly the idea that managing diversity is crucial to the accomplishment of organizational goals and therefore should be of paramount concern to managers. Three types of organizational goals facilitated by managing diversity are (l) moral, ethical, and social responsibility goals; (2) legal obligations; and (3) economic performance goals.

Managing Diversity as a Moral Imperative

In most organizations, the representation of culture groups in the overall work population, and especially in the most powerful positions, is highly skewed. For example, in the Netherlands, Dutch men are dominant; in New Zealand, Pakeha men are dominant; in the United States, White men are dominant. This fact and the pervasive tendency for in-group members to be favored over out-group members in human transactions combine to make dominance-subordination and other equal opportunity issues prominent aspects of diversity work in organizations. Thus for nations and organizations that subscribe to a creed of equal opportunity, a major motive for investing in managing-diversity initiatives is that it is morally and ethically the right thing to do. Moreover, it is certainly prudent to include, among the many goals of organizations, social responsibility objectives such as promoting fairness and improving economic opportunities for underachieving members of society. It also seems fair to say that achievement of social responsibility goals enhances economic performance goals in the long term. For example, in the United States it seems clear that improving educational achievement among non-Cuban Hispanics, Blacks, and poor people of all racioethnic groups has major implications for national economic competitiveness.

Since the moral and social justice objectives of managing diversity have been addressed in the management literature for many years (mostly under the heading of equal opportunity), I will not dwell on them here except to reemphasize that the ethical, moral, and social responsibility motives for managing diversity work remain highly relevant in today’s organizations.

Legal Requirements

Certain aspects of managing diversity are necessary, or at least strongly advised, as a matter of law. In