UGBA105: Organizational Behavior

1. UGBA105: Organizational Behavior Professor Jim Lincoln Week 12: Lecture Managing Diversity

2. Class business • Tuesday: • Black caucus groups at Xerox case and video

3. Managing Diversity • The U. S. workforce is the most diverse in the world and growing more so • Globalization demands better management of diversity

4. What are the dimensions of workforce diversity? Race, ethnicity, language, gender, sexual orientation, household/family structure, pregnancy, childcare, disability, HIV, religion, age, drugs/alcohol, region, religion, nationality, immigration status, part-time, temporaries, subcontract employees

5. The diverse US workforce • African-, Hispanic-, and Asian-Americans account for more than 25% of the U. S. workforce and for 60% of net labor force growth • Nearly half the US workforce is women • 43% in 2002, down from 47% in 2000

6. Has commitment to diversity management declined? • “Lean and mean” trend has eliminated diversity programs • “Angry white male” backlash and political debate over affirmative action (Props. 187 & 209)

7. Maybe it’s no longer a problem? • “Paired testing” research shows discrimination against minorities and women in hiring • Ongoing corporate scandals (Salomon Smith Barney, Coca Cola, Astra USA, Mitsubishi Motors, Texaco, Wal-Mart, Morgan Stanley) • Employee surveys show diversity still a concern • Underrepresentation of women and minorities in top jobs

8. Debate at Harvard:Are there “innate” gender differences in math and science ability? "We adults may think very different things about boys and girls, and treat them accordingly, but when we measure their capacities, they're remarkably alike," said Elizabeth Spelke, a professor of psychology at Harvard. She and her colleagues study basic spatial, quantitative and numerical abilities in children ranging from 5 months through 7 years. "It's hard for me to get excited about small differences in biology when the evidence shows that women in science are still discriminated against every stage of the way." In a recent experiment Princeton students were asked to evaluate two highly qualified candidates for an engineering job - one with more education, the other with more work experience. They picked the more educated candidate 75 percent of the time. But when the candidates were designated as male or female, and the educated candidate bore a female name, suddenly she was preferred only 48 percent of the time. New York Times, 1-24-05

9. Chancellor Birgeneau takes on Prop 209 “Instead of ensuring nondiscrimination, Proposition 209 has created an environment that many students of color view as discriminatory. That's because minority representation has dropped appallingly, and where there should be camaraderie across cultural lines, I have seen too much alienation, mistrust and division.” “I believe that at Berkeley we are … missing out on exceptional African American, Latino and Native American students who can not only succeed here, but whose participation can improve the education the university offers all its students.” “Minority inclusion is a public good, not a private benefit. … the single most important skill that a 21st century student must master is "intercultural competence" — the ability, best learned via experience with and appreciation of other cultures, to navigate successfully in today's globalized society. .” As the current chancellor, I feel a moral obligation to address the issue of inclusion head-on. Ultimately it is a fight for the soul of this institution. Inclusion is about leadership and excellence, principles that California and its leading public university have long represented and might again. Los Angeles Times Op-Ed Piece, 3/27/05

10. The underrepresentation of women and minorities at the top • Women comprise: • 15.7 percent of Fortune 500 corporate officers • 7.9 percent of the Fortune 500’s highest titles • 5.2 percent of the Fortune 500’s top earners • 1.6% (8) of the CEOs of Fortune 500 companies • 24% of Fortune 1000 board directorships • Less than 9% of managers in Fortune 1000 firms are people of color, compared with 21% of the workforce overall • Four Fortune 500 firms have African-American CEO’s • Merrill Lynch, AOL Time Warner, Fannie Mae, & Maytag

11. What Women Executives Say Males stereotyping and preconceptions (83%) Exclusion from informal networks (49%) Lack of significant general management or line experience (47%) Inhospitable corporate culture (35%) Women not in pipeline long enough (29%) What CEO’s Say Lack of significant general experience (82%) Women not in pipeline long enough (64%) Male stereotyping and preconceptions (25%) Inhospitable corporate culture (18%) Exclusion from informal networks (5%) Source: 1996 Catalyst survey Why the low representation of women in corporate leadership positions?

12. The roots of diversity problems • Individual-level • Organization-level

13. Why do people discriminate?

14. Why do organizations discriminate?

15. Organizational culture • Content of corporate culture glorifies white maleness • ”Macho” industry cultures: construction, air traffic controller, energy, securities, military, heavy industry, sales • “Country club” leadership and culture (old Chase Manhattan) • “Good old boy” small town—P&G-- or Southern cultures-Coke) • Culture strength • Too strong culture (homogeneity, stringent screening/socialization) • Too weak culture (lack of transcendent values & community, negative politics)

16. Strong culture and homogeneity at P&G Few corporate cultures are as dominant as the "Procter Way." "It's such a strong culture, they really want sameness," says Ms. Beck, who later worked as a brand manager for Dunkin Donuts and as a vice president for Burger King. "The way women think and the way we do business has some inherently different qualities to it," Ms. Beck says. "In retrospect, there was a gender aspect to [P&G's culture] that was not intentional, but was very, very real.“ WSJ, 9/9/98

17. Does diversity reduce trust? A bleak picture of the corrosive effects of ethnic diversity has been revealed in research by Harvard University political scientist Robert Putnam. His research shows that the more diverse a community is, the less likely its inhabitants are to trust anyone - from their next-door neighbour to the mayor. “In the presence of diversity, we hunker down. We act like turtles. The effect of diversity is worse than had been imagined. And it's not just that we don't trust people who are not like us. In diverse communities, we don't trust people who do look like us." Prof Putnam found trust was lowest in Los Angeles, "the most diverse human habitation in human history", but his findings also held for rural South Dakota, where "diversity means inviting Swedes to a Norwegians' picnic". When the data were adjusted for class, income and other factors, they showed that the more people of different races lived in the same community, the greater the loss of trust. "They don't trust the local mayor, they don't trust the local paper, they don't trust other people and they don't trust institutions," said Prof Putnam. "The only thing there's more of is protest marches and TV-watching?” Financial Times, 10/9/06

18. Culture and branding:Abercrombie’s preppy image leads todiscrimination in hiring Some retail chains (e.g., the Gap or Benetton), pride themselves on hiring attractive people from many backgrounds and races. Abercrombie and Fitch's "classic American" look is blond, blue-eyed and preppy. The company says it does not discriminate. But in a recent lawsuit Hispanic, Asian and black job applicants maintained otherwise. Plaintiffs said that when they applied for jobs, store managers steered them to the stockroom, not to the sales floor. New York Times, July 13, 2003

19. Organization & job design causes Vertical and horizontal differentiation segregates and isolates women and minorities • Physical nature of job tasks exclude women, aged, disabled • Jobs with ambiguous goals/skill requirements prompt selection on personalistic criteria (“tall, good hair, right accent, smooth style”) • Exclusion of women/minorities from “pipeline” or fast-track jobs • E.g., women in HR • Segregation of women/minorities by job, department, and level makes them vulnerable to: • Downsizing • Pay discrimination • Less perceived inequity when job and skill differences coincide with demographics By contrast, “flat,” flexible organizational designs mingle people via teamwork and networks. They also have more and faster paths to the top but fewer high-level positions

20. Why manage diversity?

21. History of diversity management: ignore differences & demand assimilation • Taylorism: dumb-down the job. Reduce the worker to set of hands • Melting pot idea: (“English-only”) • “Tossed salad” as today’s metaphor Neither of these is an option in today’s economy

22. The melting pot ideal “...Alongside our famous individualism, there's another ingredient in the American saga, a belief that we are all connected as one people.... It is that fundamental belief—I am my brother's keeper, I am my sister's keeper—that makes this country work. It's what allows us to pursue our individual dreams, yet still come together as a single American family: ‘E pluribus unum’; out of many, one.... There's not a black America and a white America and a Latino America and an Asian America; there's the United States of America.” Illinois Senator Barak Obama’s keynote address to the Democratic National Convention, July 2004

23. The U. S. has the world’s toughest anti-discrimination regulations • Equal Pay Act of 1963 • Civil Rights Act of 1964. Title VII prohibits discrimination in hiring. • Executive Order # 11246, 1965: mandated affirmative action for federal contractors • 1967 Age Discrimination in Employment Act; amendments in 1978 • Equal Employment Opportunity Act of 1972 • Rehabilitation Act of 1973 • Americans with disabilities act; July, 1990 • Family and medical leave act of 1993 No federal law specifically outlaws workplace discrimination on the basis of sexual orientation in the private sector

24. High-profile discrimination lawsuits • Sexual discrimination/harassment litigation settlements • Mitsubishi Motors, 1990: $34M • Astra USA, 1996: $10M • Salomon Smith Barney, 1998 $15M • Morgan Stanley $54M • Racial discrimination litigation settlements • Denny’s, 1994, $54M • Texaco, 1996: $176M • Coca Cola, 1999: $192M

25. Wal-Mart in trouble Wal-Mart, ranked number one on Fortune’s prestigious "America’s Most Admired Companies" list for 2003, is appealing a court judgment against it in the largest class-action sex-discrimination lawsuit in U.S. history, with 1.5M plaintiffs.

26. Solutions: Toward better diversity management • People and culture change • Recruitment • Training & socialization • Restructuring • Politics and networks • Leadership change • Incentives • External stakeholder pressure • PR & reputation • Corporate governance change Beware of slap-on, window-dressing solutions!! • Towers-Perrin’s “customized” program

27. Making the business case for diversity In many companies, diversity is still viewed as something that has only a tenuous impact on the bottom line... But rather than creating a business case for diversity, which is what they should be doing, many diversity officers are moralizing the issue. They are still attempting to advance diversity because it's the right thing to do, because it makes for good corporate citizenship. But, says Kenneth Sole, a Durham, N.H.-based management consultant, "This approach involves scrutinizing, chastising, and .. punishing people. When people feel preached to, they are not motivated to change their behavior." Moralizing diversity, he adds, guarantees that people in diversity leadership will become devalued and held in low esteem. The Conference Board: “Do companies truly value their diversity directors”(2006)

28. Good diversity management helps the bottom line Annualized stock market return for the 100 companies which rated lowest in equal employment opportunities issues, average 7.9 percent, compared to 18.3 percent for the 100 companies that rated highest in their equal employment opportunities. Source: Convenant Investment Management Also, firms that received U. S. Department of Labor awards for their success in implementing voluntary affirmative action policies are rewarded with a boost in their share price within 10 days of the announcement. Source: "Competitiveness Through Management of Diversity: Effects on Stock Price Valuation."

29. Women and minorities as consumers • Women account for nearly half of the nation's workforce, college graduates, and talent pool. They make over 85 percent of consumer purchases and influencing over 95 percent. • Likewise, racial and ethnic minorities, now spending in excess of a trillion dollars annually, account for 30 percent of consumers and 34 percent of the labor force. By 2050, these minorities will account for almost 50 percent of U.S. consumers and workers. Source: Calvert Online 2004

30. Recruiting • Widen recruiting network • Use minority recruiters • Practice affirmative action • Consider non-traditional criteria • More fast track; less reliance on seniority and hiring through conventional pipelines • Bias-free testing and screening

31. Training and socialization • Training: better understanding of other cultures and styles, regulations. • Sensitivity groups/role playing • Downside: villifying white males • Mentoring programs

32. Retructuring and job redesign • Standard job redesign • Job rotation to expand contactds & experience • Empower lower level people • Convert to teams • Customize job requirements (flextime, “Mommy track,” disability) • Appoint diversity managers (> half of F500 firms have them). • Create diversity councils & task forces (Honeywell)

33. Politics and networks • Self-help and advocacy groups (e.g., Xerox black caucus; GE women’s network) • Appoint diversity “champions” • Create diversity-oriented newsletters and email lists

34. Select leaders for commitment to diversity:GE’s diversity management improved under CEO Jeffrey Immelt Of GE's top 173 officers, 13.3% are now women, up from the 4.5% of six years ago (the Jack Welch era). Business Week, July 28, 2003

35. Incentives and benefits • Tie managerial compensation and promotion to progress in meeting diversity goals (Colgate, GE Capital) • “Family friendly” policies (family leave, on-site childcare, domestic partner benefits) • New mandated benefits and anti-discrimination rules for domestic partners

36. Executive bonuses tied to diversity goals at Wal-Mart Wal-Mart CEO Lee Scott, speaking at the company's annual meeting with analysts in Fayetteville, Ark., said the bonuses, including his own, would be cut by up to 7.5% this year and 15% next year if the company doesn't promote women and minorities in proportion to the number that apply for management positions. "If 50% of the people applying for the job of store manager are women, we will work to make sure that 50% of the people receiving those jobs are women," Mr. Scott said. WSJ 6/4/04

37. Tracking & rewarding diversity progress at Ryder Ryder System, Inc. Ryder, a logistics, supply-chain, and transportation giant, runs an extensive diversity program for its 30,000 employees. Ryder measures the return on its program by tracking litigation costs and the number of women and members of minority groups hired and promoted in key jobs throughout the company. "Since the initiation of these programs, litigation costs have dropped dramatically," says Gerri Rocker, director of corporate diversity for the Miami-based company. The company uses a scorecard for each business unit that includes a diversity component, with specific targets for hiring and promoting women and people of color. Senior leadership bonuses are tied to meeting these targets.

38. Reputational effects:Fortune’s top 10 companies for minorities • Advantica • Fannie Mae • MacDonald’s • Southern California Edison • Sempra Energy • Xerox • Silicon Graphics • SBC Communications • Lucent Technologies • Bell South

39. Corporate governance reform and stakeholder pressure In May of 2003, Calvert Funds became the first investor to propose model language for nominating and corporate governance committees that assures diversity among boards of directors. This charter provides a vehicle for companies to implement their commitment to an independent and diverse board.

40. Diversity takeaways • Effective management of diversity is a huge challenge with no easy solutions • But there are many things companies can and should do • And doing nothing is not an option