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Making the ‘Business Case for Diversity’ Can Backfire with Underrepresented Groups

Many companies say that they are committed to diversity because women, people of color, and LGBTQ+ individuals bring unique contributions that boost firm performance. In a new study, Oriane Georgeac at Yale SOM and Aneeta Rattan at London Business School find that this explanation can have detrimental consequences for the very applicants that companies seek to attract.

When Oriane Georgeac attended her first management conference as a PhD student, she noticed a curious pattern. At sessions about diversity in the workplace, scholars and practitioners alike argued that companies needed more women in top leadership and on boards because of their communal, warm, and ethical leadership style—and that such contributions would ultimately benefit the business.

Georgeac, whose background is in psychology, was taken aback. In that field, the harmful consequences of stereotypes, including positive ones, are well-known—so why were management scholars and advocates using gender stereotypes to promote gender diversity in organizations? Besides, justifying women’s presence as a way to improve company performance—rather than as part of its commitment to fairness and equality—rubbed her the wrong way.

“This argument suggests you’re not actually interested in gender diversity per se; you’re interested in it only as a means to an end, which is increasing profits.”

The argument that diversity is good for business, which is also called the “business case” for diversity, felt like “conditional support,” says Georgeac, now an assistant professor of organizational behavior at Yale SOM. “This argument suggests you’re not actually interested in gender diversity per se; you’re interested in it only as a means to an end, which is increasing profits.” In contrast to this instrumental rhetoric, the “fairness case” for diversity argues that diversity is the right thing to do—independent of any benefits to the company. Georgeac and her co-author, Aneeta Rattan, an associate professor at London Business School, wondered if other people, and especially members of underrepresented groups, would share their negative reaction to the business case.

As a first step, Georgeac and Rattan sought to quantify the current prevalence of the argument in organizations. To do so, Georgeac and Rattan went on the websites of the Fortune 500 companies, and collected all the text that these companies used to describe why they feel diversity is important. They next created a machine-learning algorithm to categorize each explanation as pertaining either to the business case or the fairness case. The results were clear: about 80% of the Fortune 500 used the business case, whereas less than 5% used the fairness case (the rest did not provide a rationale for their commitment to diversity). “We found that the business case is indeed omnipresent,” Georgeac says.

What are the consequences of these diversity rationales? And in particular, what are those of the business case, given its prevalence?

To investigate this, the researchers ran a study with 151 LGBTQ+ MBAs and business school alumni at a recruitment conference. Participants were asked to imagine that they were looking for a job, came across a potentially interesting job opening on a company’s website, and found a diversity statement on the site. Half the participants were randomly assigned to read a business case for diversity, whereas the other half instead read a fairness case. Then, they answered some questions to assess how strongly they felt that they would belong at this company, and how attracted they were to it.

Results showed that relative to the LGBTQ+ professionals who had been randomly assigned to read the fairness case, those who read the business case reported a significantly lower sense of belonging. And in turn, these lower feelings of belonging predicted lower interest in joining the company.

Georgeac and Rattan found similarly negative reactions among women seeking jobs in STEM (science, technology, engineering, and math), where women represent only 25% of the workforce, and among Black American students—underrepresented in virtually all organizations. After reading a business case (rather than a fairness case), STEM women and Black Americans anticipated significantly greater rejection (i.e., lower belonging) in the organization, which in turn dampened their interest in joining the organization.

Why would the business case undermine LGBTQ+ professionals’, STEM women’s, and African Americans’ sense of belonging to a prospective organization? “When members of underrepresented groups enter a new environment,” the authors say, “they’re alert to signals suggesting that they might be evaluated through the lens of their social identity (e.g., as a female engineer, rather than just as an engineer). Since this often comes with stereotyping and discrimination, such cues can trigger concerns that they will be less valued there. As a result, underrepresented job seekers start questioning whether they would really belong in that environment.”

This hypothesis was supported by two additional studies showing that women in STEM and Black Americans encountering the business case (versus a fairness case, or a neutral diversity statement) were significantly more concerned about the possibility that the organization would see and judge them through the lens of their social identity—what scholars call “social identity threat.” They also reported feeling significantly more depersonalized—i.e., feeling seen by the organization as interchangeable with other members of their social group in terms of what they bring to the table. Finally, they saw the organizations’ commitment to diversity as less genuine. All of this, in turn, predicted lower anticipated sense of belonging to the organization making the business case.

One unexpected result was that hearing the fairness case for diversity also increased social identity threat compared to a neutral diversity statement—but only about half as much as the business case. Moreover, Georgeac notes, the fairness case did not increase depersonalization feelings, or undercut the organization’s claims of being committed to diversity.

“This message really is a wolf in sheep’s clothing. It sounds positive on the surface, but its inherent instrumentality actually undermines organizations’ efforts to attract individuals from these underrepresented talent pools.”

Taken together, these results suggest that the business case, while potentially well-intentioned, could backfire when it comes to attracting diverse applicants. “This message really is a wolf in sheep’s clothing,” Georgeac says. “It sounds positive on the surface, but its inherent instrumentality actually undermines organizations’ efforts to attract individuals from these underrepresented talent pools.”

She adds, “What this work allows us to acknowledge is that organizations’ explanations for why they care about diversity do matter, and that they may be harmful even when they superficially sound positive.”

How does the business case shape the perceptions of members of groups that are well represented in their fields, such as men in STEM or White students? The authors found that men in STEM didn’t react differently to the various cases. But in a study conducted after the murder of George Floyd, White students expressed feeling threatened after hearing the business case. “With the salience of race in public discourse post-Floyd,” the researchers write, “White Americans may also feel concerned by the possibility that an organization could see and judge them through the lens of their race.”

If the business case is alienating the very people that companies hope to attract to increase diversity within their ranks (and perhaps members of some well-represented groups as well), how should firms change their messaging? “If companies do feel compelled to give an explanation, the fairness case is much less harmful,” Georgeac says. “However, our results suggest that organizations should consider stating their commitment to diversity as a matter of fact, which doesn’t require any justification—because it’s a value that’s just as obvious and core to the organization’s purpose as innovation and integrity.”

What are the authors planning on investigating next? “One possible area for future research”, Georgeac says, “is to explore how workers from underrepresented groups are affected when diversity rhetoric and diversity practices don’t match.” For instance, an organization might claim to care about fairness but, in reality, just pay lip service to the issue to burnish its reputation. “The consequences of organizations’ diversity messages may also be shaped by actual diversity practices, actual levels of representation, etc. As scientists, we cannot wait to investigate further.”

Department: Research