Managing diversity in the workplace: competitive advantages for companies

Report of EMCC seminar

Paris, 14–15 June 2007

The first EMCC company network seminar of 2007 addressed the issue of diversity management practices in enterprises and was hosted by Schneider Electric in Paris. Five companies from France, Ireland, Spain and Sweden reported on their practice. Fifty delegates participated enthusiastically in discussions on the practicalities and difficulties of implementing diversity management in the workplace.

What is diversity management?

Diversity management (DM) is the label given to a wide range of management practices which seek to promote the employment and career development of a range of specified groups. Under EU law, the Racial Equality Directive (2004/43/EC) and the Employment Equality Directive (2000/78/EC) have enforced the rights of employees to non-discrimination in employment on the basis of age, beliefs, religion, gender, sexual orientation or ethnicity.

Many employers now run diversity management programmes for these groups. These programmes seek to improve recruitment, retention and promotion practices and also seek to change the ethos of the company in relation to the diversity of its workforce.

Seminar structure

Diversity is not an issue– it is a given (De Castro)

The seminar took place in the context of ‘European Year of Equal Opportunities for all 2007’.

It sought to place diversity management in the workplace as a major initiative that could meet the goals of the European Year.

The seminar was introduced by Jean-François Pilliard (Head of Global Human Resources) from Schneider Electric, who outlined Schneider’s interest in diversity management. A welcome address on behalf of the European Foundation for the Improvement of Living and Working Conditions was made by Florence Cordier (Member of the Governing Board of the Foundation). The seminar itself was introduced by Gregorio De Castro from the Foundation, who also gave an overview of diversity management policy and practice [De Castro presentation].

Five companies presented their strategies for diversity management and its application in practice:

Schneider Electric from France [case study], [presentation]

Dublin Bus from Ireland [case study], [presentation]

NH Hoteles from Spain [case study], [presentation]

Carrefour from France [case study], [presentation]

Volvo from Sweden [case study] [presentation]

Each of the case study presentations was followed by extensive question and answer sessions.

On the second day three parallel workshops took place, each of them setting out to identify the key issues for developing, implementing, monitoring and measuring the impact DM strategies. The workshop concluded with a short plenary session that discussed the workshop conclusions.

Who attended the seminar?

The seminar was attended by participants from 13 Member States coming from industry, the social partners and from research backgrounds.

Seminar themes

A number of themes emerged from the presentations and discussions at the seminar.

• There are different drivers for diversity – legislation, business opportunity, globalisation and company expansion
• The comprehensiveness of initiatives
• Transnational versus local implementation of diversity programmes
• Measuring the cost and benefits of diversity programmes
• The issue of recruitment versus career development
• Overcoming resistance to diversity management among managers and employees

Other recurring themes concerned the maintenance of employment rights, the possible negative effects of diversity programmes, what diversity programmes look like in SMEs, internationalisation and diversity, and the input of staff into the design of diversity initiatives.

Employers can be active, proactive or reactive in relation to how they deal with diversity. Proactive employers make forward-looking decisions to employ diverse groups for reasons of business advantage. Active employers seek to engage in best practice when faced with the issue; while reactive employers seek to comply with the provisions of the law. Of course, employers may engage in DM for more than one of these reasons.

What drives diversity management programmes?

There is diversity in diversity programme drivers

Legislation on anti-discrimination specifies the grounds upon which discrimination is banned. These grounds vary from country to country, but they typically include gender, race, disability, age, sexual orientation and religion. Diversity management programmes may focus on any of these issues but even in the case where legislation is a driver, it is rare to find programmes that focus on all of them.

It was clear that different drivers operated in stimulating DM programmes. In two of the companies (Schneider and NH Hoteles), there was rapid growth from local origins to genuinely global businesses. The companies recognised the need to integrate people of different nationalities into the ethos, functioning and development vision of the business. In both of these cases the emphasis was mainly on national and linguistic groups, towards which the companies took a proactive stance.

The case of Dublin Bus contains elements of a reactive and defensive approach to diversity management. On the one hand, management had to react to and take advantage of the new job applicants from racially and nationally diverse backgrounds, while on the other, it was conscious of the need (especially as a public sector company) to comply with Irish equality legislation.

In Volvo, the main issue in focus was the employment and promotion of women. This was a strategic business-related decision to focus on women’s needs in automobile development, augmented by company policy on gender equality (conforming to Swedish law). The successful implementation of gender initiatives encouraged the company to develop a DM program aimed at improving business performance.

In Carrefour, the main drivers for DM were twofold: one concerned the need to reflect the demography of the company’s customer base and the other related to the need to meet the requirements of the French Diversity Charter.

The focus of DM programmes

DM programmes evolve from single to multiple issue programmes

In theory, comprehensive DM programmes can simultaneously address a number of elements of diversity such as race, nationality, age or disability. However, it seems rare for companies to design and implement a DM programme de novo: instead programmes are put together in a more piecemeal or evolutionary way. They may draw upon already existing programmes (for example, gender equality), they may be a response to market opportunities or the diversity of new job applicants, they may be a response to legislation (e.g. programmes focused on disabled people), or they may be a response to the changing demographic of their workforce (e.g. older workers’ programmes).

Each of the case studies presented during the seminar showed an evolutionary rather than a comprehensive, planned approach to DM programmes. Companies were at different stages of development and though many had more than one element of DM practice, in many cases programmes were not linked together. For example, Carrefour has a systematic and extensive programme focusing on ethnic origin and a programme for disabled people that complies with French legislation in the area. In Schneider Electric, the Marco Polo Programme (the programme for promoting transnational experience) co-exists with programmes for disabled people. There was no evidence of a comprehensive planned approach to multiple elements of diversity in the other cases either.

Transnational issues in DM

Central programme design– local tailoring

Four of the five case studies came from companies that operate on a transnational basis and each of these faced the issue of implementing DM across national borders. Operating on a transnational basis means that companies must cope with multiple legislative demands, including employees’ working conditions and their career prospects.

In practice, even companies with a strong policy basis to their DM programmes tended to operate different policies in different countries. In part, this was because legislative demands differ so much from country to country, but it may also reflect the relatively localised nature of the DM programmes.

For companies operating diversity programmes focusing on the geographical mobility of their employees, procedures had to be put in place to ensure that employees were not penalised financially or in relation to working conditions as a result of their having taken up these programmes. Visa and work permit requirements are also a concern.

Measuring costs, benefits and impacts

If you are not managing diversity, competitiveness will be reduced (NH Hoteles)

The emphasis placed on how the costs and benefits of diversity programmes could be measured varied in the different companies. Where the reasons for introducing DM contained a strong business development element, there was a greater stress on costs and benefits. The opposite was true where the drivers for DM were more related to legislative or voluntary issues.

Regardless of the weight placed on costs and benefits, all companies reported difficulties in identifying and measuring cost and benefit indicators. This was mostly due to the fundamental difficulty of reliably measuring the benefits of any business activity and of attributing changes to specific interventions, but it also related, in France at least, to the provision of data protection legislation, which does not allow information on racial origin to be collected by companies.

While there was considerable agreement on the need for indicators, a contrary view was also expressed, that it was more important for DM programmes to be credible than to be accurately costed if they were to be sanctioned by senior management.

Recruitment and career development

Diversity is for life – programmes need to provide for career development

DM programmes should have a major impact on recruitment programmes for specific target groups. They should also impact on career development programmes. There was much discussion around the issue of whether the target groups for DM programmes had risen through the grade structures of the case study companies and whether there was representation of the target groups in question at senior management and board level.

The answer to this question varied: in principle none of the case study companies were against the promotion of target groups to the highest levels of the company (in some case such promotion had been achieved, e.g. NH Hoteles); but the nature of the target groups and the relatively short operating period for DM policies meant that penetration to the highest levels of the companies was limited.

For example, in Dublin Bus, recruitment was at bus driver level and even though this was one of the longest running DM programmes among the case study companies, the natural time scale for bus drivers to move to the next grade level had not elapsed for the vast bulk of new recruits affected by the DM policy.

However, experience elsewhere with target groups other than those specified in the case studies is mixed. People with disabilities often experience a ‘glass ceiling’ with regard to promotion, as do women. It remains to be seen whether the same applies for specific ethnic groups or people of different nationalities.

Resistance among managements and employees

Good implementation reduces resistance

Many questions were raised around the issue of resistance to DM programmes by either management or employees. In part, resistance was felt to be an issue because of either increased workload or because of perceptions that existing employees would be discriminated against (though prejudice may also be an issue).

In all cases the companies had taken steps to reduce the possibility and impact of resistance. Measures taken included running awareness programmes for staff, providing training for management in diversity related skills and attitudes and ensuring that new employees are treated on the same basis as older employees. These measures proved to be effective as none of the case study companies reported significant resistance among their workforces.

Other salient issues and diversity management

Some other issues were consistently raised by participants in the seminar. Of particular interest is the issue of how DM might be implemented in SMEs. There were somewhat conflicting views on the implications of DM for SMEs. Some participants thought that there was a need for support structures for SMEs which would provide information and where necessary, the skills for DM implementation from outside the SME. It was also stated that SMEs would have relatively few problems in implementing DM, especially where the ethos and culture of the SME is supportive in terms of levels of trust and respect between management and employees.

The issue of trust and respect was also discussed in relation to larger organisations – here it was felt that these attributes were essential foundations for successful DM programmes, especially where the target groups for the programme come from potentially sensitive backgrounds (e.g. where the focus of DM is ethnic groups).

Working groups report

Three parallel working group discussions were held as part of the seminar. The working groups were asked to address three questions:

• What are the five principal strategies that may be used in DM implementation?
• What are the five main arguments that may be used to make the business case for DM?
• What are the five main indicators that may be used for monitoring the impact of DM?

There was a remarkable level of agreement between the groups in relation to the answers to these questions. [See summary of work groups findings below.]

Strategies for implementation

For the first question, it was agreed that a structured approach involving reviewing the current situation, defining what diversity means in the company context, developing and carrying out an implementation plan and communicating with all relevant stakeholders would be needed. Other useful elements of strategy included developing specific procedures in relation to recruitment practices and career management and using benchmarking to identify best practice elsewhere.

Elements of the business case

There was also fairly widespread agreement regarding the main elements of the business case. Common elements here included meeting the demands of legislation, improving the ability of the company to attract employees, improving company image and making a positive impact on customers. Other important elements of the business case included gaining improvements in productivity, developing innovation and creativity, improving job satisfaction and becoming an employer of choice.

Indicators of DM

There was a somewhat lower level of agreement regarding the main indicators that could be used to measure the impact of DM, in part because the working groups addressed slightly different aspects of the question at hand (some focused on indicators and others on methods). Nevertheless, a useful range of indicators and methods for measuring the impact of DM were proposed.

Some suggestions referred to when relevant data might be collected, e.g. at exit interviews or at various points in the career development process or by using complaints or grievance procedures and social dialogue interactions to investigate the impact of DM. It was also proposed that there could be formal surveys of stakeholders in relation to DM impact.

Specific indicators of impact were also proposed and these included the use of diversity in communications by the company, employee satisfaction, key stakeholder satisfaction, demographic analysis of target groups, public image indicators and using benchmarking indicators in comparison with other companies.

Conclusions

The seminar received presentations from a range of company contexts and also had contributions from participants coming from diverse backgrounds. The range of contexts and experiences represented at the seminar therefore provides a sound basis for drawing conclusions about how diversity management operates and what the factors are that influence its development.

Gap between legal and operational concepts of diversity

National and EU level definitions of the areas to be covered by diversity emphasise the range of issues that are covered by the legislation. This comprehensive listing of issues reflects a broad concept of diversity that is apparently not reflected in the kinds of concepts used by companies in their diversity management programmes. In companies, DM tends to deal with one or two issues simultaneously (e.g. nationality, ethnicity), even though companies may have relevant programmes in other areas (e.g. older workers, disabled people). The concept (or perhaps the organisation) of DM used by companies is more limited than that implied by legislation.

Approaches to diversity management vary

Companies develop DM programmes for a range of reasons. Some companies are active in their approach, i.e. they tend to introduce DM in order to comply with legislation. Others are reactive – they introduce DM programmes in response to circumstance, e.g. when job applicants come from different ethnic backgrounds. Other companies are more proactive, i.e. they seek to take business advantage of the opportunities offered by a diverse workforce.

Role of legislation is complex

Legislation in the area appears to play a complex role in promoting diversity management programmes. In the public sector, legislation is more likely to act as a major driver, while in the private sector, companies may have other drivers operating, though compliance with legislation appears to be a useful additional benefit of DM programmes.

Depth of diversity management varies

Many DM programmes operate primarily through recruitment practices. There is a real concern that they might remain operating only at this level and that employees from diverse groups may not achieve promotion to higher grades. The lack of representation of target groups at higher grades may be a result of the relative novelty of DM programmes, but may also be due to an unwillingness to enable appropriate career development by employers.

Indicators for diversity management

There is a need to develop more robust and easily applicable indicators of diversity management and its impacts in order to strengthen the business case. These should focus on the measurement of progress and on linking DM programmes and business benefits. There is also a need to develop a reliable and easy-to-use method for linking these indicators.

Summary of working groups findings