Walking the talk in diversity management: Exploring links between strategic statements, management practices, and external recognition

Highlights

• This study examines the links between strategic diversity statements, diversity practices, and external recognition for diversity management.

• Content about diversity statements, diversity practices and external recognition was obtained from 27 hospitality firms from Fortune 1000 list.

• This study identified six new themes related to diversity statements and two new themes related to diversity practices.

• Companies that exhibit links between statements and their practices are more likely to gain recognition, which often leads to favorable outcomes.

Abstract

Despite a link between external recognition for diversity management and important financial outcomes, very little research has examined the organizational efforts that can lead to such external recognition. To address this gap, this study examines the links between strategic diversity statements, diversity management practices, and external recognition of diversity using the theoretical lenses of the resource-based view (RBV) and institutional theory. Data on diversity statements and practices were collected from 27 Fortune 1000 companies, and, using a time-lag approach, external recognition data were collected from professional organizations one year later. Results show that organizations that “walk the talk” and institute both diversity statements and practices were more likely to gain external recognition. This study provides timely and practical recommendations for hospitality firms to integrate diversity statements with diversity practices, a process that may lead to external recognition and thus to favorable outcomes.

Introduction

Current world events stemming from movements such as Black Lives Matter have brought diversity to the forefront of business and social discourse. Corporate America has stepped forward, re-examined its policies and practices, and committed resources to diversity and inclusion in the workplace (Hessekiel, 2020), recognizing their social and business value (Hunt et al., 2015). CNBC reports that 40 % of S&P 500 companies discussed diversity, equality, and inclusion during their 2020 s-quarter earnings calls, up significantly from last year (Stevens, 2020). In addition, companies invest $8 billion annually on diversity and inclusion training, and nearly 50 % of US organizations plan to offer diversity and inclusion training in the future (Carter et al., 2020).

Past research has shown that diverse employees are a competitive advantage (Dass and Parker, 1999). This is especially true in the context of the hospitality industry, which is labor intensive, caters to diverse customers from all over the world, and experiences high labor turnover (Madera, 2013). To achieve sustainable competitive advantage and maximize the positive outcomes related to workforce diversity, almost 98 % of companies, based in the US, have a diversity program. As far back as 2011, a Society for Human Resource Management study found that 21 % of companies reported using a variety of diversity management practices, such as diversity committees, diversity councils, and diversity advisory boards. Among organizations with these types of diversity management practices, 72 % reported that these groups were used to help augment their organization’s business efforts. It must be noted that 13 % of organizations reported having staff dedicated exclusively to diversity. Globally, 55 % of organizations in a study by Society for Human Resource Management reported their organizations “strongly promote” Diversity and Inclusion (Gehrels and Suleri, 2016). Stronger business performance can be achieved through more significant investment in diversity management practices (Singal, 2014).

To leverage and showcase their investment in diversity management, organizations often use external recognition as a measure of success. For example, a widely used practice is to benchmark against other organizations considered leaders in diversity management, such as those included on DiversityInc’s annual list of “The 50 Best Companies for Diversity,” Fortune magazine’s “Top 50 Companies for Minorities,” or the Human Rights Campaign’s “Best Places to Work for LGBTQ Equality.” Research shows that external recognition for diversity pays off for organizations. Specifically, receiving external recognition for diversity has been linked to strong financial performance via conscious efforts to build a positive reputation to signal a competitive advantage to stakeholders (Cook and Glass, 2014; Richard et al., 2013; Roberson and Park, 2007).

Despite a link between external recognition for diversity and important financial outcomes, very little research has examined the antecedents and organizational efforts that can lead to this external recognition. That is, what do organizations do to gain external recognition for diversity? Using Yang and Konrad’s (2011) model of diversity management, we propose that linking both strategic diversity statements (henceforth, diversity statements) and diversity management practices is related to external recognition for diversity—“walking the talk” is the way to receive recognition. Yang and Konrad’s model of diversity management is grounded in resource-based view (RBV) and institutional theory, which suggest that organizational motivation to invest in diversity management starts with corporate strategy. A strategy is defined as “a set of goal directed actions a firm takes to gain and sustain superior performance relative to competitors and can act as a guiding policy to address the competitive advantage” (Rothaermel, 2019, p. 4). Thus, hospitality firms seeking to implement diversity management start by including diversity as an agenda item in their corporate strategic statements, which helps them formulate policies toward diverse employees and external stakeholders. A clear diversity statement can guide diversity management practices and the positive outcomes of such practices (Thomas, 2004). Diversity management is planning and implementing organizational systems and practices to manage people, thus maximizing the potential advantages of diversity and minimizing its potential disadvantages (Cox, 1994). Research shows that diversity management leads to innovation, strong financial outcomes (Manoharan et al., 2019), and lower turnover (Richard and Johnson, 1999), and positively influences group performance and job satisfaction (Pitts, 2009). Richard and Johnson (1999, p. 89) find that “if the diversity practices ‘fit’ with the firm’s business strategy, productivity and market performance are higher than for those firms without ‘fit.’”

While existing research confirms that strategic diversity statements and diversity management practices can lead to positive organizational outcomes, the literature has several limitations. First, little is known about the actual strategic diversity statements that organizations adopt (Kossek et al., 2005). Instead, the majority of the research has focused on the antecedents and outcomes of strategic diversity statements (Cook and Glass, 2015; Friday and Friday, 2003; Richard, 2000; Roberson and Park, 2007), but not on what they are (i.e., their content). Second, research on diversity management practices is often micro-level—for example, it examines the effect of team and work unit demographics, or the effect of the manager- and employee-perceived diversity climate on team- and individual-level outcomes (Kalargyrou and Costen, 2017; Manoharan and Singal, 2017). Third, although some research has been conducted at the macro or organizational level, much of this has only focused on the effect of diversity management practices on individual aspects of firm performance and not on external recognition for diversity (e.g., Richard, 2000; Richard et al., 2004). In addition, these studies have often been conducted as silos, creating a gap in understanding relationships between strategy statements, diversity management practices, and external recognition for diversity. Lastly, although industry context matters (Johns, 2018), only two studies have used hospitality organizations to examine external recognition for diversity. Both were limited to investigating the relationship between diversity management practices and a single type of external recognition for diversity, and neither looked at diversity statements (Madera, 2013; Gajjar and Okumus, 2018).

To address these gaps, we build on Yang and Konrad’s (2011) model of diversity management to examine (1) the content of diversity statements, (2) diversity management practices, and (3) the links between diversity statements, diversity management practices, and external recognition for diversity management. Using Fortune 1000 companies to select our sample, we identified hospitality-related firms, manually collected data related to their diversity statements and diversity practices from their websites, and examined the links between these data and external recognition, such as any diversity-related awards and accolades these firms received.

Addressing these gaps is important because gaining a deeper understanding of the relationship between strategy statements, diversity management practices, and external recognition for diversity will benefit both academics and practitioners. For academics, examining the relationships between strategy, practices, and performance through the lens of diversity management builds on the tradition of strategic human resource management (HRM), investigating how practices such as those for diversity management can be measured and compared between organizations and linked to strategy and important outcomes (Madera et al., 2017). For practitioners, there is a need to understand the effects of diversity management practices on external recognition for diversity, because hospitality organizations substantially invest in diversity management to generate reputations for being diversity leaders (Gajjar and Okumus, 2018; Madera, 2013).