Why CEOs Are Committed to Diversity Management

Instrumental, normative, and affective commitment to diversity

Posted Oct 30, 2015

Efforts to integrate an increasingly diverse workforce have evolved from anti-discrimination (e.g., Title VII of the Civil Rights Act, Equal Employment Opportunity Act) to diversity managementPrivate sector employers are credited for voluntarily engaged in managing for diversity and inclusion because it is an economic imperative.  Indeed, research suggests that diversity management is good for business because firms can attract the best talents across different groups, enhance their marketing efforts, boost creativity and innovation within workgroups, and reduce turnover among culturally employees. 

Initiatives for diversity management often come from CEOs, as they are the most senior executives responsible for charting the strategic direction of the firm.  CEOs set the corporate agenda and allocate resources to implement a host of diversity management policies and practices.  CEO commitment is also crucial as they take a personal stand on diversity, act as role models and cheer leaders, and assist with the change necessary to make their organizations more inclusive.  As many of the benefits derived from workforce diversity (e.g., creativity and innovation) are not immediately realized, diversity management often requires a long-term effort.  Therefore, CEO support is essential to keep the mental and financial support focused on diversity management for a sustained period of time.  

Wikimedia Commons/Free Usage
Source: Wikimedia Commons/Free Usage

A number of studies have shown that firm commitment to diversity payoffs in a number of ways.  Firms with espoused messages of diversity tend to attract more diverse and better quality job applicants.  Work units with more diverse employees also report greater financial performance than work units with more homogeneous employees.  Moreover, firms winning awards for diversity management also see an increase in their stock prices.  However, it is unclear if CEOs would be committed to diversity management in the absence of economic or instrumental benefits.

There could be other reasons that may persuade CEOs to exhibit a stronger commitment to diversity management.  First, CEOs may be persuaded that diversity and inclusion are a moral obligation, and firms should adopt diversity management on account of corporate social responsibility.  Indeed, CEOs who exhibit stronger social values and who are older are more likely to implement diversity management practices.  CEOs who exhibit stronger social values tend to show a greater concern for others and engage in more socially acceptable behaviours, even in the absence of economic benefits.  Second, older CEOs may have daughters themselves, and thus consider making the workplace more inclusive in light of their daughters’ careers.  Indeed, a recent study has shown that CEOs with daughters tend to act in more socially responsible ways.

Third, CEOs are highly egoistical and they derive their self-worth from their contributions and accomplishments.  As a result, they want to be identified with a strategy or policy they instituted as they want to be remembered as a “folk hero.”  Even after a CEO has departed, his or her actions will continue to affect the firm.  Thus, the desire to leave a positive legacy may convince a CEO that managing diversity is the right thing to do.

Eddy Ng is F.C. Manning Chair in Economics and Business at Dalhousie University, Canada.  This post is based on the paper, “Motivational bases for managing diversity: A model of leadership commitment” in Human Resource Management Review (Elsevier), he co-authored with Cheryl Wyrick (California State Polytechnic University, Pomona) on why CEOs may be motivated to manage diversity.  Follow Ed on Twitter @profng.