MAKING DIFFERENCES MATTER; A NEW PARADIGM FOR …

What will it take for organizations to reap the realand full benefits of a diverse workforce} A radically new

understanding of the term, for starters.

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MAKING DIFFERENCES MATTER;A NEW PARADIGM FORMANAGING DIVERSITY

by David A. Thomas and Robin J. Ely

Why should companies concern themselves with diversity? Until recently, many managersanswered this question with the assertion that discrimination is wrong, both legally andmorally. But today managers are voicing a second notion as well. A more diverse workforce,they say, will increase organizational effectiveness. It will lift morale, bring greater access tonew segments of the marketplace, and enhance productivity. In short, they claim, diversitywill be good for business.

Yet if this is true-and we believe it is-where are the positive impacts of diversity? Numer-ous and varied initiatives to increase diversity in corporate America have been under way formore than two decades. Rarely, however, have those efforts spurred leaps in organizational ef-

David A. Thomas is an associate professor at the Harvard Business School in Boston, Massachusetts.Robin J- Ely is an associate professor at Columbia University's School of International and Public Af-fairs in New York City. Their research and teaching focus on the influence of race, gender, and ethnicityon career dynamics and organizational effectiveness.

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Workplace paradigms channel organizationalthinking in powerful ways. By limiting the abilityof employees to acknowledge openly their work-re-lated but culturally based differences, the paradigmactually undermines the organization's capacity to

learn about and improve its own strategies, pro-cesses, and practices. And it also keeps peoplefrom identifying strongly and personally with theirwork-a critical source of motivation and seli-regu-lation in any business environment.

As an illustration of the paradigm's weaknesses,consider the case of Iversen Dunham, an interna-tional consulting firm that focuses on foreign anddomestic economic-development policy. (Like allthe examples in this article, the company is real,but its name is disguised.) Not long ago, the firm'smanagers asked us to help them understand whyrace relations had become a divisive issue preciselyat a time when Iversen was receiving accolades forits diversity efforts. Indeed, other organizations hadeven begun to use the firm to benchmark their owndiversity programs.

Iversen's diversity efforts had begun in the early1970s, when senior managers decided to pursuegreater racial and gender diversity in the firm'shigher ranks. (The firm's leaders were stronglycommitted to the cause of social justice.) Womenand people of color were hired and charted on careerpaths toward becoming project leaders. High per-formers among those who had left the firm werepersuaded to return in senior roles. By 1989, about50% of Iversen's project leaders and professionalswere women, and 30% were people of color. The

13-member management committee, once exclu-sively white and male, included five women andfour people of color. Additionally, Iversen had de-veloped a strong contingent of foreign nationals.

It was at about this time, however, that tensionsbegan to surface. Senior managers found it hard tobelieve that, after all the effort to create a fair andmutually respectful work community, some staffmembers could still be claiming that Iversen badracial discrimination problems. The managementinvited us to study the firm and deliver an out-sider's assessment of its problem.

We had been inside the firm for only a short timewhen it became clear that Iversen's leaders viewedthe dynamics of diversity through the lens of thediscrimination-and-fairness paradigm. But wherethey saw racial discord, we discerned clashing ap-proaches to the actual work of consulting. Why?Our research showed that tensions were strongestamong midlevel project leaders. Surveys and inter-views indicated that white project leaders wel-comed demographic diversity as a general sign ofprogress but that they also thought the new em-ployees were somehow changing the company,pulling it away from its original culture and its mis-sion. Common criticisms were that African Ameri-can and Hispanic staff made problems too complexby linking issues the organization had traditionallyregarded as unrelated and that they brought onprojects that seemed to require greater cultural sen-sitivity. White male project leaders also com-plained that their peers who were women and peo-ple of color were undermining one of Iversen'straditional strengths: its hard-core quantitative ori-entation. For instance, minority project leaders hadsuggested that Iversen consultants collect informa-tion and seek input from others in the client com-pany besides senior managers - that is, from therank and file and from middle nianagers. Some hadurged Iversen to expand its consulting approach toinclude the gathering and analysis of qualitativedata through interviewing and observation. Indeed,these project leaders had even challenged one ofIversen's long-standing, core assumptions: that thefirm's reports were objective. They urged IversenDunham to recognize and address the subjectiveaspect of its analyses; the firm could, for example,include in its reports to clients dissenting Iversenviews, if any existed.

For their part, project leaders who were womenand people of color felt that they were not accordedthe same level of authority to carry out that work astheir white male peers. Moreover, they sensed thatthose peers were skeptical of their opinions, andthey resented that doubts were not voiced openly.

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Oiir goal is to help business leaders see what theirown approach to diversity currently is and howit may already have influenced their companies'diversity efforts. Managers can learn to assesswhether they need to change their diversity initia-tives and, if so, how to accomplish that change.

The following discussion will also cite severalexamples of how connecting the new definition ofdiversity to the actual doing of work has led someorganizations to markedly better performance. Theorganizations differ in many ways-none are in thesame industry, for instance-but they are united byone similarity: Their leaders realize that increasingdemographic variation does not in itself increaseorganizational effectiveness. They realize that it ishow a company defines diversity-and v^hat it doeswith the experiences of being a diverse organiza-tion-that delivers on the promise.

The Discrimination-and-FairnessParadigm

Using the discrimination-and-fairness paradigmis perhaps thus far the dominant way of under-standing diversity. Leaders who look at diversitythrough this lens usually focus on equal opportu-nity, fair treatment, recruitment, and compliancewith federal Equal Employment Opportunity re-quirements. The paradigm's underlying logic can beexpressed as follows:

Prejudice has kept members of certain demographicgroups out of organizations such as ours. As a matter offairness and to comply with federal mandates, we need towork toward restructuring the makeup of our organiza-tion to let it more closely reflect that of society. We needmanagerial processes that ensure that all our employeesare treated equally and with respect and that some are notgiven unfair advantage over others.

Although it resembles the thinking behind tradi-tional affirmative-action efforts, the discrimina-tion-and-fairness paradigm does go beyond a simpleconcern with numbers. Companies that operatewith this philosophical orientation often institutementoring and career-development programsspecifically for the women and people of color intheir ranks and train other employees to respectcultural differences. Under this paradigm, never-theless, progress in diversity is measured by howwell the company achieves its recruitment and re-tention goals rather than by the degree to whichconditions in the company allow employees todraw on their personal assets and perspectives to dotheir work more effectively. The staff, one mightsay, gets diversified, but the work does not.

What are some of the common characteristics ofcompanies that have used the discrimination-and-fairness paradigm successfully to increase their de-mographic diversity? Our research indicates thatthey are usually run by leaders who value dueprocess and equal treatment of all employees andwho have the authority to use top-down directivesto enforce initiatives based on those attitudes. Suchcompanies are often bureaucratic in structure, withcontrol processes in place for monitoring, measur-ing, and rewarding individual performance. And fi-nally, they are often organizations with entrenched,easily observable cultures, in which values likefairness are widespread and deeply inculcated andcodes of conduct are clear and unambiguous. [Per-haps the most extreme example of an organizationin which ail these factors are at work is the UnitedStates Army.)

Without doubt, there are benefits to this para-digm: it does tend to increase demographic diver-sity in an organization, and it often succeeds in pro-moting fair treatment. But it also has significantlimitations. The first of these is that its color-blind,gender-blind ideal is to some degree built on the im-plicit assumption that "we are all the same" or "weaspire to being all the same." Under this paradigm,it is not desirable for diversification of the work-force to influence the organization's work or cul-ture. The company should operate as if every per-son were of the same race, gender, and nationality.It is unlikely that leaders who manage diversity un-der this paradigm will explore how people's differ-ences generate a potential diversity of effectiveways of working, leading, viewing the market,managing people, and learning.

Not only does the discrimination-and-fairnessparadigm insist that everyone is the same, but, withits emphasis on equal treatment, it puts pressure onemployees to make sure that important differencesamong them do not count. Genuine disagreementsabout work definition, therefore, are sometimeswrongly interpreted through this paradigm's fair-ness-unfairness lens - especially when honest dis-agreements are accompanied by tense debate. A fe-male employee who insists, for example, that acompany's advertising strategy is not appropriatefor all ethnic segments in the marketplace mightfeel she is violating the code of assimilation uponwhich the paradigm is built. Moreover, if she werethen to defend her opinion by citing, let us say, herpersonal knowledge of the ethnic group the compa-ny wanted to reach, she might risk being perceivedas importing inappropriate attitudes into an organi-zation that prides itself on being blind to culturaldifferences.

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fectiveness. Instead, many attempts to increase di-versity in the workplace have backfired, sometimeseven heightening tensions among employees andhindering a company's performance.

This article offers an explanation for why diver-sity efforts are not fulfilling their promise andpresents a new paradigm for understanding - andleveraging - diversity. It is our helief that there isa distinct way to unleash the powerful benefits of adiverse workforce. Although these benefits includeincreased profitability, they go beyond financialmeasures to encompass learning, creativity, flexi-bility, organizational and individual growth, andthe ability of a company to adjust rapidly and suc-cessfully to market changes. The desired transfor-mation, however, requires a fundamental change inthe attitudes and behaviors of an organization'sleadership. And that will come only when seniormanagers abandon an underlying and flawed as-sumption ahout diversity and replace it with abroader understanding.

Most people assume that workplace diversity isahout increasing racial, national, gender, or classrepresentation - in other words, recruiting and re-taining more people from traditionally underrepre-sented "identity groups." Taking this commonlyheld assumption as a starting point, we set out six

years ago to investigate its link to organizationaleffectiveness. We soon found that thinking of diver-sity simply in terms of identity-group representa-tion inhibited effectiveness.

Organizations usually take one of two paths inmanaging diversity. In the name of equality and

fairness, they encourage (and expect) women andpeople of color to blend in. Or they set them apartin johs that relate specifically to their backgrounds,assigning them, for example, to areas that requirethem to interface with clients or customers of thesame identity group. African American M.B.A.'soften find themselves marketing products to inner-city communities; Hispanics frequently market toHispanics or work for Latin American suhsidiaries.In those kinds of cases, companies are operatingon the assumption that tbe main virtue identitygroups have to offer is a knowledge of tbeir ownpeople. This assumption is limited-and limiting-and detrimental to diversity efforts.

What we suggest here is that diversity goes be-yond increasing the numher of different identity-group affiliations on the payroll to recognizing thatsuch an effort is merely the first step in managinga diverse workforce for the organization's utmostbenefit. Diversity should he understood as the var-ied perspectives and approaches to work tbat mem-bers of different identity groups bring.

Women, Hispanics, Asian Americans, AfricanAmericans, Native Americans - these groups andothers outside the mainstream of corporate Amer-ica don't bring with them just their "insider infor-mation." They bring different, important, and com-petitively relevant knowledge and perspectivesabout how to actually do work - how to designprocesses, reach goals, frame tasks, create effectiveteams, communicate ideas, and lead. When allowedto, members of these groups can help companiesgrow and improve by challenging hasic assump-tions about an organization's functions, strategies,operations, practices, and procedures. And in doingso, they are able to bring more of their whole selvesto the workplace and identify more fully with thework they do, setting in motion a virtuous circle.Certainly, individuals can be expected to con-tribute to a company their firsthand familiaritywith niche markets. But only when companiesstart thinking about diversity more holistically-asproviding fresh and meaningful approaches towork-and stop assuming that diversity relates sim-ply to how a person looks or where he or she comesfrom, will they he able to reap its full rewards.

Two perspectives have guided most diversityinitiatives to date: the discrimination-and-fairnessparadigm and the access-and-legitimacy para-digm. But we have identified a new, emergingapproacb to this complex management issue.Tbis approach, which we call the learning-and-effectiveness paradigm, incorporates aspects of thefirst two paradigms but goes heyond tbem hy con-cretely connecting diversity to approaches to work.

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Meanwhile, there also was some concern ex-pressed about tension between white managers andnonwhite subordinates, who claimed they were he-ing treated unfairly. But our analysis suggested thatthe manager-subordinate conflicts were not numer-ous enough to warrant the attention they weredrawing from top management. We believed it wassignificant that senior managers found it easier tofocus on this second type of conflict than on mid-level conflicts about project choice and project defi-nition. Indeed, Iversen Dunham's focus seemed tobe a result of the firm's reliance on its particular di-versity paradigm and the emphasis on fairness andequality. It was relatively easy to diagnose proh-lems in light of those concepts and to devise a solu-tion: just get managers to treat their subordinatesmore fairly.

In contrast, it was difficult to diagnose peer-to-peer tensions in the framework of this model. Suchconflicts were about the very nature of Iversen'swork, not simply unfair treatment. Yes, they wererelated to identity-group affiliations, hut they werenot symptomatic of classic racism. It was Iversen'sparadigm that led managers to interpret them assuch. Remember, we were asked to assess what wassupposed to he a racial discrimination problem.Iversen's discrimination-and-fairness paradigm hadcreated a kind of cognitive blind spot; and, as a re-sult, the company's leadership could not frame theproblem accurately or solve it effectively. Instead,the company needed a cultural shift - it needed tograsp what to do with its diversity once it hadachieved the numbers. If all Iversen Dunham em-ployees were to contribute to the fullest extent, thecompany would need a paradigm that would en-courage open and explicit discussion of what iden-tity-group differences really mean and how theycan be used as sources of individual and organiza-tional effectiveness.

Today, mainly hecause of senior managers' resis-tance to such a cultural transformation, Iversencontinues to struggle with the tensions arisingfrom the diversity of its workforce.

The Access-and-Legitimacy Paradigm

In the competitive climate of the 1980s and1990s, a new rhetoric and rationale for managing di-versity emerged. If the discrimination-and-fairnessparadigm can he said to have idealized assimilationand color- and gender-blind conformism, the ac-cess-and-legitimacy paradigm was predicated onthe acceptance and celebration of differences. Theunderlying motivation of the access-and-legitimacyparadigm can be expressed this way:

We are living in an increasingly multicultural country,and new ethnic groups are quickly gaining consumerpower. Our company needs a demographically more di-verse workforce to help us gain access to these differenti-ated segments. We need employees with multilingualskills in order to understand and serve our customers bet-ter and to gain legitimacy with them. Diversity isn't justfair; it makes business sense.

Where this paradigm has taken hold, organiza-tions have pushed for access to - and legitimacywith-a more diverse clientele hy matching the de-mographics of the organization to those of criticalconsumer or constituent groups. In some cases, theeffort has led to suhstantial increases in organiza-tional diversity. In investment hanks, for example,municipal finance departments have long led cor-porate finance departments in pursuing demo-graphic diversity hecause of the typical makeup ofthe administration of city halls and county boards.Many consumer-products companies that haveused market segmentation hased on gender, racial,and other demographic differences have also fre-quently created dedicated marketing positions foreach segment. The paradigm has therefore led tonew professional and managerial opportunities forwomen and people of color.

What are the common characteristics of organi-zations that have successfully used the access-and-legitimacy paradigm to increase their demographicdiversity? There is but one: such companies almostalways operate in a business environment in whichthere is increased diversity among customers,clients, or the labor pool-and therefore a clear op-portunity or an imminent threat to the company.

Again, the paradigm has its strengths. Its market-based motivation and tbe potential for competitiveadvantage that it suggests are often qualities an en-tire company can understand and therefore support.But the paradigm is perhaps more notable for itslimitations. In their pursuit of niche markets, ac-cess-and-legitimacy organizations tend to empha-size the role of cultural differences in a companywithout really analyzing those differences to seehow they actually affect the work that is done.Whereas discrimination-and-fairness leaders aretoo quick to subvert differences in the interest ofpreserving harmony, access-and-legitimacy leadersare too quick to push staff with niche capabilitiesinto differentiated pigeonholes without trying tounderstand what those capahilities really are andhow they could be integrated into the company'smainstream work. To illustrate our point, we pre-sent the case of Access Capital.

Access Capital International is a U.S. investmenthank that in tbe early 1980s launched an aggres-

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sive plan to expand into Europe. Initially, however,Access encountered serious problems opening of-fices in international markets,- the people from theUnited States who were installed abroad lackedcredibility, were ignorant of loeal cultural normsand market conditions, and simply couldn't seem toconnect with native clients. Access responded byhiring Europeans who had attended North Ameri-can business schools and by assigning them inteams to the foreign offices. This strategy was amarked success. Before long, the leaders of Accesseould take enormous pride in the fact that theirEuropean operations were highly profitable andstaffed by a truly international corps of profession-als. They took to calling the company "the hest in-vestment bank in the world."

Several years passed. Access's foreign offices con-tinued to thrive, hut some leaders were beginningto sense that the company was not fully benefitingfrom its diversity efforts. Indeed, some even sus-pected that the bank had made itself vulnerahle be-cause of how it had chosen to manage diversity. Asenior executive from the United States explains:

If the French team all resigned tomorrow, what wouldwe do? I'm not sure what we could do! We've never at-tempted to learn what these differences and culturalcompetencies really are, how they change the process ofdoing business. What is the German country team actu-ally doing? We don't know. We know they're good, but wedon't know the subtleties of how tbey do what they do.We assumcd-and I think correctly-that culture makes adifference, but that's about as far as we went. We hiredEuropeans with American M.B.A.'s because we didn'tknow why we couldn't do business in Europe-we justassumed there was something cultural ahout why wecouldn't connect. And ten years later, we still don't knowwbat it is. If we knew, tben perhaps we could take it andteach it. Which part of tbe investment hanking process isuniversal and which part of it draws upon particular cul-tural competencies? What are the commonalities and dif-ferences? I may not he German, but mayhe I eould do bet-ter at understanding what it means to be an Americandoing husiness in Germany. Our company's biggest fail-ing is that the department heads in London and the direc-tors of the various country teams have never talked ahoutthese cultural identity issues openly. We knew enough touse people's cultural strengths, as it were, but we neverseemed to learn from them.

Access's story makes an important point abouttbe main limitation of the access-and-legitimacyparadigm: under its influence, the motivation fordiversity usually emerges from very immediateand often crisis-oriented needs for access and legiti-macy-in this case, the need to broker deals in Eu-ropean markets. However, once the organizationappears to be achieving its goal, the leaders seldom

go on to identify and analyze the culturally basedskills, heliefs, and practices that worked so well.Nor do they consider how the organization can in-corporate and learn from those skills, beliefs, orpractices in order to capitalize on diversity in thelong run.

Under the access-and-legitimaey paradigm, itwas as if the hank's country teams had become lit-

tle spin-off companies in their own right, doingtheir own exotic, slightly mysterious cultural-di-versity thing in a niche market of their own, usingcompetencies that for some reason could not be-come more fully integrated into the larger organiza-tion's understanding of itself. Difference was val-ued within Access Capital-henee the developmentof country teams in tbe first place-but not valuedenough that the organization would try to integrateit into the very eore of its culture and into its busi-ness praetiees.

Finally, the access-and-legitimacy paradigm canleave some employees feeling exploited. Many or-ganizations using this paradigm have diversifiedonly in those areas in which they interact with par-ticular niche-market segments. In time, many indi-viduals recruited for this function have come to feeldevalued and used as they hegin to sense that op-portunities in other parts of the organization areclosed to them. Often the larger organization re-gards the experience of these employees as morelimited or specialized, even though many of themin fact started their careers in the mainstream mar-ket before moving to special markets where theircultural backgrounds were a recognized asset. Also,


many of these people say that when companieshave needed to downsize or narrow their marketingfocus, it is tbe special departments that are oftenthe first to go. That situation creates tenuous andultimately untenable career paths for employees inthe special departments.

The Emerging Paradigm: ConnectingDiversity to Work Perspectives

Recently, in the course of our research, we haveencountered a small number of organizations that,having relied initially on one of the above para-digms to guide their diversity efforts, have come tobelieve tbat they are not making the most of theirown pluralism. These organizations, like AccessCapital, recognize that employees frequently makedecisions and choices at work tbat draw upon theircultural background-choices made because of theiridentity-group affiliations. The companies havealso developed an outlook on diversity that enablesthem to incorporate employees' perspectives intotbe main work of the organization and to enbancework by retbinking primary tasks and redefiningmarkets, products, strategies, missions, businesspractices, and even cultures. Such companies areusing the learning-and-effectiveness paradigm formanaging diversity and, by doing so, are tapping di-versity's true benefits.

A case in point is Dewey &. Levin, a small public-interest law firm located in a northeastern U.S.city. Although Dewey & Levin had long been a prof-itable practice, by the mid-1980s its all-white legalstaff had become concerned that the women theyrepresented in employment-related disputes were

exclusively white. The firm's attorneys viewed thatfact as a deficiency in light of their mandate to ad-vocate on behalf of all women. Using the thinkingbebind the access-and-legitimacy paradigm, theyalso saw it as bad for business.

Shortly thereafter, the firm hired a Hispanic fe-male attorney. The partners' hope, simply put, wasthat she would bring in clients from her own com-munity and also demonstrate the firm's commit-ment to representing all women. But somethingeven bigger than that happened. The new attorneyintroduced ideas to Dewey & Levin about whatkinds of cases it should take on. Senior managerswere open to those ideas and pursued them withgreat success. More women of color were hired, andthey, too, brought fresh perspectives. The firm nowpursues cases that its previously all-white legalstaff would not have thought relevant or appropri-ate because tbe link between the firm's mission andthe employment issues involved in the cases wouldnot bave been obvious to them. For example, thefirm has pursued precedent-setting litigation thatchallenges English-only policies - an area that itonce would have ignored because such policies didnot fall under the purview of traditional affirma-tive-action work. Yet it now sees a link betweenEnglish-only policies and employment issues fora large group of women - primarily recent immi-grants-whom it had previously failed to serve ade-quately. As one of the white principals explains, thedemographic composition of Dewey & Levin "basaffected the work in terms of expanding notionsof what are [relevant] issues and taking on issuesand framing them in creative ways that would havenever been done [with an all-white staff[. It's really

The ResearchThis article is based on a three-part research effort

that began in 1990. Our subject was diversity; but,more specifically, we sought to understand three man-agement challenges under that heading. First, how doorganizations successfully achieve and sustain racialand gender diversity in their executive and middle-management ranks? Second, what is the impact of di-versity on an organization's practices, processes, andperformance? And, finally, how do leaders influencewhether diversity becomes an enhancing or detractingelement in the organization?

Over the following six years, we worked particular-ly closely with three organizations that had attained ahigh degree of demographic diversity: a small urban

law firm, a community bank, and a 200-person con-sulting firm. In addition, we studied nine other com-panies in varying stages of diversifying their work-forces. The group included two financial-servicesfirms, three Fortune 500 manufacturing companies,two midsize high-technology companies, a privatefoundation, and a university medical center. In eachcase, we based our analysis on interviews, surveys,archival data, and observation. It is from this workthat the third paradigm for managing diversityemerged and with it our belief that old and Umiting as-sumptions about the meaning of diversity must beabandoned before its true potential can be realized as apowerful way to increase organizational effectiveness.


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changed the substance-and in that sense enhancedthe quality-of our work."

Dewey Sk Levin's increased business success hasreinforced its commitment to diversity. In addition,people of color at the firm uniformly report feelingrespected, not simply "brought along as windowdressing." Many of the new attorneys say their per-spectives are beard with a kind of openness and in-terest they have never experienced before in a worksetting. Not surprisingly, the firm has had little dif-ficulty attracting and retaining a competent and di-verse professional staff.

If the discrimination-and-fairness paradigm is or-ganized around the theme of assimilation - inwhich the aim is to achieve a demographieally rep-resentative workforce whose members treat oneanother exactly the same - then the access-and-legitimacy paradigm can be regarded as coalescingaround an almost opposite concept: differentiation,in wbich the objective is to place different peoplewhere their demographic characteristics matchthose of important constituents and markets.

The emerging paradigm, in contrast to both, orga-nizes itself around the overarching theme of inte-gration. Assimilation goes too far in pursuing same-ness. Differentiation, as we have shown, overshootsin the other direction. The new model for manag-ing diversity transcends botb. Like the fairnessparadigm, it promotes equal opportunity for all in-dividuals. And like the access paradigm, it acknowl-edges cultural differences among people and recog-nizes the value in those differences. Yet this newmodel for managing diversity lets the organizationinternalize differences among employees so thatit learns and grows because of them. Indeed, withthe model fully in place, members of tbe organiza-tion can say. We are all on the same team, with ourdifferences-not despite them.

Eight Preconditions forMaking the Paradigm Shift

Dewey & Levin may be atypical in its eagernessto open itself up to change and engage in a long-term transformation process. We remain con-vinced, however, that unless organizations that arecurrently in the grip of the other two paradigms canrevise their view of diversity so as to avoid cogni-tive blind spots, opportunities will be missed, ten-sions will most likely be misdiagnosed, and compa-nies will continue to find the potential benefits ofdiversity elusive.

Hence the question arises: What is it about tbelaw firm of Dewey & Levin and other emergingthird-paradigm companies that enables them to

make the most of their diversity? Our research sug-gests that there are eight preconditions tbat help toposition organizations to use identity-group differ-ences in the service of organizational learning,growth, and renewal,

1. The leadership must understand that a diverseworkforce will embody different perspectives andapproaches to work, and must truly value variety ofopinion and insight. We know of a financial ser-vices company that once assumed that the onlysuccessful sales model was one that utilized ag-gressive, rapid-fire cold calls. (Indeed, its incentivesystem rewarded salespeople in large part for thenumber of calls made.) An internal review of thecompany's diversity initiatives, however, showedthat the company's first- and third-most-profitableemployees were women who were most likely touse a sales technique based on the slow but surebuilding of relationships. The company's top man-agement has now made the link between differentidentity groups and different approaches to howwork gets done and bas come to see that there ismore than one right way to get positive results.

2. The leadership must recognize both the learn-ing opportunities and the challenges that the ex-pression of different perspectives presents for an or-ganization. In otber words, the second preconditionis a leadership that is eommitted to perseveringduring tbe long process of learning and relearningthat the new paradigm requires.

3. The organizational culture must create an ex-pectation of high standards of performance fromeveryone. Such a culture isn't one that expects lessfrom some employees tban from others. Some orga-nizations expect women and people of color to un-derperform - a negative assumption that too oftenbecomes a self-fulfilling prophecy. To move to thethird paradigm, a company must believe that all itsmembers can and should contribute fully.

4. The organizational culture must stimulate per-sonal development. Such a culture brings out peo-ple's full range of useful knowledge and skills-usu-ally through the careful design of jobs tbat allowpeople to grow and develop but also through train-ing and education programs.

5. The organizational culture must encourageopenness. Sueh a culture instills a high tolerancefor debate and supports constructive conflict onwork-related matters.

6. The culture must make workers feel valued. Ifthis precondition is met, workers feel committedto - and empowered within - the organization andtherefore feel comfortable taking tbe initiative toapply their skills and experiences in new ways toenhance their job performance.

86 HARVARD BUSINESS REVIEW Sept ember-October 1996

7. The organization must have a well-articulatedand widely understood mission. Such a mission en-ables people to be clear about what the company istrying to accomplish. It grounds and guides discus-sions about work-related changes that staff mem-bers might suggest. Being clear about the compa-ny's mission helps keep discussions about workdifferences from degenerating into debates aboutthe validity of people's perspectives. A clear mis-sion provides a focal point that keeps the discussioncentered on accomplishment of goals.

8. The organization must have a relatively egali-tarian, nonhureaucratic structure. It's important to

have a structure that promotes the exchange ofideas and welcomes constructive challenges to theusual way of doing things-from any employee withvaluable experience. Forward-thinking leaders inbureaucratic organizations must retain the organi-zation's efficiency-promoting control systems andchains of command while finding ways to reshapethe change-resisting mind-set of the classic bureau-cratic model. They need to separate the enablingelements of bureaucracy (the ability to get thingsdone) from the disabling elements of hureaucracy(those that create resistance to experimentation),

First Interstate Bank:A Paradigm Shift in Progress

All eight preconditions do not have to be in placein order to begin a shift from the first or second di-versity orientations toward the learning-and-effec-tiveness paradigm. But most should be. First Inter-

state Bank, a midsize bank operating in a midwest-ern city, illustrates this point.

First Interstate, admittedly, is not a typical bank.Its client base is a minority community, and itsmission is expressly to serve that base through "thedevelopment of a highly talented workforce." Thebank is unique in other ways: its leadership wel-comes constructive criticism; its structure is rela-tively egalitarian and nonbureaucratic; and its cul-ture is open-minded. Nevertheless, First Interstatehad long enforced a policy that loan officers had tohold college degrees. Those witbout were hiredonly for support-staff jobs and were never promotedbeyond or outside support functions.

Two years ago, however, the support staff beganto challenge the policy. Many of them had beenwith First Interstate for many years and, with thecompany's active support, had improved their skillsthrough training. Others had expanded their skillson the job, again with the bank's encouragement,learning to run credit checks, prepare presentationsfor clients, and even calculate the algorithms nec-essary for many loan decisions. As a result, somepeople on the support staff were doing many of thesame tasks as loan officers. Why, then, they won-dered, couldn't they receive commensurate rewardsin title and compensation?

This questioning led to a series of contentiousmeetings hetween the support staff and the bank'ssenior managers. It soon became clear that theproblem called for managing diversity - diversitybased not on race or gender but on class. The sup-port personnel were uniformly from lower socio-economic communities than were the college-edu-cated loan officers. Regardless, the principle wasthe same as for race- or gender-based diversity prob-lems. The support staff had different ideas abouthow the work of the bank should be done. They ar-gued that those among them with the requisiteskills should be allowed to rise through the ranks toprofessional positions, and they believed their ideaswere not being heard or accepted.

Their beliefs challenged assumptions that thecompany's leadership had long held about whichemployees should have the authority to deal withcustomers and about how much responsibility ad-ministrative employees should ultimately receive.In order to take up this challenge, the bank wouldhave to be open to exploring the requirements thata new perspective would impose on it. It wouldneed to consider the possibility of mapping out aneducational and career path for people without de-grees - a path that could put such workers on theroad to becoming loan officers. In other words, theleadership would have to transform itself willingly

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DIVERSITY MATTERS

and embrace fluidity in policies that in times pastbad been clearly stated and unquestioningly held.

Today the bank's leadership is undergoing justsuch a transformation. The going, however, is farfrom easy. The bank's senior managers now mustlook beyond the tensions and acrimony sparked bythe debate over differing work perspectives andconsider tbe bank's new direction an importantlearning and growth opportunity.

Shift Complete: Third-ParadigmCompanies in Action

First Interstate is a shift in progress; but, in addi-tion to Dewey &. Levin, there are several organi-zations we know of for which the shift is complete.In these cases, company leaders have played a crit-ical role as facilitators and tone setters. We haveobserved in particular that in organizations thathave adopted the new perspective, leaders andmanagers - and, following in their tracks, employ-ees in general-are taking four kinds of action.

They are making the mental connection. First, inorganizations that have adopted tbe new perspec-tive, the leaders are actively seeking opportunitiesto explore how identity-group differences affect re-lationships among workers and affect tbe way workgets done. They are investing considerable time andenergy in understanding how identity-group mem-berships take on social meanings in the organiza-tion and how those meanings manifest tbemselvesin tbe way work is defined, assigned, and accom-plished. When there is no proactive search to under-stand, tben learning from diversity, if it happens atall, can oecur only reactively - that is, in responseto diversity-related crises.

Tbe situation at Iversen Dunham illustrates tbemissed opportunities resulting from that scenario.Rather than seeing differences in the way projectleaders defined and approached their work as anopportunity to gain new insights and develop newapproaches to achieving its mission, tbe firm re-mained entrenched in its traditional ways, able toarbitrate such differences only by thinking aboutwbat was fair and what was racist. With tbis quitelimited view of tbe role race can play in an organi-zation, discussions about the topic become fraughtwith fear and defensiveness, and everyone missesout on insights about bow race might influencework in positive ways.

A second case, however, illustrates how someleaders using the new paradigm have been able toenvision-and make-the connection between cul-tural diversity and the company's work. A vicepresident of Mastiff, a large national insurance

company, received a complaint from one of tbemanagers in her unit, an African American man.The manager wanted to demote an African Ameri-can woman be had hired for a leadership positionfrom another Mastiff division just three months be-fore. He told tbe vice president he was profoundlydisappointed with the performance of bis new hire.

"I hired her because I was pretty certain she hadtremendous leadership skill," he said. "I knew shehad a management style tbat was very open andempowering. I was also sure she'd bave a great im-pact on the rest of the management team. But shehasn't done any of tbat."

Surprised, tbe vice president tried to find outfrom him what he thought the problem was, butshe was not getting any answers tbat she felt reallydefined or illuminated tbe root of the problem. Pri-vately, it puzzled her that someone would decide todemote a 15-year veteran of the company-and a mi-nority woman at that-so soon after bringing her tohis unit.

The vice president probed further. In the courseof the conversation, the manager happened to men-tion that he knew the new employee from churchand was familiar with the way she handled leader-ship there and in other community settings. Inthose less formal situations, he had seen her per-form as an extremely effective, sensitive, and influ-ential leader.

That is when tbe vice president made an interpre-tive leap. "If that's what you know about ber," thevice president said to tbe manager, "tben tbe ques-tion for us is, why can't she bring those skills towork here?" The vice president decided to arrange ameeting with all three present to ask tbis very ques-tion directly. In the meeting, the African Americanwoman explained, "I didn't think I would last longif I acted that way here. My personal style of leader-ship-that particular style-works well if you havethe permission to do it fully; then you can iust do itand not have to look over your shoulder."

Pointing to the manager who had planned to fireber, she added, "He's right. Tbe style of leadershipI use outside this company can definitely be effec-tive. But I've been at Mastiff for 15 years. I knowthis organization, and I know if I brought thatpiece of myself-if I became that authentic-I justwouldn't survive here."

What this example illustrates is that the vicepresident's learning-and-effectiveness paradigm ledher to explore and then make tbe link between cul-tural diversity and work style. Wbat was occurring,she realized, was a mismatch between the culturalbackground of the recently promoted woman andthe cultural environment of her work setting. It had


little to do with private attitudes or feelings, or gen-der issues, or some inherent lack of leadership abil-ity. The source of the underperformance was thatthe newly promoted woman had a certain style andthe organization's culture did not support her in ex-pressing it comfortably. The vice president's para-digm led her to ask new questions and to seek outnew information, but, more important, it also ledher to interpret existing information differently.

The two senior managers began to realize thatpart of the African American woman's inability tosee herself as a leader at work was that she had forso long been undervalued in the organization. And,in a sense, she had become used to splitting herselfoff from who she was in her own community. In the15 years she had been at Mastiff, she had done herjob well as an individual contributor, but she hadnever received any signals that her bosses wantedher to draw on her cultural competencies in orderto lead effectively.

They are legitimating open discussion. Leadersand managers who have adopted the new paradigmare taking the initiative to "green light" open dis-cussion about how identity-group memberships in-form and influence an employee's experienee andthe organization's behavior. They are encouragingpeople to make explicit use of background culturalexperience and the pools of knowledge gained out-side the organization to inform and enhance theirwork. Individuals often do use their cultural com-petencies at work, but in a closeted, almost embar-rassed, way. The unfortunate result is that the op-portunity for collective and organizational learningand improvement is lost.

The case of a Chinese woman who worked as achemist at Torinno Food Company illustrates thispoint. Linda was part of a product developmentgroup at Torinno when a problem arose with the fla-voring of a new soup. After the group had made anumber of scientific attempts to correct the prob-lem, Linda came up with the solution by "settingaside my chemistry and drawing on my under-standing of Chinese cooking." She did not, how-ever, share with ber colleagues - all of them whitemales-the real source of her inspiration for the so-lution for fear that it would set her apart or thatthey might consider her unprofessional. Overlaidon the cultural issue, of course, was a gender issue(women cookingi as well as a work-family issue(women doing home cooking in a chemistry lab).All of these themes had erected unspoken bound-aries that Linda knew could be career-damagingfor her to cross. After solving the problem, she sim-ply went back to the so-called scientific way of do-ing things.

Senior managers at Torinno Foods in fact hadmade a substantial commitment to diversifying theworkforce through a program designed to teach em-ployees to value the contributions of all its mem-bers. Yet Linda's perceptions indicate that, in theactual day-to-day context of work, the program hadfailed-and in precisely one of those areas where itwould have been important for it to have worked. Ithad failed to affirm someone's identity-group expe-riences as a legitimate source of insight into herwork. It is likely that this organization will miss fu-ture opportunities to take full advantage of the tal-ent of employees such as Linda. When people be-lieve that they must suggest and apply their ideascovertly, the organization also misses opportuni-ties to discuss, debate, refine, and build on thoseideas fully. In addition, because individuals likeLinda will continue to think that they must hideparts of themselves in order to fit in, they will findit difficult to engage fully not only in their workbut also in their workplace relationships. That kindof situation can breed resentment and misunder-standing, fueling tensions that can further obstructproductive work relationships.

They actively work against forms of dominanceand subordination that inhibit full contribution.Companies in which the third paradigm is emerg-ing have leaders and managers who take responsi-bility for removing the barriers that block employ-ees from using the full range of their competencies,cultural or otherwise. Racism, homophobia, sex-ism, and sexual harassment are the most obviousforms of dominance that decrease individual andorganizational effectiveness - and third-paradigmleaders have zero tolerance for them. In addition,the leaders are aware that organizations can createtheir own unique patterns of dominance and sub-ordination based on the presumed superiority andentitlement of some groups over others. It is notuncommon, for instance, to find organizations inwhich one functional area considers itself betterthan another. Members of the presumed inferiorgroup frequently describe the organization in thevery terms used by tbose who experience identity-group discrimination. Regardless of the source ofthe oppression, the result is diminished perfor-mance and commitment from employees.

What can leaders do to prevent those kinds of be-haviors beyond explicitly forbidding any forms ofdominance? They can and should test their own as-sumptions about the competencies of all membersof the workforce because negative assumptions areoften unconsciously communicated in powerful -albeit nonverbal - ways. For example, senior man-agers at Delta Manufacturing had for years allowed


DIVERSITY MATTERS

productivity and quality at their inner city plants tolag well behind the levels of other plants. When thecompany's chief executive officer began to questionwhy the problem was never addressed, he came torealize that, in his heart, he had believed that inner-city workers, most of whom were African Ameri-can or Hispanic, were not capable of doing betterthan subpar. In the end, the CEO and his seniormanagement team were able to reverse their rea-soning and take responsibility for improving thesituation. The result was a sharp increase in theperformance of the inner-city plants and a messageto the entire organization about the capabilities ofits entire workforce.

At Mastiff, the insurance company discussed ear-lier, the vice president and her manager decided towork with the recently promoted African Ameri-can woman rather than demote her. They realizedthat their unit was really a pocket inside the largerorganization: they did not have to wait for the restof the organization to make a paradigm shift in or-der for their particular unit to change. So they metagain to think about how to create conditions with-in their unit that would move the woman towardseeing her leadership position as encompassing allher skills. They assured her that her authentic styleof leadership was precisely what they wanted her tobring to the job. They wanted her to he able to usewhatever aspects of herself she thought wouldmake her more effective in her work because thewhole purpose was to do the job effectively, not tofit some preset traditional formula of bow to be-have. They let her know that, as a managementteam, they would try to adjust and change and sup-port her. And they would deal with whatever conse-quences resulted from her exercising her decisionrights in new ways.

Another example of this line of action-workingagainst forms of dominance and subordination toenable full contribution - is the way the CEO of amajor chemical company modified the attendancerules for his company's annual strategy conference.In the past, the conference had been attended onlyby senior executives, a relatively homogeneousgroup of white men. The company had been work-ing hard on increasing the representation of womenand people of color in its ranks, and the CEO couldhave left it at that. But he reckoned that, unlesssteps were taken, it would be ten years before theconferences tapped into the insights and perspec-tives of his newly diverse workforce. So he took thebold step of opening the conference to people fromacross all levels of the hierarchy, bringing togethera diagonal slice of the organization. He also askedthe conference organizers to come up with specific

interventions, such as small group meetings beforethe larger session, to ensure that the new attendeeswould be comfortable enougb to enter discussions.The result was that strategy-conference partici-pants heard a much broader, richer, and livelier dis-cussion about future scenarios for the company.

They are making sure that organizational truststays intact. Few things are faster at killing a shiftto a new way of thinking about diversity than feel-ings of broken trust. Therefore, managers of organi-zations that are successfully shifting to the learn-ing-and-effectiveness paradigm take one more step:they make sure their organizations remain "safe"places for employees to be themselves. These man-agers recognize that tensions naturally arise as anorganization begins to make room for diversity,starts to experiment with process and productideas, and learns to reappraise its mission in light ofsuggestions from newly empowered constituentsin the company. But as people put more of them-selves out and open up about new feelings andideas, the dynamics of the learning-and-effective-ness paradigm can produce temporary vulnerabili-ties. Managers who have helped their organizationsmake the change successfully have consistentlydemonstrated their commitment to the process andto all employees by setting a tone of honest dis-course, by acknowledging tensions, and by resolv-ing them sensitively and swiftly.

Our research over the past six years indicates thatone cardinal limitation is at the root of companies'inability to attain the expected performance bene-fits of higher levels of diversity: the leadership's vi-sion of the purpose of a diversified workforce. Wehave described the two most dominant orientationstoward diversity and some of their consequencesand limitations, together with a new framework forunderstanding and managing diversity. The learn-ing-and-effectiveness paradigm we have outlinedhere is, undoubtedly, still in an emergent phase inthose few organizations that embody it. We expectthat as more organizations take on the challenge oftruly engaging their diversity, new and unforeseendilemmas will arise. Thus, perhaps more than any-thing else, a shift toward this paradigm requires ahigh-level commitment to learning more about theenvironment, structure, and tasks of one's organi-zation, and giving improvement-generating changegreater priority than the security of what is famil-iar. This is not an easy challenge, but we remainconvinced that unless organizations take this step,any diversity initiative will fall short of fulfilling itsrich promise^ ^

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