Considering only one diversity attribute is too simplified

When we think about diversity, we often tend to focus on one particular aspect of a person’s demographic background – for example whether that person is female or male, young or old. Similarly, diversity & inclusion initiatives in most companies are targeted at particular demographic groups, such as women or older workers. However, this one-dimensional view of diversity may be too simplified as employees often differ on more than one demographic attribute at a time.

Faultlines can emerge when two or more diversity attribute fall together

When an organization’s employees differ on two or more demographic attributes that are systematically intertwined (for example, when the younger employees in the organization are primarily women and the older employees predominantly men), so-called “faultlines” can emerge. Faultlines are hypothetical dividing lines that split an organization’s workforce into subgroups based on employees’ demographic attributes. Such faultlines and their consequences have already been examined in small groups. However, although initial evidence suggests that faultlines also exist in the larger organizational context (Lawrence and Zyphur, 2011), both the consequences of faultlines on organizational-level functioning and effectiveness and possible managerial interventions for altering their influence have remained unexplored.

We examine consequences of organizational faultlines

In our recently published study in the Journal of Management Studies, we examine the consequences of organizational faultlines (based on employees’ age and gender) on employees’ identification with their company as well as firm performance and firm innovation. To this end, we conducted an empirical analysis among 82 German small- and medium-sized companies with 4,975 employees.

Organizational faultlines can provide “pockets of social support”

Our findings provide a nuanced view of the consequences of organizational faultlines: The effects of demographic subgroups based on employees’ age and gender (e.g., younger women, older men) largely depend on the specific context within the organization. When the members of a demographic subgroup primarily work in one functional area of the company (e.g., younger women primarily working in the marketing department, and older men primarily working in the IT department), there is little exchange between demographic subgroups. As a result, employees tend to primarily identify with their specific demographic subgroup (e.g., younger women or older men) and not with the organization as a whole, which negatively impacts firm performance and innovation. In contrast, when the members of the demographic subgroups are spread throughout the organization (i.e., they work in a number of different departments), the opposite effect can be observed. In this case, membership in a demographic subgroup (e.g., younger women or older men) may serve as a “pocket of social support” in which employees feel comfortable; at the same time, there is more exchange with members of other demographic subgroups in the same department. As a result, employees also feel a stronger feeling of belonging to the organization as a whole, which subsequently improves firm performance and innovation.

Organizations should actively manage organizational faultlines

What can organizations learn from these findings? First, demographic faultlines matter for the organization’s bottom-line. Our results thus underscore the business case of diversity and call for managerial attention to the topic of diversity and inclusion as a strategic business objective. Second, the positive potential of faultlines in organizations does not materialize automatically – rather, faultlines require active diversity management that also precludes negative side effects. Third and relatedly, decision makers should warrant that the members of demographic subgroups are represented in all parts of an organization: To exploit the positive potential of organizational faultlines, diversity is required in all functional areas. As such, in particular HR recruiting and development should foster the participation of demographic groups that are traditionally underrepresented in certain functional areas (e.g., younger women in technology and engineering). Moreover, they should warrant that all members of an organization – irrespective of their demographic background – feel valued and included to strengthen their sense of belonging to the organization as a whole. This can, for example, be implemented by fostering a truly inclusive diversity-related organizational climate (Reinwald et al., 2019).

Picture Credit: © Tim Mossholder, www.unsplash.com

Keywords

diversity; faultlines; demographic differences; diversity management

References

Lawrence, B. S. and Zyphur, M. J. (2011). ‘Identifying organizational faultlines with latent class cluster analysis’. Organizational Research Methods, 14, 32–57.

Reinwald, M., Huettermann, H. and Bruch, H. (2019). ‘Beyond the mean: Understanding firm-level consequences of variability in diversity climate perceptions’. Journal of Organizational Behavior, 40, 472–91.