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HR Dive: Racially diverse management boosts tech firms' productivity, study finds

12 Jun 2020
Research shows that firms with unequal levels of racial diversity in upper and lower management were less capable of making good business decisions, absorbing information and obtaining a competitive advantage.

Originally found at HR Dive, by Sheryl Estrada

Dive Brief:​

There's a business case for racial diversity congruence — having matching levels of representation in upper management and lower management —  according to a study published June 9 in the Academy of Management (AOM) Journal. The study found that firms with high levels of diversity in both upper management and lower management achieved the greatest levels of productivity.

Academic researchers Orlando Richard, María del Carmen Triana and Mingxiang Li analyzed 201 high tech firms' EEO-1 data. Firms with unequal levels of racial diversity in upper and lower management were less capable of making good business decisions, absorbing information and obtaining a competitive advantage, according to the study. Researchers found that a 1% increase in racial diversity congruence in management increased a tech firm's productivity by $729 per employee. For Fortune 500 firms, analyzed in a supplemental sample, productivity increased by $1,590 per employee. 

Tech firms with more racial diversity in upper management than lower management out-produced firms with more diversity in lower management, according to the study. Researchers also pointed to the "critical role" that lower management plays in organizations. They stressed that even if management levels are "demographically different," information exchange should be prioritized as lower-level managers may have valuable ideas to enhance a company's strategy.


Continue reading the original article at HR Dive

Read the original research in Academy of Management Journal

 

Learn more about the AOM Scholars and explore their work:

Orlando Richard

María del Carmen Triana

Mingxiang Li

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