Store sales increase when the level of diversity among employees matches that of its surrounding community, according to a study recently published online in the Journal of Management.
For the study, researchers collected demographic and performance data from a large retailer that operates more than 200 stores in small communities and compared that with community demographic data from the U.S. Census Bureau.
The research revealed that having a diverse group of employees can have a positive impact on performance. In addition, the positive effects are even greater when the community in which the store is located is also diverse.
The study merges two opposing views on diversity in the workplace: the social identity theory, which predicts that diversity is negative because people can't identify with one another, and the information-based perspective, which argues that diversity is positive because it leads to more creativity. [Got Diversity? Time to Change Your Perspective ]
Orlando Richard, the study's lead author and associate professor of organizations, strategy and international management at the University of Texas at Dallas, said the goal of the study was to find context in which diversity within a business would lead to more creativity and problem-solving, while at the same time having a workforce that could identify with the customers.
"This way, both of the theories are working simultaneously, and you have the highest level of performance," Richard said in a statement.
The study discovered that the store performance was best within stores that had high racial diversity among its employees and high racial diversity in the surrounding community. The worst performing stores were those with low workforce diversity that were located in diverse communities.
In the case of the low performing stores, employees didn't have the creativity and problem-solving skills because everyone is the same. Additionally, they weren't able to identify with their diverse community.
"So you had two negative implications working hand-in-hand," Richard said.
In order to try and combat these negative effects, businesses need to examine the communities they serve in order to have a higher identification between employees and their customers, according to Richard.
"If companies continue their same hiring practices and do not necessarily diversify their workforce, then it has negative implications for sales performance," Richard said.
Just because communities are becoming more diverse and providing a broader pool of potential employees to choose from doesn't mean hiring mangers won't continue to make the same hiring decisions they always have.
"They may have biases and continue to hire the same types of people, whether that be race, gender or age," Richard said. "They have to be proactive and be aware of the environment and also aware of what can be done within the company."
The study was co-authored by Marcus Stewart of Bentley University, Patrick McKay of Rutgers and Timothy Sackett of HRU Technical Resources.