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nt. J. Business Performance Management, Vol. 23, Nos. 1/2, 2022
Copyright © 2022 Inderscience Enterprises Ltd.
Exploring the correlation between diversity and
financial performance: an empirical study
Mengsteab T. Beraki
School of Business,
State University of New York (SUNY),
Farmingdale Campus, New York
Email: berakim@farmingdale.edu
Mussie T. Tessema
Department of Business Administration,
Winona State University
75 W Mark Street, Winona, MN 55987, USA
Email: Mtessema@winona.edu
*Corresponding author
Parag Dhumal
Department of Business,
University of Wisconsin-Parkside, WI,
900 Wood Rd, Kenosha, WI 53144, USA
Email: Dhumel@uwp.edu
Kathryn J. Ready
Department of Business Administration,
Winona State University,
75 W Mark Street, Winona, MN 55987, USA
Email: Kread@winona.edu
Sebhatleab Kelati
Faculty of Health and Social Work,
Frankfurt University of Applied Sciences
Zeißelstraße 42, 60318 Frankfurt am Main, Germany
Email: kelati@fb4.fra-uas.de
Abstract: Although a myriad of studies has been conducted on workforce
diversity issues, only a handful of studies have examined the correlation
between diversity-related values and the financial performance of companies.
This study examines this relationship by testing the extent to which
diversity-related values are correlated with the financial performance of
publicly traded companies using companies listed on the New York Stock
Exchange. Companies were grouped into primary, secondary, and tertiary
sectors for the analysis. The findings reveal that the diversity value dimension
Exploring the correlation between diversity and financial performance 207
is positively correlated with companies’ financial performance. No significant
differences were found between the commitment to diversity value dimension
and the three sectors. Implications of these findings and future research
directions are discussed.
Keywords: diversity; corporate value; culture; financial; non-financial
performance.
Reference to this paper should be made as follows: Beraki, M.T.,
Tessema, M.T., Dhumal, P., Ready, K.J. and Kelati, S. (2022) ‘Exploring the
correlation between diversity and financial performance: an empirical study’,
Int. J. Business Performance Management, Vol. 23, Nos. 1/2, pp.206–223.
Biographical notes: Mengsteab T. Beraki is a Professor of Management at
State University of New York (SUNY). He has presented numerous research
papers at national and international conferences. His areas of expertise include:
entrepreneurship and entrepreneurial innovation and incubation; business
development research and strategy; economic development strategies; small
business financing and microfinance for development; and managing
operations, and technological innovation.
Mussie T. Tessema is a Professor of HR Management at Winona State
University, MN. He has presented numerous research papers at national and
international conferences. His researches have been published in several
journals such as the International Journal of HRM, International Journal of
HRDM, International RAS, and Review of Public Personnel Administration.
Parag Dhumal is a Professor of Business at the University of
Wisconsin-Parkside, WI. He has presented numerous research papers at
national and international conferences. He has published in several journals
such as International Journal of Education and Social Science, Journal of
Academy of Business and Economics, and European Journal of Business and
Social Sciences.
Kathryn J. Ready is a Professor of Management at Winona State University,
MN. She has presented numerous research papers at national and international
conferences. She has published several papers on strategic management,
cross-cultural, labour relations, and pedagogy issues.
Sebhatleab Kelati is a Professor of Accounting at Frankfurt University. He has
presented numerous research papers at national and international conferences.
He has published in several journals such as International Journal of Business
and Mgmt Research, Global Journal of Commerce and Mgmt Perspective, and
Journal of Business and Mgmt.
1 Introduction
In order for companies to achieve goals, they require basic resources, namely, human,
financial, and physical (Valentine et al., 2019). Although these resources are important to
varying degrees, human resources are believed to be the most critical resources that
companies need to achieve their goals. Successful companies attribute their past
successes partly in the way they deal with their employees (Boxall, 2003; Bowen et al.,
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2004; Birasnav and Rangnekar, 2009). Effective use of the company’s human capital may
explain a significant part of the difference in higher market value between companies.
Today’s working environment encompasses an increasingly diverse workforce.
According to the Census Bureau (2014), the non-Hispanic white majority will remain the
single largest group in the coming years, but by 1944, minority groups such as Hispanic,
African Americans, Asian Americans, and multiracial groups combined with other
minority groups will represent the majority of the USA. population; the multi-racial
group is projected to be the fastest-growing group (Colby and Ortman, 2015). Thus, the
need to attract, develop, motivate and retain a wider range of employees will continue to
increase as the country grows more diverse. Companies must become effective in
attracting, developing, motivating, and retaining minorities and women, as these groups
represent an important talent base (Parsi, 2017).
Workforce diversity can only be managed successfully in a company that values
diversity (Sidle, 2009). Companies recognise the business imperative of having an
employee base that represents their customer base. To truly satisfy the target population
companies want to serve, they need diverse groups of employees, suppliers, and vendors
(Lussier and Hendon, 2021). Companies that can effectively manage workforce diversity
are likely to succeed in the war for talent (Jackson, 2017a) and attract talented people
willing to join, stay longer, and exert more efforts toward company goals (Greenberg,
2004; Lussier and Hendon, 2021; Parsi, 2017).
In addition to human, financial, and physical resources, the presence of a clear vision,
mission, and value statements are critical components of a company’s strategic planning
process and are instrumental in achieving company goals and objectives (SHRM, 2012;
Weiss, 2015; Welch and Welch, 2009). Collectively, they provide the information
necessary to focus every employee on the company’s goals and objectives (Lussier and
Hendon, 2021). The ultimate purpose of a value statement is to encourage desired
behaviours from company employees that positively impact the achievement of the
company’s mission and its goals. Leaders of a company can encourage these behaviours
from its members with a value framework that guides members’ behaviours (Richard,
2000). Although numerous studies have been conducted on workforce diversity-related
issues (e.g., Kim et al., 2020; Porcena et al., 2020; Schneid et al., 2016; Armstrong et al.,
2010), only a handful of studies have examined the correlation between diversity-related
values and financial performance of companies (e.g., Hunt et al., 2015; Roberson and
Park, 2009). Hence, this study intends to address the existing research gap using a large
sample of companies across sectors listed on the New York Stock Exchange.
2 Literature review
The growth in the number of multinational companies (MNCs) has impacted diversity
across organisations. For example, the 2006 World Investment Report issued by the
United Nations reported 24 million workers in MNCs in 1990; by 2006, 62 million
workers were employed in 77,000 MNCs with over 770,000 foreign affiliates. Further,
the United Nation’s Conference on Trade and Development (UNCTAD) database reveals
that there are about 1,500 State-owned MNEs (1.5% of all MNEs) owning more than
86,000 foreign affiliates, or close to 10 per cent of all foreign affiliates (UNCTAD,
2017). This suggests that in addition to a highly diverse U.S. workforce, these publicly
Exploring the correlation between diversity and financial performance 209
traded companies have more employees from overseas with different backgrounds,
preferences, expectations, traditions, and cultures. As a result, workforce diversity is not
a choice but is a requirement for organisational success (Tessema et al., 2017).
Diversity has been defined in numerous ways. Some scholars define diversity
narrowly, yet others take a broader approach. For example, diversity refers to the varied
backgrounds of company members in terms of gender, race, age, sexual orientation, and
ethnicity (Verhulst and DeCenzo, 2019). Others definitions of diversity include: the
existence of differences due to different types of people in an organisation (Lussier and
Hendon, 2021); any perceived difference among people including age, race, religion,
functional specialty, profession, sexual orientation, geographic origin, lifestyle, tenure
with the company or position and other perceived difference (Mondy and Martocchio,
2016); a collection of individuals differing from each other on one or any number of
dimensions including culture, values, education, gender, marital status and age (Church,
1995); the variety or multiplicity of demographic features that characterise a company’s
workforce, particularly in terms of race, sex, culture, national origin, handicap, age, and
religion (Dessler, 2020); the interaction of different backgrounds, cultures, and
generations into the same company (Richard and Johnson, 2001); differences between
individuals on any personal attributes that determine how people perceive one another
(Gonzales and Denisi, 2009); and policies and practices that seek to include people who
are considered to be, in some way, different from the traditional members (Herring and
Henderson, 2015).
Diversity can also be defined with primary or secondary dimensions. Primary
dimensions of diversity include factors that are either inborn or exert extraordinary
influence on early socialisation which include age, race, ethnicity, gender, physical and
mental abilities, and sexual orientation. Secondary dimensions of diversity refer to factors
that are important and help define individuals and include dimensions such as educational
background, geographical location, income, marital status, military experience, parental
status, religious beliefs, and work experience (Griffin and Moorhead, 2014). Snyder
(2017) argues that the concept of diversity has broadened to include personality type,
thinking style and other factors that influence how people perceive the world.
While diversity is about the ingredients, the mix of people and perspectives; inclusion
is about the container, the place that allows employees to feel they belong, to feel both
accepted and different. Meinert (2018) noted that while diversity is simply having
representation; inclusion is when people get invited to be at the table. Belonging is the
third piece of the diversity and inclusion effort and is the emotional connection that
people feel to each other and to the organisation. Companies need a group of people who
think differently - in a container that is safe to share those differences (Snyder, 2017).
Workforce diversity is not just about mirroring the country’s demographics, it is about
innovation and performance (Parsi, 2017). Rock (2017) argues that companies get a lot
more buy-in for diversity and inclusion when they emphasise the business case for its
relevance.
The broad spectrum of diversity definitions suggests that there are many types of
diversity classifications. A majority of the diversity characteristic classifications are
based on perception and are dichotomous in nature. Some of the classifications are
readily detectable/less observable, highly job-related/less job related, surface-level/deep-
level, task-related/relations-oriented, and role-related/ inherent dimensions (Christian
et al., 2006). The above definitions also suggest that diversity is more than equal
employment opportunity (EEO) and affirmative action. Managing diversity means
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maximising diversity’s potential benefits while minimising the potential barriers that can
undermine the company’s performance (Dessler, 2020). Diversity management,
according to Mondy and Martocchio (2016), is ensuring that factors are in place to
provide for and encourage the continued development of a diverse workforce by melding
these actual and perceived differences among workers to achieve maximum productivity.
It is much broader than simply not discriminating; it is about the ability of a company to
effectively manage its diverse workforce (Richard and Johnson, 2001).
Companies differ in how they approach the challenges related to workforce diversity.
Some companies define workforce diversity as a competitive advantage that brings in a
wider pool of talent and greater insight into the needs and behaviours of their diverse
customers. This implies that such companies have a policy of valuing diversity (Noe,
Hollenbeck, Gerhart and Wright, 2021). The practice of valuing diversity has no single
form; it is not written into law or business theory. Companies that value diversity may
practice some form of affirmative action (Noe et al, 2021). Recently, many successful
companies have introduced different HR practices in managing their workforce.
Whatever their HR practices, these efforts are intended to make each individual feel
respected and welcome. Many companies have policies that value understanding and
respecting differences and try to hire, reward, and promote employees that demonstrate
respect for others (Tessema et al., 2019). These actions can support EEO requirements by
cultivating an environment in which employees feel welcome and able to do their best
(Mondy and Martocchio, 2016).
Policies that organisations adopt flow from its vision, mission and values. A strong
vision, authentic values and a relevant mission statement are critical components of the
strategic planning process. While a mission is a clear, concise and enduring statement of
the reasons for a company’s existence today (Nagy and Fawcett, 2017), the vision is a
statement about a company’s desired state, where it wants to go, and is best stated in the
future tense (Horwath, 2005). A value statement is a declaration that informs the
workforce and customers about the company’s top priorities and its core beliefs
(Markgraf, 2016). Companies often use a value statement to help them identify with and
connect to targeted consumers, as well as to remind the workforce about its priorities and
goals (Welch and Welch, 2009).
Noe et al. (2021) argues that valuing diversity, especially in support of a company’s
mission and strategy need not be limited to the categories protected by law. Companies
should go further and introduce progressive HR programs and policies that support
conclusive efforts. Further, Herring and Henderson (2015) argue that companies should
approach diversity and inclusion as a business imperative. For this reason, companies
must prepare managers to recognise and embrace cultural differences. To fully maximise
the contributions of the company’s diverse workforce, management must commit to
creating a culture that fosters mutual respect and understanding. This can be
accomplished by valuing differences in the workforce, not only because of EEO laws, or
because it is morally and ethically the right thing to do, or because it promotes good
business practices, but also because when employees open their minds and hearts, they
feel better about themselves (Verhulst and DeCenzo, 2019). The bottom line is that the
presence of effective diversity values can play an important role in attracting, motivating,
and retaining the right talent, which is an ongoing challenge as the needs of the business
change over time.
Exploring the correlation between diversity and financial performance 211
Although companies have been taking a ‘melting pot’ approach to workforce
diversity, which assumes that people that are different would somehow automatically
want to assimilate, scholars find that employees do not set aside their lifestyle preferences
and cultural values when they come to work (Robbins et al., 2017). The assumption of
‘melting-pot’ is being replaced by the recognition and celebration of differences. Those
who do celebrate the differences are finding their companies more successful than their
competitors (Bersin, 2017; Greenburg, 2004). Hence, diversity values have a significant
impact on a 21st-century workplace that is innovative, diverse, fair, and competitive.
2.1 Factors affecting workforce diversity
The pervasiveness of diversity in the workforce is well documented. The question is:
Why is the U.S. workforce becoming more diversified? Scholars have found many
factors contribute to workforce diversity (Herring and Henderson, 2015; Christian et al.,
2006; Verhulst and DeCenzo, 2019; Robbins et al., 2017). Historically, one of the main
factors in promoting diversity is the USA. federal legislation prohibiting employment
discrimination such as the American Civil Rights Act (1964, 1991), Age Discrimination
in Employment Act (1967), and Americans with Disabilities Act (1990). As a result of
increased legislation supporting workforce participation among all groups, females, and
minorities have become the fastest-growing segments in the workforce. The declining
birth-rate is a second factor that has led to an increase in the labor participation rate of
women. The third factor is globalisation that has reduced barriers to immigration. The
fourth factor is the business necessity or economic factors. Given the benefits of
workforce diversity, many companies have been diversifying their workforce
intentionally. Herring and Henderson (2015) also point out that publicly held for-profit
businesses tend to have HR practices that are more subject to public scrutiny and thus,
they have a more diverse workforce. The fifth factor is demographic change, which has
increased elderly participation in the labour force. Given the increase in life expectancy
in the USA (about 79 years in 2018), many Americans are working after the social
security retirement age (currently 66 years and 2 months).
Despite the many changes in the workforce, there are proponents and opponents for
embracing workforce diversity. Proponents of workforce diversity make a business case
and claim that diversity pays; they try to justify their arguments by identifying a number
of advantages, which subsequently influence the bottom-line of companies (e.g., Lussier
and Hendon, 2021; Parsi, 2017; Richard, et al., 2004). Opponents of workforce diversity
claim that diversity does not pay and try to justify their arguments by identifying the
costs and challenges associated with incorporating workforce diversity efforts (Bateman
and Snell, 2007; Schneider and Northcraft, 1999).
2.2 Advantages of diversity
Effective workforce diversity values can provide many advantages. For example,
diversity can play an important role in recruiting, retaining, and motivating employees
(Weiss, 2015) as well as attracting talented applicants (Avery et al., 2013; Glassdoor,
2016). More business opportunities can be created (Holladay and Quinones, 2008)
resulting in more sales revenue, more customers, and higher profits (Parsi, 2017). It can
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provide products and service that appeal to larger and more diverse groups during the
course of doing business (Bell et al. 2011; Avery et al., 2013) and can benefit the
company by fostering more innovations, better decision-making, a larger talent pool, and
a wider customer base (Cox, 1993; Ryan and Wessel, 2015). Diversity can provide a
competitive advantage (Noe et al., 2021), and companies gain from employees that come
from diverse backgrounds and think differently, which in turn has the effect of increasing
creativity and innovation in the organisation (Lussier and Hendon, 2021; Pieterse et al.,
2013). This can help in analysing problems from different directions and in different
ways and discovering more of the aspects of the problem than would a single person or a
more homogeneous work group (Mayfield and Mayfield, 2010). It can provide a
company with greater knowledge of the preferences and consuming habits of a
diversified market (Rice, 2014). Thus, smart companies reflect that reality in the
collective composition of their employees and understand that yesterday’s workforce
cannot lead them into tomorrow (Eagle’s Flight, 2016; Parsi, 2017).
A recent study by McKinsey and Co. reports that companies that exhibit ethnic and
gender diversity are, respectively, 35% and 15% more likely to outperform those that do
not (Parsi, 2017). This study further reveals companies in the top quartile of executive
board diversity had returns on equity that were 53% higher than those in the bottom
quartile. Moreover, companies with more female executives are more profitable
according to a 2016 analysis of more than 20,000 firms in 91 countries (Parsi, 2017).
Forbes (2011) found that 87% of executives from three global regions reported that
workforce diversity increased productivity. Further, 87% reported business with diverse
customers, 87% reported increased innovation and creativity, and 80% reported increased
profitability. A SHRM survey also reports that while 78% of the respondents claimed that
diversity practices have helped reduce costs, 74% of the respondents claimed that
diversity practices improved the financial bottom line (Meisinger, 2005). A Gallup
survey also shows that 61% of the respondents who placed their company’s diversity
efforts in the upper third of companies surveyed said they are extremely satisfied with
their company (Leonard, 2006). According to Glassdoor (2014), 67% of active and
passive job seekers say that when they are evaluating companies and job offers, it is
important to them that the company has a diverse workforce. Although the above studies
are encouraging, most of them offered no hard evidence in support of the perceptions.
Much of the academic debate on the workforce diversity-performance relationship has
provided argument rather than evidence.
2.3 Requirements for an effective workforce diversity program
As previously indicated, the advantages of workforce diversity and inclusion are not
without challenges. The question is: What can be done to overcome these challenges?
Because every person, culture, and business situation are unique, there are no simple
rules for managing workforce diversity. However, scholars have provided several
suggestions on how to improve the effectiveness of workforce diversity programs.
A company should commence its workforce diversity program by assessing the
current state of affairs using employee attitude surveys, management and employee
evaluations, and focus groups (Robbins et al. 2017). A company must also evaluate its
workforce diversity and inclusion programs through employee attitude surveys to
determine improvement in employees’ diversity attitudes (Kearney et al. 2009). It must
manage its workforce by evaluating workforce diversity program efforts, recruiting
Exploring the correlation between diversity and financial performance 213
minority groups to the board of directors, and formally interacting with representative
minority groups and networks (Avery et al., 2013; Jackson, 2017b). It must publicise its
support to workforce diversity and take steps to foster workforce diversity (Herring and
Henderson, 2015; Kirton and Greene, 2016), and be willing to devote the required
resources to creating authentic diversity values and then live up to and include them in all
company decisions (Dessler, 2020). Further actions companies can take include:
incorporating diversity training that supports strategies to fully integrate all employees
into the company’s culture (Richard and Johnson, 2001); incorporating HR policies and
practices that reinforce diversity such as training/development, work design, staffing and
compensation (Armstrong et al., 2010; Kirton and Greene, 2016); making diverse
employees feel included and their needs and preferences accommodated (Joshi et al.,
2006; Mondy and Martocchio, 2016); creating an inclusive culture that values and uses
the talents of all would-be members (Herring and Henderson, 2015); recognising and
dealing with the different values, needs, interests, and expectations of employees
(Kochan et al, 2003; Jackson, 2017b); and having workforce diversity and inclusion
programs strongly supported by top-level management (Tessema et al., 2017).
In addition, organisations should ensure that their HR systems value the perspectives
and experience that women and minorities contribute to company goals (Noe et al, 2021).
Organisations can promote a culture that values diversity, knowledge and acceptance of
cultural differences, and deal with employees’ resistance to diversity (Bateman and Snell,
2007); make the workforce aware of unconscious bias and develop practices to mitigate
(Bisoux, 2017; Snyder, 2017); develop patience, open-mindedness, acceptance, and
cultural awareness (Mondy and Martocchio, 2016); teach managers about the legal
framework for equal employment opportunity and how a diverse workforce will be better
able to serve a diverse market of customers and clients (Mondy and Martocchio, 2016);
create a more smoothly functioning and hospitable environment for the company’s
diverse workforce where people feel respected, productive and important (Herring and
Henderson, 2015); support underrepresented employees through mentorships and
employee resource groups (ERGs) (Parsi, 2017; Meinert, 2018); and make sure diversity
is part of strategic goals (Meisinger, 2005).
Due to the many requirements of workforce diversity and its many advantages, one
can argue that companies cannot afford to ignore or discount the potential contributions
of women and minorities. Snyder (2017) concludes that thinking about diversity and
inclusion in new and exciting ways should represent a win-win for employees and
company leaders and is critical to organisational success.
2.4 Challenges of workforce diversity
Although workforce diversity and inclusion have the aforementioned advantages, there
are many challenges associated with workforce diversity. Scholars have identified several
challenges of workplace diversity including: lower cohesiveness, communication
problems, unexamined assumptions, mistrust and tension, and stereotyping (Bateman and
Snell, 2007); resistance to change, and problems associated with the successful
implementation of workforce diversity policies (Greenberg, 2004); difficulties associated
with making a company more accommodating to diverse groups of people by addressing
different lifestyles, family needs, and work styles (Robbins et al, 2017); conflict and
reduced cohesiveness measured by the intent and desire for group members to stick
together in their action (Benard and Doan, 2011; Lussier and Hendon, 2021; Jehn,
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Northcraft, and Neale, 1999); and recognising that people with common, but different
characteristics from the mainstream, often think, act, learn, and communicate differently
(Mondy and Martocchio, 2016). An oft-quoted maxim is that diversity is being invited to
the party, whereas inclusion is being asked to dance (Snyder, 2017).
Increasing cultural diversity in the workforce poses one of the most challenging HR
and company issues of our time (Kearney et al, 2009). Schneider’s (1987) attraction-
selection-attrition hypothesis (ASA) suggests that companies tend to attract, hire, and
retain similar types of people. This natural tendency to drive out diversity implies that
companies desiring diversity must proactively develop mechanisms to ensure company
heterogeneity (Richard and Johnson, 2001). For instance, Glassdoor (2014) reported that
more than half (57%) of the respondents think that their company should be doing more
to increase diversity among its workforce. Further, 41% of the respondents do not think
their company has a diverse executive team, and 48% of respondents are not aware of
initiatives to increase diversity within their organisation. It should be noted that achieving
a truly diverse and inclusive workplace demands a lot of work. Problem’s surface such as
the biases people embrace on an unconscious level, that is, deep prejudices or stereotypes
imparted by upbringing, culture, and mass media that influence perceptions about others
(Bisoux, 2017; Snyder, 2017). It has been argued that diversifying the workforce is
necessary, but not sufficient, which also requires further examination to determine the
extent to which workforce diversity is correlated with the performance of a company.
While some studies found neither positive nor negative effect of workforce diversity
on performance (Kochan et al., 2003), a few other studies portrayed a positive effect of
workforce diversity on performance (Herring, 2009; Herring and Henderson, 2015; Ng
and Tung, 1998; Williams and O’Reilly, 1998; Watson et al., 1993). Furthermore, some
studies revealed a positive correlation between workforce diversity and performance
(Armstrong et al., 2010; Backes-Gellner and Veen, 2013; Ng and Tung, 1998; Herring,
2009). Based on the above research findings, the following hypothesis is proposed:
H1 Diversity related values statements will be positively correlated with companies’
financial performance.
Armstrong et al. (2010) underscored that when a diverse workforce is effectively treated
and managed by employers and is managed in ways that commit to investing in people
and treating them fairly, greater motivation will follow, which in turn will lead to
performance gains for the company. In other words, although workforce diversity appears
to create additional coordination and control costs, these negative effects may diminish
with time and are offset by better quality and more creative decisions (Herring and
Henderson, 2015; Williams and O’Reilly, 1998). It has been argued that when companies
effectively manage their diverse workforce, they are more likely to have higher
performance (Herring and Henderson, 2015; Ng and Tung, 1998) regardless of the sector
in which they operate. On the basis of the above discussions, the following hypothesis is
forwarded:
H2 Diversity related values statements will be positively correlated with companies’
financial performance regardless of the sector in which they operate.
Exploring the correlation between diversity and financial performance 215
3 Research methodology
3.1 Sample
This study uses values statements randomly collected from 249 companies listed on the
New York Stock Exchange (NYSE). The sample companies had 1,419 corporate values
statements (39 of which were deleted), then categorised into 51 value classes. The 51
value classes were grouped into the following seven value dimensions: Commitment to
diversity, commitment to customers, commitment to shareholders, commitment to
employees, commitment to integrity, social responsibility, and entrepreneurship
(Tessema et al., 2019). In addition, the sample companies were grouped into three
sectors: Primary (agriculture, extraction of raw materials, etc.), secondary
(manufacturing), and tertiary (service). This study uses the following four indicators of
financial performance of the sample companies: 2-year stock price changes, 5-year stock
price changes, the price to earnings ratio, and price to sales ratio.
3.2 Data analysis
In this study, we employed several methods of data analyses such as frequency
distributions, descriptive statistics, and a correlation matrix (Tables 1–4).
Table 1 Descriptive statistics of commitment to diversity
Value dimensions SD No. of value
statements
% of value
statement
No. of companies
with value
dimensions
% of companies
with value
dimensions
Commitment to
diversity
0.84 192 13.91 142 57.03
Commitment to
integrity
1.12 341 24.71 213 85.54
Commitment to
customers
0.89 238 17.25 159 63.86
Commitment to
employees
0.82 175 12.68 129 51.81
Commitment to
stakeholders
0.67 141 10.22 113 45.38
Entrepreneurship 0.72 164 11.88 130 52.21
Social responsibility 0.66 129 9.35 104 41.77
4 Results
This section presents the findings of the statistical analyses. Table 1 reports the results of
the descriptive statistics of the value dimensions. As revealed in Table 1, out of 1,380
value statements of the 249 sample companies, 192 (14%) of them were related to
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diversity, which makes the diversity value dimension the third top value dimension,
following commitment to integrity and commitment to customers. Likewise, 142 out of
249 companies (57%) have clearly stated diversity-related value statements.
Table 2 shows the frequency distribution of the seven value dimensions among three
sectors. As displayed in Table 2, about two-thirds of the companies are in the
manufacturing sector. In addition, 157 of the 1089 value statements are related to
diversity. While companies in the secondary (manufacturing) sector have about 64%
diversity-related value statements; companies in the tertiary (service) sector have about
27% diversity-related value statements, and companies in the primary sector (raw
materials) have about 9% diversity-related value statements.
Table 2 Frequency distribution of commitment to diversity among three sectors
Value
dimensions
Primary
sector
Secondary
sector Tertiary sector Total
N (value
class) % N (value
class) % N (value
class) % N (value
class) %
Commitment to
diversity
14 8.9 100 63.7 43 27.4 157 100
Commitment to
integrity
25 9.0 178 64.0 75 27.0 278 100
Commitment to
customers
8 4.3 135 71.8 45 23.9 188 100
Commitment to
employees
10 7.5 97 72.4 27 20.1 134 100
Commitment to
stakeholders
7 6.6 72 67.9 27 25.5 106 100
Entrepreneurship 9 6.8 98 73.7 26 19.5 133 100
Social
responsibility
10 10 63 67.7 20 21.5 93 100
Total 83 7.6 743 68.2 263 24.2 1089 100
Table 3 reports the correlations between the commitment to diversity value dimension
and the financial performance of the sample companies as measured by two and five-year
price changes as well as price-to-earnings ratio and price to sales ratio. As shown in
Table 3, the commitment to diversity value dimension is positively correlated with the
four financial indicators of the sample companies (r ranges between 0.023 and 0.066),
although not statistically significant.
Table 4 shows the correlations between the commitment to diversity value dimension
and sector type. The finding reveals that, while commitment to diversity value dimension
is positively correlated with primary sector (r = 0.046) and tertiary sector (r = 0.089); it is
negatively correlated with secondary sector (r = –0.107).
Exploring the correlation between diversity and financial performance 217
Table 3 Correlation matrix - commitment to diversity and financial performance
N Value dimensions Mean SD 1 2 3 4 5 6 7 8 9 10 11
1 Commitment to customers 0.97 0.89 1
2 Commitment to diversity 0.80 0.84 –0.096 1
3 Commitment to employees 0.68 0.82 0.150* –0.077 1
4 Commitment to stakeholders 0.54 0.67 –0.045 –0.162* 0.106 1
5 Entrepreneurship 0.66 0.72 –0.062 –0.010 0.071 0.146* 1
6 Commitment to integrity 1.42 1.12 –0.169* 0.236** 0.055 0.011 0.029 1
7 Social responsibility 0.47 0.66 –0.005 –0.134 0.145* –0.015 –.116 0.056 1
8 5-year stock price changes 1.52 0.89 0.107 0.045 0.028 –0.058 0.015 –0.010 –0.158* 1
9 2-year stock price changes 0.99 0.37 0.114 0.046 0.005 –0.096 0.132 0.020 –0.044 0.689** 1
10 Price to earnings ratio 24.73 103.71 0.003 0.023 0.027 0.040 –0.052 –0.016 0.051 –0.033 –0.038 1
11 Price to sales ratio 1.28 1.01 –0.050 0.066 0.031 0.008 0.152* –0.020 0.016 0.337** 0.430** –0.032 1
Note: *Correlation is si
g
nificant at the 0.05 level
(
2-tailed
)
, **Correlation is si
g
nificant at the 0.01 level
(
2-tailed
)
.
218
M
.T. Beraki et al.
Table 4 Correlation matrix – commitment to diversity and sector type
N Value dimensions Mean SD 1 2 3 4 5 6 7 8 9 10
1 Commitment to customers 0.97 0.89 1
2 Commitment to diversity 0.80 0.84 –0.096 1
3 Commitment to employees 0.68 0.82 0.150* –0.077 1
4 Commitment to stakeholders 0.54 0.67 –0.045 –0.162* .106 1
5 Entrepreneurship 0.66 0.72 –0.062 –0.010 .071 .146* 1
6 Commitment to integrity 1.42 1.12 –0.169* .236** .055 .011 .029 1
7 Social responsibility 0.47 0.66 –0.005 –0.134 .145* –0.015 –0.116 .056 1
8 Primary sector 0.077 0.267 –0.143* .046 –0.006 –0.032 –0.026 .064 .084 1
9 Secondary sector 0.689 0.464 0.080 –0.107 .063 –0.017 .084 –0.133 –0.018 –0.428** 1
10 Tertiary sector 0.235 0.425 0.002 .089 –0.065 .038 –0.076 .105 –0.033 –0.159* –0.824** 1
N
ote: *Correlation is si
g
nificant at the 0.05 level
(
2-tailed
)
, **Correlation is si
g
nificant at the 0.01 level
(
2-tailed
)
.
Exploring the correlation between diversity and financial performance 219
5 Discussion
In this study, about 57% of the sample companies have publicised diversity-related value
statements. This may suggest that the number of companies that are working to diversify
their workforce has been increasing. Noe et al. (2021) stated that many the USA.
companies have already committed themselves to ensure that they recognise the value of
workforce diversity and are using it to gain a competitive advantage. As indicated
previously, having a diverse workforce and effective workforce diversity management
can provide a number of advantages such as: fostering a larger pool of ideas and
experiences (Griffin and Moorhead, 2014); providing a company with greater knowledge
of the preferences and consuming habits of a diversified market (Rice, 2014); supporting
a broader range of services (Greenberg, 2004); providing more effective service to
customers on a global basis (Kreitz, 2008); meeting business strategy needs and the needs
of customers more effectively (Heneman et al. 2019); helping businesses increase market
share (Kerby and Burns, 2012); supplying a greater variety of solutions to problems in
service, sourcing, and allocation of resources (Griffin and Moorhead, 2014); increasing
adaptability in the marketplace (Kelly et al., 2004); and generating a variety of
viewpoints (Herring and Henderson, 2015).
The findings of the current study show that diversity-related values statements are
found to be positively correlated with the financial performance of the sample companies,
as indicated by two and five-year price changes and price-to-earnings and sales ratios
(Table 3). Hence, Hypothesis 1 is supported. It must also be noted that, although their
correlation is positive, their strength is weak. The findings are consistent with some
previous studies (Armstrong et al., 2010; Herring, 2009: Ng and Tung, 1998). The current
study also reveals that diversity-related values statements are positively correlated with
two sectors, namely primary and tertiary. And thus, it partly supports Hypothesis 2, in
that, diversity-related values statements can be positively correlated with the performance
of companies regardless of the sector in which they operate.
Tables 3–4 did not report statistically significant results. Some of the possible
explanations for the findings are as follows: First, there are many factors that influence
financial performance of publicly traded companies (Pandey, 2015), and diversity-related
value statements are just one of those factors that influence the financial performance of
companies. Kochan et al. (2003) acknowledge that it is extremely difficult to objectively
measure the effect of workforce diversity on financial performance for it is extremely
complicated to isolate other possible factors that impact the financial performance of
companies. Second, companies diversify their workforce for many reasons such as legal,
moral, and economic/financial reasons (Kerby and Burns, 2012; Rice, 2014; Griffin and
Moorhead, 2014; Heneman et al., 2019), and thus financial reason is just one of the many
reasons for workforce diversity.
6 Conclusions and implications
This study concludes that the majority of the sample companies have publicly stated
diversity- related value statements. This suggests that companies have started to realise
the importance of emphasising diversity related values. This study also concludes that
diversity-related value statements are positively correlated with the financial performance
of the sample companies, although their correlation is not statistically significant.
220
M
.T. Beraki et al.
Another important finding of the current study is that no significant differences were
found between the commitment to diversity value dimension and the three sectors. This
finding may imply that, nowadays, companies have started to give due attention to
diversity-related values regardless of the sector where they operate for, they believe
diversity-related values have a positive contribution to their bottom line. This, however,
does not mean that having a diverse workforce is without a challenge. This study argues
that as the workforce becomes more diverse, organisations managing a divorce workforce
should expect both opportunities and challenges, and organisations that are able to
effectively manage a diverse workforce are more likely to get a myriad of benefits. This
study extends previous research on workforce diversity by examining the correlation
between diversity-related value statements and the financial performance of publicly
traded companies. This study has merit because, unlike most previous studies, it has
attempted to test not only the diversity value dimension and the financial performance of
publicly traded companies but also examines this dimension across sectors. Limitations
of the study include that it does not test the validity of the diversity-related value
statements. Future research therefore should try to validate the authenticity of diversity-
related values statements of publicly traded companies.
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