The Link Between Diversity and Equality Management Practice Bundles and Racial Diversity in the Managerial Ranks: Does Firm Size Matter?

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Management Department Faculty Publications Management Department

3-2013

(e Link Between Diversity and Equality

Management Practice Bundles and Racial Diversity

in the Managerial Ranks: Does Firm Size Ma)er?

Orlando C. Richard

University of Texas at Dallas, sbhuian@cab.latech.edu

Hyuntak Roh

Yonsei University, Seoul, hroh@yonsei.ac.kr

Jenna R. Pieper

University of Nebraska-Lincoln, jpieper@unl.edu

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Richard, Orlando C.; Roh, Hyuntak; and Pieper, Jenna R., "<e Link Between Diversity and Equality Management Practice Bundles

and Racial Diversity in the Managerial Ranks: Does Firm Size Ma=er?" (2013). Management Department Faculty Publications. 109.

h=p://digitalcommons.unl.edu/managementfacpub/109

ince the passage of the Civil Rights Act

of 1964, diversity and equality manage-

ment (DEM) has been an enduring issue

for organizations. While the DEM con-

cept has historically been associated with

mere legal compliance, the concept has advanced

from armative action (AA) and equal employ-

ment opportunity (EEO) to assume the view of a

competitive resource for organizations above and

beyond traditional high-performance work sys-

tems (Armstrong, Flood, Guthrie, Liu, MacCurtain,

& Mkamwa, 2010; Cox & Blake, 1991). Importantly,

many business leaders recognize the inherent

value in a diverse workforce and its boom-line

Published in Human Resource Management 52:2

(March–April 2013), pp. 215–242; doi: 10.1002/hrm.21528

The Link Between Diversity

and Equality Management

Practice Bundles and Racial

Diversity in the Managerial

Ranks: Does Firm Size Maer?

Orlando C. Richard, Hyuntak Roh, and Jenna R. Pieper

Abstract

Invoking strategic human resource management (SHRM) theory and tenets of the

resource-based view of the rm, we explore how two bundles of diversity and

equality management (DEM) practices inuence racial diversity in the manage-

rial ranks. By considering the conceptualization of DEM practices and the mod-

erating role of rm size, our study disentangles subtle nuances in the DEM prac-

tices–racial diversity in managerial ranks relationship. Based on a sample of 137

Fortune 1,000 rms over a two-year period, our results suggest that minority op-

portunity-based DEM practices and manager accountability DEM practices posi-

tively relate to racial diversity in managerial ranks, and these relationships are

stronger in smaller companies than large ones. Theoretical and practical impli-

cations for a strategic perspective on future diversity management research are

elaborated.

Keywords: diversity and equality management practices, racial diversity, rm

size

215

digitalcommons.unl.edu

Corresponding author — Orlando C. Richard, Organizations, Strategy, and International Management Area, School of Management, University of

Texas at Dallas, Box 830688, Richardson, TX, 75083; ph 972 883-4073, email [email protected]

216 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

impact on the viability of their organizations. Ev-

idence of this recognition can be seen in the sub-

stantial growth in corporate investments in DEM

practices designed to create greater inclusion of all

organizational stakeholders. For instance, nearly

95 percent of Fortune 1,000 companies have diver-

sity training initiatives in place (Chavez & Weis-

inger, 2008; Grensing-Pophal, 2002), and DEM is

an eight-billion-dollar industry, with diversity con-

sultants generating annual revenues estimated to

be just under $600 million (Hansen, 2003).

Research on the outcomes of workplace di-

versity has also grown exponentially during this

time (e.g., Harrison & Klein, 2007;

Jackson, Joshi, & Erhardt, 2003;

Milliken & Martins, 1996; Rich-

ard, Barne, Dwyer, & Chad-

wick, 2004; Van Knippenberg &

Schippers, 2007; Webber & Dona-

hue, 2001; Williams & O’Reilly,

1998). Given the value placed

on diversity by both academ-

ics and practitioners, an evalua-

tion of the extent to which DEM

practices create a more diverse

set of stakeholders would seem

essential (Gilbert, Stead, & Iv-

ancevich, 1999; Yang & Konrad,

2011). However, there have been

few eorts to measure their ef-

fectiveness (Cox, 1991; Cox &

Blake, 1991; Ellis & Sonnenfeld,

1994; Konrad & Linnehan, 1995;

Na & Kellough, 2003; Rich-

ard & Johnson, 1999). Rather, ev-

idence regarding the ecacy of

DEM practices in creating a di-

verse workplace has been im-

plied through the workplace

diversity–rm performance link, research examin-

ing DEM practices as key factors empowering the

degree to which a diverse workforce is more (or

less) eective (e.g., Cunningham, 2009; Kochan et

al., 2003; Kossek, Lobel, & Brown, 2006; Yang &

Konrad, 2011), and organization stratication re-

search (e.g., Goodman, Fields, & Blum, 2003; Ka-

lev, Dobbin, & Kelly, 2006; Reskin & McBrier, 2000)

studying the association between broad-based

HR practices (e.g., recruitment) and percentages

of women and minority groups in organizations.

In turn, the focus of our article is to investigate

the overall racial diversity (or variety; Harrison &

Klein, 2007) in rms’ managerial ranks, as (a) race

is a major component of diversity in rms (Rich-

ard, 2000) and (b) managers inuence strategic de-

cision making and implementation of strategic pol-

icies (e.g., Burgelman, 1994; Dwyer, Richard, &

Chadwick, 2003; Floyd & Wooldridge, 1997), both

of which aect a rm’s boom line.

Based on a sample of 137 Fortune 1,000 rms

over two years, the results of our article oer

three contributions to the literature and speak

to numerous constituencies directly concerned

with the impact of DEM practices. First, we theo-

rize about and empirically test whether two bun-

dles of DEM practices are associated with greater

overall representation of racial minorities in the

managerial ranks, which we operationalize us-

ing Blau’s (1977) index of heterogeneity. Invoking

theory from strategic human resource manage-

ment (SHRM), we examine minority-opportunity-

based DEM practices (i.e., mentoring and net-

works, management tracks for minorities) and

DEM practices aimed at increasing manager ac-

countability for racial diversity (i.e., bonuses and

performance appraisals tied to meeting diversity

goals). Such a dimensional approach (similar to

“bundles” in SHRM) lends to a beer theoretical

and practical understanding of those DEM prac-

tices associated with increased levels of racial di-

versity in the managerial ranks.

The second major contribution of our article

is to provide a more clear understanding of the

boundary conditions stipulating when the ear-

lier mentioned DEM practice bundles are strongly

(weakly) related to a rm’s level of racial diversity

in managerial ranks. Given the lack of in-depth

knowledge of this relationship, plus the likelihood

that developments in such knowledge will beer

expose how rms can create greater levels of di-

versity to stimulate their performance, the practi-

cal and conceptual payo to uncovering such sub-

Given the value

placed on diversity

by both academics

and practitioners,

an evaluation of

the extent to which

DEM practices

create a more

diverse set of

stakeholders would

seem essential.

However, there

have been few

efforts to measure

their effectiveness.

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 217

tle nuances is great. To this end, we theorize about

and empirically examine how rm size moderates

the value of DEM practices.

Our third contribution reects the inclusion of

multiple racial minority groups to investigate DEM

practice eects on not only broad-based diversity

indices (i.e., Blau’s index of heterogeneity), but also

specic minority groups. Going beyond previous

research, which has narrowly focused on African

American mobility into management, we consider

other often disenfranchised minority subgroups

such as Hispanics and Asians. Hence, our ndings

provide detailed insight into how DEM practices

aect managerial representation across a multitude

of racial minority subgroups.

Theoretical Development and Hypotheses

A signicant body of research in the area of stra-

tegic human resource management (SHRM) pur-

ports that human resource practices can be aligned

with rm business strategy and contribute to or-

ganizational performance goals (Delery & Doty,

1996; Huselid, 1995). These practices (e.g., rigor-

ous selection procedures, group-based pay, merit-

based promotion, high levels of training, and self-

managed teams) are touted as “high-performance”

work practices (HPWPs) or “strategic” HR prac-

tices. In a comprehensive review of 92 studies,

Combs, Liu, Hall, and Ketchen (2006) found that

HPWPs have a moderately positive (r = .20) eect

on rm performance. Based on SHRM theory, such

practices operate by increasing employees’ human

capital, empowering employees with the opportu-

nity to act, and motivating employees to behave in

ways conducive to meeting organizational goals

(Becker & Huselid, 1998; Becker, Huselid, Pickus,

& Spra, 1997; Gerhart, 2007).

Some researchers have argued that DEM prac-

tices also fall into this framework and are likely to

provide rms with a competitive advantage (e.g.,

Armstrong et al., 2010; Kossek et al., 2006; Richard

& Johnson, 1999). Specically, diversity manage-

ment has been dened as a strategy that rms use

to more eciently capitalize on the opportunities

that diversity oers (Society for Human Resource

Management, 2008) and goes beyond Armative

Action and EEO-based programs (R. R. Thomas,

1991). Under this broad denition, rms adopt a

number of practices, including increasing aware-

ness through training, mentoring and network-

ing programs, management tracks for minorities,

and so on. Indeed, in a recent study of 241 rms

in Ireland, Armstrong and colleagues (2010) found

that a diversity and equality management system

predicted rms’ labor productiv-

ity, workplace innovation, and

employee voluntary turnover

rates and uniquely accounted for

an additional 2–2.5 percent of the

variance in these outcomes above

traditional HPWPs.

A predominant theoretical per-

spective in the area of SHRM use-

ful to understanding how DEM

practices lead to a competitive

advantage is the resource-based

view of the rm (Barney, 1991;

Conner, 1991; Wright & McMa-

han, 1992). The theory has been

applied to shed light on how HR

practices shape a rm’s human

capital pool to provide a com-

petitive advantage for the rm

(Pfeer, 1998; Schuler & MacMil-

lan, 1984; Ulrich, 1991; Wright &

McMahan, 1992). These researchers have consid-

ered four criteria by which human resource prac-

tices can add competitive advantage for the rm:

human resource practices must add value to the

rm, be rare, be inimitable, and not have substi-

tutes (Wright & McMahan, 1992).

Extending these perspectives, some research-

ers have proposed that by broadening the talent

pool, providing access to diverse perspectives, in-

creasing the diversity of the customer base, en-

hancing the cultural competence of employees, and

increasing the inclusion of diverse groups, DEM

practices can provide rms with a sustained com-

petitive advantage (Cox, 1991; Cox & Blake, 1991;

Yang & Konrad, 2011). Under the RBV, DEM prac-

A predominant the-

oretical perspec-

tive in the area of

SHRM useful to un-

derstanding how

DEM practices

lead to a compet-

itive advantage is

the resource-based

view of the rm.

218 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

tices can also be characterized as a rm capability,

as they are designed to heighten workplace diver-

sity (Yang & Konrad, 2011). As we noted earlier, al-

though a majority of rms have adopted a num-

ber of diversity practices (e.g., in 2010, 68 percent

of rms indicated that they had

practices in place to address

workplace diversity; SHRM,

2010), there is limited empiri-

cal evidence to support the con-

tention that these practices do

in fact constitute an important

rm capability in terms of facil-

itating greater diversity. Apply-

ing the RBV perspective, we con-

sider how specic DEM practices

can be a source of competitive ad-

vantage by enabling rms to meet

an important eectiveness goal

of increasing racial diversity in

managerial ranks, which has im-

plications for enhanced rm per-

formance (Richard et al., 2004).

In addition, invoking an

SHRM perspective suggests that

single DEM practices alone may

not constitute a source of compet-

itive advantage; rather, the “bun-

dling” of dierent DEM practices

together provides for unique ar-

rangements of DEM practices that

are dicult for competitors to im-

itate, leading to stronger eects

on rm outcomes than individ-

ual HR practices (cf. Combs et al.,

2006). Proponents of HR “bun-

dles” (e.g., Appelbaum, Bailey,

Berg, & Kalleberg, 2000; Gerhart,

Trevor, & Graham, 1996; Ichnio-

wski, Shaw, & Prennushi, 1997;

MacDue, 1995) and “congurations” (Delery &

Doty, 1996) argue that an array of internally co-

herent HR practices creates “reinforcing eects”

or “synergy” that maximizes rm eectiveness. In

turn, we expand upon DEM practices conceptual-

ization to include two bundles of DEM practices

that have been designed to facilitate greater lev-

els of racial diversity in managerial ranks and are

widely adopted in US workplaces (SHRM, 2010).

The individual DEM practices, and their corre-

sponding umbrella dimensions, are deemed race-

related DEM practices because they are specically

designed to address racial diversity in organiza-

tions, not other dimensions of diversity (e.g., gen-

der and age).

Minority Opportunity-Based DEM Practices

Targeted Toward Racial Minorities

In this section, we discuss DEM practices that are

used to promote minority retention and develop-

ment and those DEM practices that theoretically

enhance rms’ racial diversity in the manage-

rial ranks. We use the term minority opportunity-

based DEM practices to describe the following bun-

dle of DEM practices: racial minority mentoring

programs, racial minority network groups, in-

ternships for racial minorities, and career tracks

for racial minorities with high potential as future

managers. These DEM practices correspond to

the identity-conscious HRM structures discussed

by Konrad and Linnehan (1995) that are aimed

at remedying current racial discrimination in the

workplace, addressing past inequity, and achiev-

ing fair representation for various racial minor-

ity groups within managerial levels. Together, as

a bundle, these DEM practices aimed at provid-

ing the necessary opportunity structures for ra-

cial minorities to achieve advancement operate by

increasing racial minorities’ social resources nec-

essary to succeed, increasing organization eorts

to identify and promote high-potential minority

managers, and enhancing developmental opportu-

nities for minorities.

Formal network programs and mentoring are

viewed as essential elements of an organization’s

eorts to improve the social environment for ra-

cial minorities in rms. Minorities are often ex-

cluded from informal social networks in rms,

and this can have a detrimental impact on their

career success and retention (Blake-Beard, Mur-

rell, & Thomas, 2007; Ibarra, 1993). Indeed, re-

Invoking an SHRM

perspective

suggests that single

DEM practices

alone may not

constitute a source

of competitive

advantage; rather,

the “bundling”

of different DEM

practices together

provides for unique

arrangements of

DEM practices that

are difcult for

competitors to

imitate, leading

to stronger effects

on rm outcomes

than individual HR

practices.

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 219

search involving social networks has provided ev-

idence that individuals with more social ties or “in

the thick of things” are less likely to leave the or-

ganization (Feeley, 2000; Feeley, Hwang, & Barne,

2008; Mossholder, Seoon, & Henagan, 2005). The

social exclusion of minorities from informal net-

works in organizations has been aributed to the

tendency of individuals to engage in homophilous

interactions (i.e., interactions with similar others)

that tend to facilitate greater acceptance, trust, and

predictability. When minorities are represented in

small numbers, they tend to be excluded from so-

cial interactions and lose out on developmental op-

portunities (Ibarra, 1992, 1993; Kanter, 1977; Miller,

Lincoln, & Olson, 1981).

More specically, formal network groups are as-

sociations of minority employees that exist within

organizations to remedy social isolation and exclu-

sion in organizations. Common activities within

these groups include sharing information about

happenings within the company, providing so-

cial support to members, and providing oppor-

tunities to interact with other minorities (Fried-

man & Holtom, 2002). The earliest network groups

were formed by African American sales employ-

ees at Xerox in the late 1960s, and subsequently

several rms have adopted ethnicity-based net-

work groups to aract and retain qualied minor-

ity managers (Friedman & Deinard, 1991). Fried-

man (1996) identies the following characteristics

that distinguish formal network groups from other

types of employee associations: these groups are

organized based on social identity, such as com-

mon ethnicity; these groups are intra-organiza-

tional entities, organized by members rather than

managers; and these groups are publicly recog-

nized or formally organized. Although network

groups are fairly ubiquitous in organizations, there

is limited empirical evidence to test their eective-

ness (Blake-Beard et al., 2007). Based on data from

the National Black MBA Association, Friedman

(1996) found that those managers who worked

in organizations with network groups were more

aware of the importance of networks, less likely to

be kept out of informal networks, and more likely

to have mentors in organizations. More recent re-

search shows that networking had modest benets

in terms of increasing the representation of white

women and a negative eect on the representation

of black men (Kalev et al., 2006).

The positive eects of mentoring programs on

career outcomes are more widely documented

(e.g., Allen, Eby, Poteet, Len, & Lima, 2004; Eby,

Allen, Evans, Ng, & DuBois, 2008). In particu-

lar, mentoring is seen as a powerful tool facilitat-

ing employees’ career progression up the organi-

zation ladder (Blake-Beard, 1999; Murrell, Crosby,

& Ely, 1999; D. A. Thomas & Gabarro, 1999). Men-

toring programs tend to be formalized at the dy-

adic level with a matching between senior man-

agers and their junior counterparts, with the two

parties meeting regularly for ca-

reer counseling and informal ad-

vice (Kram & Hall, 1991; Ragins,

1995). DiTomaso, Thompson, and

Blake (1988) noted that a lack of

mentors is seen by managers as

the most important roadblock to

career success. Cox and Nkomo

(1991), in a study of 729 black and

white MBAs, found that black

MBAs were less likely to report

having access to a mentor than

their white counterparts. R. R.

Thomas (1991) notes that even

when black managers do have

mentors, they still need to proac-

tively cultivate multiple social re-

lationships with black and white

mentors to maximize the instru-

mental career and social support

needed to succeed. These nd-

ings suggest that although minor-

ity mentoring can have benecial

consequences in organizations,

there are challenges to fully

realizing these benets. Nevertheless, empiri-

cal evidence shows a positive impact of mentor-

ing programs for increasing representation of black

women in management (Kalev et al., 2006).

While networking and mentoring programs

provide opportunity structures by reducing so-

The earliest

network groups

were formed by

African American

sales employees

at Xerox in the

late 1960s, and

subsequently

several rms have

adopted ethnicity-

based network

groups to attract

and retain qualied

minority managers.

220 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

cial isolation, internships and career tracks for mi-

norities reduce barriers by improving the access

that minorities have to higher-level jobs in organi-

zations (Konrad & Linnehan, 1995). Although the

specic impact of these types of practices has re-

ceived almost no prior research aention, related

personnel practices (such as armative action

plans) have been found to have the most imme-

diate direct impact on increasing racial minority

group representation in the management ranks

(Kalev et al., 2006; Leonard, 1984). At the manage-

rial level, we would also like to note that minority

internships and career tracks for employees may

make rms more aractive to qualied minority

applicants. Thus, these practices could improve

the araction and retention of minority managers

in rms and contribute to racial diversity in man-

agerial ranks.

Hypothesis 1: Race-based minority opportunity-

based DEM practices will be positively related to ra-

cial diversity in the managerial ranks.

Manager Accountability DEM Practices

The second bundle of DEM practices we discuss in-

clude those practices aimed at increasing manage-

rial diversity by directly motivating actions and be-

havior of managers through performance appraisal

and reward systems. Such practices, which we la-

bel manager accountability DEM practices, include

providing managers with incentive pay when they

meet organizational diversity goals and evaluating

managers on diversity-related tasks or outcomes

(e.g., establishing a positive diversity climate, pro-

moting an equal opportunity environment, retain-

ing minorities, and so forth) in the performance

appraisal process. Importantly, lile empirical re-

search to date has evaluated the impact of these di-

versity practices on racial diversity within rms—a

gap that we note may be due to the low incidence

of such practices in rms (e.g., a 2010 SHRM sur-

vey nds that only 47 percent of surveyed rms

evaluate managers on diversity-related goals and

even fewer, 10 percent, tie managers’ pay-for-per-

formance to diversity goals). However, there is rel-

evant theory suggesting that increasing account-

ability through formalized personnel practices can

improve the representation of women and minor-

ities in organizations (e.g., DiMaggio & Powell,

1983; Edelman, 1992). Morrison (1992) proposes

enhancing accountability for increasing diversity

through the inclusion of diversity goals in manag-

ers’ performance appraisals and in the determina-

tion of bonuses. In fact, Fortune companies such

as Hya and Denny’s oer strong incentives (e.g.,

15 percent bonuses) for meeting diversity goals

and benchmarks (Brathwaite, 2002; Prince, 2005).

At Colgate- Palmolive, for example, when reten-

tion levels for high-potential minorities fall below

90 percent, senior executives lose money (Greer &

Virick, 2008).

These accountability practices provide the or-

ganization with tools to communicate the value

it places on improving managerial racial diver-

sity, thus fostering competitiveness (Prince, 2005).

Nevertheless, organizations encounter dicul-

ties dening and measuring specic behaviors

that are directed at improving diversity or the di-

versity climate in the rm and, alternatively, may

choose to make evaluative and reward decisions

based on the extent to which managers are able

to change the demographic prole of their direct

reports (Greer & Virick, 2008). Limited evidence

suggests that adoption of diversity-related per-

formance evaluation improves the representation

of white women but not black men (Kalev et al.,

2006). In our study, we focus only on accountabil-

ity practices aimed at increasing racial diversity

in the managerial ranks (not the representation of

women).

Hypothesis 2: Manager accountability DEM prac-

tices will be positively related to racial diversity in

the managerial ranks.

The Moderating Role of Firm Size

Organization theorists have greatly elaborated

factors that moderate the relationship between

organizational features and their eectiveness

(Lawrence, 1993; Lawrence & Lorsch, 1967). Like-

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 221

wise, a major focus of SHRM research is to iden-

tify the relevant organizational characteristics

that shape the ecacy of HR practices (Schuler &

Jackson, 1989). Accordingly, we next turn our at-

tention to one of the more dominant contextual

factors used in the sociological and organiza-

tional theory literatures (Haveman, 1993)— rm

size—to provide a more nuanced understanding

of the ecacy of our two DEM practice bundles

in inuencing racial diversity in the managerial

ranks. We discuss the relevant logics concerning

the importance of rm size, predicting that while

larger rms adopt more DEM practices, DEM

practices are more important in smaller compa-

nies in terms of inuencing diversity eective-

ness goals.

First, while rm size is often associated with

the adoption of human resource policies (Mat-

lay & Addis, 2002; van Eerde, Tang, & Talbot,

2008) and diversity practices specically (Konrad

& Linnehan, 1995; Rynes & Rosen, 1995), it also

has implications for the implementation phase

of DEM practices. Specically, the implementa-

tion of DEM practices should be more eective

in smaller rms for reasons such as greater rm

exibility and reduced inertia, both of which af-

fect a rm’s ability to compete in dynamic and

competitive environments. Larger rms are more

likely to have formalized routines, policies, and

structures in place that impede implementation

of HRM practices. In fact, smaller rms have

been found to be more exible (Fiegenbaum

& Karnani, 1991; Levy & Powell, 1998) and ex-

perience less inertia (Hannan & Freeman, 1984)

than larger rms. Further supporting our notion,

Garrison (2009) found that organization size im-

peded organizational response capability on the

early adoption of disruptive technology, with

larger rms having fewer early adoptions. Such

ndings translate to more eective implementa-

tion of DEM practices in smaller rms, as well

as the mere ability for small rms to adapt and

change the demographic composition of man-

agement levels through their DEM practices. In

large organizations, on the contrary, we expect

higher levels of inertia to hinder the eective-

ness of diversity practices intended to change the

composition of the workforce.

Second, Goodman et al. (2003) suggested that

smaller rms may be more resource-dependent

and experience heightened pressure to remove the

glass ceiling for minorities. In turn, the amount

of DEM practices in place within small rms will

prove to be more valuable in comparison to the

same amount of DEM practices operating in larger

rms. For instance, smaller rms often have a more

dicult time recruiting and hiring minorities than

larger ones ( Carrington, McCue, & Pierce, 2000;

Chay, 1998; Holzer, 1998). Given a greater resource

need, the DEM practices that small rms imple-

ment should be even more critical for them to

achieve their diversity eectiveness goals.

Third, research conducted by Sels, De Winne,

Maes, Faems, Delmoe, and Forrier (2003) found

that the adoption of HRM best practices was prof-

itable for smaller organizations. Their results re-

vealed that while the adoption of HRM best prac-

tices was low in small rms relative to large rms,

the intense use of HR practices was more positively

related to productivity and protability in smaller

rms. Thus, there is evidence that HRM best prac-

tices confer rm value for smaller organizations

(Klein, 2004). In summary, we surmise that similar

to HRM best practices, our DEM practices will be

most benecial for smaller organizations.

Hypothesis 3: Firm size will moderate the race-

based minority opportunity-based DEM practices–

racial diversity in the managerial ranks relationship.

Race-based minority opportunity-based DEM prac-

tices will have a stronger positive relationship with

racial diversity in the managerial ranks in small ver-

sus large organizations.

Hypothesis 4: Firm size will moderate the manager

accountability DEM practices–racial diversity in the

managerial ranks relationship. Manager accountabil-

ity DEM practices will have a stronger positive rela-

tionship with racial diversity in the managerial ranks

in small versus large organizations.

222 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

Methods

Sample

Our dataset merges data from two unique sources

for two consecutive years (i.e., 2002– 2003). First,

information on rms’ demographic composition

and DEM practices came from a sample of US

rms participating in Fortune magazine’s manag-

ing diversity questionnaire. The sampling frame

represents a wide cross-section of Fortune 1,000

rms and the largest 200 privately held US compa-

nies spanning numerous industrial sectors; on av-

erage, a response rate of 14 percent was reported

(e.g., Hickman, Tkaczyk, Florian, Stemple, & Vazquez,

2003). Fortune magazine, in conjunction with the

Council on Economic Priorities

(CEP; a nonprot research orga-

nization that has evaluated cor-

porate diversity since 1971), col-

lected data on the demographic

proles of the participating orga-

nizations (both gender and race)

and surveyed rms’ DEM prac-

tices, especially with regard to ra-

cial diversity in the managerial

ranks. Our sample was selected

because (1) detailed demographic

data on rms’ racial composition

was available across ve racial

categories and (2) the rms went

through an extensive, rigorous

evaluation process that required

them to disclose their diver-

sity practices at the headquarters

level. Next, we utilized COMPU-

STAT to acquire the nancial vari-

ables (e.g., industry-level control

measures) in our study and to

cross-check the nancial data re-

ported in the Fortune survey. We

used a conservative approach to

test our hypotheses, including

those cases where all data were

available for both years; as a result, our sample of

rms was varied from 68 to 137 depending on the

model specication.

It is important to highlight that our sample in-

cluded rms that were listed in the Diversity Elite

list (50 Best Companies for Minorities). However,

about 60 percent of the rms in our sample (ap-

proximately 87 of the 137 rms) were not a part of

the 50 companies that compose the Diversity Elite,

further increasing our condence that our sample

consisted of rms with varying levels of racial di-

versity and DEM practices. For example, the range

on the racial diversity in the managerial ranks in-

dex was from .02 (practically no diversity) to .60

(high levels of diversity), providing evidence of

variation in our dependent variable.

To check whether response bias existed, we also

compared our sample of respondents to nonre-

sponding Fortune 500 companies in terms of reve-

nue, total assets, and total number of workers. Fol-

lowing the work of Osterman (1994) and Delery

and Doty (1996), we employed a logistical regres-

sion analysis, where the dependent variable was

dened as a dummy variable coded 1 for respon-

dents and 0 for nonrespondents. No signicant dif-

ferences were detected from the analysis, indicat-

ing that response bias was not a serious problem in

the current dataset.

Measures

Dependent Measure

The dependent variable representing DEM prac-

tice eectiveness in our study was racial diversity

in the managerial ranks. Blau’s (1977) index of het-

erogeneity was used to develop the measure of ra-

cial diversity in the managerial ranks. The index

is calculated as follows: racial diversity index = (1

− ΣP

), where P

is the proportion of group mem-

bers in a category i. The Fortune survey assessed

the percentage of ve categories of managers’ race

in rms (i.e., white, black [i.e., African American],

Hispanic, Asian, and Native American [i.e., Amer-

ican Indian]). For ve categories, Blau’s index

takes on a range from 0 to 0.80. An index of zero

suggests only one category of employees, while

a value of 0.80 implies that all ve categories are

equally represented in the organization. Racial di-

versity in managerial ranks in our study ranged

About 60 percent

of the rms

in our sample

(approximately 87

of the 137 rms)

were not a part of

the 50 companies

that compose the

Diversity Elite,

further increasing

our condence

that our sample

consisted of rms

with varying levels

of racial diversity

and DEM practices.

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 223

from .02 (practically no diversity) to .60 (high lev-

els of diversity).

We also provided supplemental analyses using

the proportion of each racial minority category in

the managerial ranks (i.e., the proportion of man-

agers in each racial category among total number

of managers). While the index of racial diversity in

the managerial ranks captured the overall level of

diversity, examining the eects of DEM practices

on individual racial categories provided for more

detailed analyses. Such an approach yielded ne-

grained information highlighting the drivers of

overall racial diversity. Because we did not observe

adequate variation across the proportional mea-

sure for Native American (which we believe to be

due to the low incidence of rms employing Na-

tive American managers), we excluded this cate-

gory from the detailed analyses.

Independent Variables

We selected two types of DEM practice bundles

as antecedents to racial diversity in managerial

ranks: minority opportunity-based DEM practices

and manager accountability DEM practices. Minor-

ity opportunity-based DEM practices was the sum-

mate of several items that tapped into the pres-

ence (yes/no responses) of racial minority specic

practices, including internships for racial minor-

ities, racial minority mentoring programs, net-

work groups, and career tracks for high-potential

racial minority managers. Manager accountability

DEM practices represented diversity practices that

(1) evaluate managers on diversity-related goals

and (2) tie managers’ rewards (bonuses) to racial

diversity goals. Managers’ performance appraisal

was the proportion of managers with apprais-

als tied to racial diversity goal accomplishment,

while managers’ bonus was the proportion of

managers with their bonuses tied to racial diver-

sity goal achievement. These two DEM practices

were averaged to represent manager accountabil-

ity DEM practices.

To assess and conrm the factor structure asso-

ciated with these practice bundles, we factor-ana-

lyzed each practice’s standard score using princi-

pal component extraction with Varimax rotation.

As expected, two factors emerged from the analy-

sis (minority opportunity-based and manager ac-

countability DEM practices). Table I shows these

results.

Other Measures

We included rm size as a moderator variable in

the model and operationalized this variable as the

Table I. Factor Analysis Results

Factor Loading

DEM Practices 1 2

Minority opportunity-based DEM practices

Internship for racial minorities 0.68 0.08

Racial minority mentoring program 0.82 −0.01

Network groups for racial minorities 0.66 −0.03

Career tracks for high-potential racial minorities 0.72 0.21

Manager accountability DEM practices

Performance appraisal tied to diversity goals 0.16 0.90

Managers’ bonus tied to diversity goals −0.04 0.91

Eigenvalue 2.06 1.47

Percentage of variance explained 34.37 24.47

Alpha 0.69 0.80

Factor loadings for the correct category are shown in bold type.

N = 146 rm year observations.

224 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

logged value of a rm’s total assets in billions of

dollars for the given year.

We also included two

rm-level control variables that may have a direct

eect on racial diversity in managerial ranks—to-

tal number of managers (logarithm) and gender diver-

sity in the managerial ranks (Blau’s index of hetero-

geneity applied to the rms’ gender composition

in the managerial ranks). We also included several

environmental- level control variables that may in-

uence racial diversity (cf. Richard, Murthi, & Is-

mail, 2007). Using each rm’s standard industrial

classication (SIC) code, industry type was coded as

a dummy variable representing 0 for rms in the

manufacturing industry (SIC code = 0 from 2,000 to

3,999) and 1 for rms in the service industry (SIC

code = 1 if less than 2,000 and greater than 3,999)

(Gomez-Mejia, Larraza-Kintana, & Makri, 2003).

We calculated industry growth (municence) as the

percentage change in industry revenues from the

previous year (Ferrier, 2001). Industry revenue was

the logged value of total revenues of each industry.

Industry concentration (power) was measured as the

percentage of sales generated by the top four rms

relative to total industry sales (Berman, Wicks, Ko-

tha, & Jones, 1999).

Analytical Approach

The data were cross-sectional (across rms) and

time series (over years) in nature; thus, we ad-

opted a panel data methodology. The use of panel

data has become increasingly popular in studies of

rm-level management research and has a number

of advantages (Hi, Gimeno, & Hoskisson, 1998).

For example, panel data and the associated meth-

ods allow researchers to control for unobserved

heterogeneity, improve statistical estimates by en-

larging the sample size (in our case, we could in-

clude multiple-year observations from rms), and

capture both between- and within-unit eects of an

entire sample (Kmenta, 1996). However, care must

be taken when conducting statistical tests on panel

data (Dielman, 1983; Neter, Kutner, Wasserman,

& Nachtsheim, 1996). The main problems include

cross-sectional heteroskedasticity and within-unit

serial correlation. When these are present, the or-

dinary least squares (OLS) assumptions of constant

variance and uncorrelated error terms are violated,

rendering OLS inappropriate. To correct for het-

eroskedasticity and autocorrelated error terms, we

used the generalized least squares (GLS) procedure

(Kmenta, 1996; Sayrs, 1989).

Among the conventional panel data model

specications (xed- and random-eects mod-

els), we utilized random-eects (RE) estimators in

our analyses. Although xed-eects (FE) models

are commonly preferred (Greene, 2003), a major

drawback of the FE model is its inability to esti-

mate variables that are stable over time. Our in-

dependent variables varied lile over time in our

sample rms and, thus, resulted in a large reduc-

tion in available observations when applying the

standard FE model (xed on rms in our study)—

a common problem when there are relatively few

observations per cross-sectional unit (Greene,

2003). In turn, we deemed the FE model inappro-

priate and used RE models, which assume that

the unobserved xed eects are uncorrelated with

the explanatory variables. A Hausman test (Haus-

man, 1978) revealed no signicant correlations be-

tween independent variables and the rm-level

xed eects. In the RE specication, the intercept

α is assumed to consist of a deterministic compo-

nent (α) and a random component u

, which is as-

sumed to be distributed according to a normal

distribution (i.e., α = α + u

). Therefore, the model

is given by:

= α + β X

+ u

+ ε

Results

Table II shows descriptive statistics and correla-

tions among the variables used in the study. Mean

racial diversity in the management ranks in the

rms in our sample was .32 (SD = .12). In addition,

the correlations between the variables do not sug-

gest the potential for multicollinearity (high level

of correlations among independent measures) in

the multivariate regression analyses.

Table III presents the results of the multivari-

ate analyses used to test our hypotheses regard-

ing the eects of DEM practice bundles on racial

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 225

Table II. Descriptive Statistics and Correlations

Variables Nobs Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13

1. Minority 272 3.05 1.20

opportunity-based

DEM practices

2. Manager practices 146 58.95 36.80 0.15

accountability DEM

3. Number of 272 8.10 1.16 0.40*** −0.16*

managers

4. Gender diversity 272 0.41 0.09 0.15* −0.06 0.33***

in the managerial

ranks

5. Service industry 244 0.61 0.49 −0.16* −0.35*** 0.11 0.27***

6. Industry growth 240 0.03 0.12 −0.08 −0.06 0.06 0.19** 0.09

7. Industry revenue

255 25.65 0.89 0.10 −0.06 0.15* 0.01 0.19** 0.17**

8. Power 253 0.60 0.20 0.11 −0.02 0.35*** 0.18** −0.23*** −0.12 −0.30***

9. Firm size 221 23.96 1.45 0.27*** −0.05 0.49*** 0.27*** 0.21** 0.06 0.45*** 0.11

(total assets

)

10. Racial diversity in 272 0.32 0.12 0.07 −0.13 0.36*** 0.35*** 0.28*** −0.12 −0.11 0.19** 0.12

the managerial ranks

11. African American 272 0.08 0.04 0.22*** −0.14 0.39*** 0.31*** 0.34*** 0.09 −0.01 0.20** 0.24*** 0.53***

managers (%)

12. Asian managers (%) 272 0.05 0.04 0.08 0.12 0.08 0.20** −0.14* −0.27*** −0.08 0.20** 0.12 0.52*** −0.09

13. Hispanic managers (%) 272 0.06 0.05 −0.09 −0.19* 0.11 0.16** −0.29*** −0.04 −0.19** −0.09 −0.15* 0.68*** 0.18** 0.14*

14. Native American 272 0.01 0.01 −0.16** −0.15 0.09 −0.06 0.13 −0.02 0.08 0.03 −0.03 0.28*** −0.10 −0.10 0.05

managers (%)

Correlations are based on pairwise deletion.

a. Logarithm.

* p < .05 ; ** p < .01 ; *** p < .001

226 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

diversity in the managerial ranks and the moder-

ating inuence of rm size. The baseline model

(Model 1) indicated that of the control measures

included, total number of managers, gender di-

versity in the managerial ranks, and industry type

(i.e., service industry) were positively and signif-

icantly associated with rms’ racial diversity in

the managerial ranks. The eects of gender diver-

Table III. Results of Random-Effects GLS Regression Analysis on Racial Diversity in the Managerial Ranks

Variables Model 1 Model 2 Model 3 Model 4

Constant 0.229 0.344* 0.739** 0.808**

(0.180) (0.189) (0.302) (0.293)

Controls

Number of managers

0.018** 0.011 0.012 0.012

(0.007) (0.01) (0.009) (0.009)

Gender diversity in the managerial ranks 0.412*** 0.360** 0.283* 0.229*

(0.089) (0.120) (0.130) (0.129)

Service industry 0.046* 0.076** 0.074*** 0.080***

(0.020) (0.024) (0.023) (0.023)

Industry growth −0.023 −0.031 −0.032 −0.026

(0.015) (0.019) (0.021) (0.020)

Industry revenuea −0.010 −0.012* −0.028** −0.030**

(0.007) (0.007) (0.012) (0.011)

Power 0.003 0.014 0.030 0.022

(0.032) (0.042) (0.042) (0.041)

Main effects

Minority opportunity-based DEM practices

0.006 0.017* 0.020**

(0.007) (0.009) (0.009)

Manager accountability DEM practices

0.013*** 0.013*** 0.014***

(0.004) (0.004) (0.004)

Moderator

Firm size (total assets

) 0.006 0.021*

(0.009) (0.010)

Interactions

Minority opportunity-based DEM practices × rm size

−0.016*

(0.007)

Manager accountability DEM practices ×  rm size

–0.009*

(0.005)

Number of observations 219 124 108 108

Number of rms 137 79 68 68

0.228 0.255 0.287 0.327

Unstandardized regression coefcients (b) reported; standard errors are in parentheses.

a. Logarithm.

b. Variables standardized prior to running the analyses.

* p < .05 ; ** p < .01 ; *** p < .001 (one-tailed test)

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 227

sity in the managerial ranks and service industry

on racial diversity in the managerial ranks were

robust across all models. Models 2, 3, and 4 de-

tail the results of Hypotheses 1–4. Hypothesis 1

predicted that the presence of minority oppor-

tunity-based DEM practices would be positively

related to rms’ racial diversity in the manage-

rial ranks. As expected, we found a signicant

and positive eect of minority opportunity-based

DEM practices on racial diversity in the manage-

rial ranks (b = .017, p < .05 in Model 3 and b = .02,

p < .01 in Model 4), indicating that managerial ra-

cial diversity index can be increased by .017–.02

for each standard deviation increase (SD = 1.20)

in minority opportunity-based DEM practices, or

roughly an adoption of 1 additional practice. For

rms with average racial diversity in the mana-

gerial ranks (.32 based on Table II) and who im-

plement an additional practice, this translates

to a 5–6 percent racial diversity in the manage-

rial ranks increase. Consistent with Hypothesis 2,

which predicted that the proportion of managers

held accountable for or receiving incentive pay

for meeting diversity goals would be positively

related to racial diversity in the managerial ranks,

manager accountability DEM practices also had

a signicant and positive eect on rms’ overall

racial diversity in the managerial ranks. The re-

sults indicated that about a .013 point increase in

the racial diversity index (or 4 percent increase

for rms with an average level of racial diversity)

can be expected when there is a one standard de-

viation increase (SD = 36.8 percentage points) in

the proportion of managers held accountable for

or receiving incentive pay for meeting diversity

goals. This paern of ndings was robust across

all models presented in Table III (b = .013, p < .001

in Models 2 and 3; b = .014, p < .001 in Model 4).

Hypotheses 3 and 4 stated that rm size mod-

erates the relationship between the DEM prac-

tice bundles and racial diversity in the manage-

rial ranks (Model 4). Supporting Hypothesis 3, we

found a moderating inuence of rm size on the

eect of minority opportunity-based DEM prac-

tices—that is, the positive eect of these practices

on racial diversity was stronger in smaller rms

but not in larger rms (b = −.016, p < .05). This in-

teractive eect is illustrated in Figure 1, which

shows that smaller rms (one standard devia-

tion below the mean in terms of logged value of

total assets) have a strong, positive relationship

between the use of minority opportunity-based

DEM practices and racial diversity in the mana-

gerial ranks, whereas the relationship was weak

in larger rms (one standard deviation above the

mean). Thus, small rms with an average level of

racial diversity in the managerial ranks (.32) will

increase their racial diversity by approximately

11.25 percent with each standard-deviation in-

crease in minority opportunity-based DEM prac-

tices, whereas large rms with the same level of

racial diversity will expect only

a 1.25 percent increase. We also

found support for Hypothesis 4

regarding the moderating role

of rm size on the relationship

between manager accountabil-

ity DEM practices and racial di-

versity in the managerial ranks

(b = −.009, p < .05). As shown in

Figure 2, the relationship be-

tween manager accountability

DEM practices and racial diver-

sity in the managerial ranks was

positive and stronger in small

rms (one standard deviation be-

low the mean), but the paern

was less apparent in large rms

(one standard deviation above

the mean level). More specically, small rms

with average racial diversity in the managerial

ranks will increase their diversity by about 7.18

percent if they increase their manager account-

ability DEM practices by 36.8 percentage points

(1 SD), whereas large rms will receive a smaller

increase of roughly 1.56 percent for the same in-

crease in manager accountability DEM practices.

Together, the fully specied model with the in-

teraction terms (Model 4) accounted for an addi-

tional 4 percent of the variation in racial diversity

in managerial ranks above the main eects model

only (Model 3).

The effects of

gender diversity

in the managerial

ranks and service

industry on racial

diversity in the

managerial ranks

were robust across

all models.

228 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

Figure 1. Interactive Effect of Firm Size and Minority Opportunity-Based DEM Practices on Racial Diversity in the

Managerial Ranks

Figure 2. Interactive Effect of Firm Size and Manager Accountability DEM Practices on Racial Diversity in the Man-

agerial Ranks

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 229

Supplemental Analyses

Table IV presents the results of supplemental anal-

yses employed to beer understand which ra-

cial groups’ overall representation in rms’ man-

agerial ranks our bundles of DEM practices were

more likely to inuence. Specically, we exam-

ined the eects of the two DEM practice bundles

on the proportion of each racial minority category

in the managerial ranks (the percentage of manag-

ers in each racial category among the total num-

ber of managers, excluding Native American man-

agers due rms employing few Native American

managers in our sample). Interestingly, we ob-

served that increasing the amount of minority op-

portunity-based DEM practices was positively

and signicantly related to the proportion of Afri-

can American managers in rms (b = .009, p < .01

in Model 4), indicating that a rm’s adoption of

one minority opportunity-based DEM practice ap-

proximately leads to about a 1 percent increase of

African American manager representation in the

managerial ranks, while manager accountabil-

ity DEM practices had no eects. In contrast to the

ndings for African American managers, the pro-

portion of Asian managers was positively and sig-

nicantly aected by the use of manager account-

ability DEM practices (b = .008, p < .001 in Model

8), indicating that the representation of Asian man-

agers increases about 1 percent as the percentage

of managers are held accountable for or receive in-

centive pay for meeting diversity goals increases

one standard deviation (or 36.8 percentage points),

while no eects were found from the use of minor-

ity opportunity-based DEM practices. We found

no statistically signicant eects of DEM practice

bundles on the proportion of Hispanic managers

(Models 10–12).

The interaction between minority opportu-

nity- based DEM practices and rm size was sig-

nicant and negative for the proportion of Afri-

can American managers (b = −.006, p < .01, Model

4), indicating that the positive eect of minority

opportunity-based DEM practices on the propor-

tion of African American managers was stronger

in smaller rms than large rms (Figure 3 graph-

ically illustrates this interaction). Specically,

small rms with an average African American

manager representation, or 8 percent, can expect

about an 18.75 percent increase in this minor-

ity subgroups representation in the managerial

ranks for each minority op-

portunity-based DEM practice

they adopt. In turn, larger rms

adopting an additional practice

will only expect about a 1.75 per-

cent increase. Signicant interac-

tions with rm size were also ev-

ident for the proportion of Asian

managers. As shown in Model 8,

the eects of the two DEM prac-

tice bundles on rms’ proportion

of Asian managers were both

qualied by a signicant and

negative interaction with rm

size (b = −.006, p < .001 for mi-

nority opportunity-based DEM

practices; b = −.006, p < .001 for

manager accountability DEM

practices). These interactions in-

dicate that eects of the DEM

practice bundles on the propor-

tion of Asian managers were

stronger in smaller rms than

large rms (see Figures 4 and 5

for illustrations of these interac-

tions). In particular, small rms

with an average Asian manager

representation of 5 percent will

see about a 16–28 percent in-

crease in this minority group

representation.

Discussion

Over the past several decades, research on work-

place diversity has grown dramatically. While or-

ganizations spend millions of dollars annually on

various DEM practices, the benet of these pro-

grams to increased workplace diversity is rarely

documented. Our research recties this gap by fo-

cusing on the eects of specic bundles of DEM

practices on racial diversity in the managerial

ranks.

The interaction

between minority

opportunity-based

DEM practices

and rm size was

signicant and

negative for the

proportion of

African American

managers

( b = –.006,

p < .01, Model

4), indicating

that the positive

effect of minority

opportunity-based

DEM practices on

the proportion of

African American

managers was

stronger in smaller

rms than large

rms.

230 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

Table IV. Results of Random-Effects GLS Regression Analysis on the Proportion of Each Racial Minority Category in the Managerial Ranks

African American Managers Asian Managers Hispanic Managers

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10 Model 11 Model 12

Constant −0.043 −0.020 −0.030 −0.029 0.038 0.019 0.119 0.180* 0.161** 0.113* 0.288** 0.294**

(0.060) (0.069) (0.117) (0.116) (0.073) (0.070) (0.104) (0.100) (0.064) (0.061) (0.092) (0.094)

Controls

Number of 0.005* 0.001 −0.000 −0.001 −0.000 0.000 −0.001 −0.001 0.003 0.005 0.007* 0.007**

managers

(0.003) (0.003) (0.004) (0.004) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)

Gender 0.116*** 0.069 0.027 0.015 0.097** 0.101** 0.092* 0.081* 0.073* 0.065 0.083* 0.074*

diversity in the (0.030) (0.044) (0.052) (0.052) (0.034) (0.035) (0.040) (0.040) (0.034) (0.044) (0.043) (0.044)

managerial ranks

Service 0.022** 0.033*** 0.031*** 0.032*** −0.018** −0.002 −0.004 −0.001 0.023** 0.026** 0.024** 0.025**

industry (0.007) (0.009) (0.010) (0.009) (0.01) (0.006) (0.007) (0.007) (0.008) (0.010) (0.008) (0.008)

Industry 0.003 0.004 0.005 0.005 −0.010 −0.027** −0.030** −0.024** −0.005 −0.007 −0.007 −0.007

growth (0.005) (0.007) (0.007) (0.007) (0.007) (0.009) (0.010) (0.008) (0.005) (0.006) (0.005) (0.006)

Industry 0.001 0.001 0.002 0.003 −0.001 −0.001 −0.004 −0.007* −0.006** −0.005** −0.013*** −0.013***

revenue

(0.002) (0.003) (0.004) (0.004) (0.003) (0.003) (0.004) (0.004) (0.002) (0.002) (0.004) (0.004)

Power 0.009 0.032* 0.032* 0.034* 0.010 0.010 0.011 0.004 −0.021 −0.009 −0.014 −0.015

(0.011) (0.015) (0.016) (0.016) (0.013) (0.014) (0.015) (0.014) (0.012) (0.014) (0.013) (0.013)

Main effects

Minority 0.007** 0.008** 0.009** −0.000 0.002 0.002 0.000 0.002 0.002

opportunity- (0.003) (0.003) (0.003) (0.003) (0.004) (0.003) (0.002) (0.002) (0.003)

based DEM

practices

Manager 0.002 0.001 0.001 0.006*** 0.007*** 0.008*** −0.001 −0.000 0.000

accountability (0.001) (0.001) (0.001) (0.002) (0.002) (0.002) (0.001) (0.001) (0.001)

DEM practices

Moderator

Firm size 0.002 0.005 0.008** 0.013*** −0.004 −0.003

(total assets

) (0.003) (0.004) (0.003) (0.004) (0.003) (0.003)

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 231

African American Managers Asian Managers Hispanic Managers

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10 Model 11 Model 12

Interactions

Minority −0.006* −0.006* −0.001

opportunity-based (0.003) (0.003) (0.002)

DEM practices

× rm size

Manager 0.001 −0.006***

−0.001

accountability (0.002) (0.002)

(0.002)

DEM practices

× rm size

Number of 219 124 108 108 219 124 108 108 219 124 108 108

observations

Number of rms 137 79 68 68 137 79 68 68 137 79 68 68

0.217 0.276 0.257 0.279 0.101 0.178 0.244 0.244 0.149 0.144 0.270 0.275

Unstandardized regression coefcients (b) reported; standard errors are in parentheses.

a. Logarithm.

b. Variables standardized prior to running the analyses.

* p < .05 ; ** p < .01 ; *** p < .001 (one-tailed test)

232 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

Figure 3. Interactive Effect of Firm Size and Minority Opportunity-Based DEM Practices on the Proportion of Afri-

can American Managers

Figure 4. Interactive Effect of Firm Size and Minority Opportunity-Based DEM Practices on the Proportion of Asian

Managers

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 233

Our results suggest that rms with greater lev-

els of the two bundles of DEM practices—minor-

ity opportunity-based DEM practices and man-

ager accountability DEM practices—have higher

levels of racial diversity in their managerial ranks

(approximately 4–6 percent higher levels). The

practical eect of such increases can be further

seen when considering the racial diversity in man-

agerial ranks–rm performance link. Andrevski,

Richard, Shaw, and Ferrier (in press) found that

a .01 unit increase in racial diversity in the man-

agerial ranks led to about a .0032 percent market

share gain (i.e., the positive year-to-year change in

the proportion of total sales in the focal rm’s pri-

mary industry that its sales represented). Combin-

ing our ndings (Table III’s Model 4) with those

of Andrevski et al., rms increasing either of their

DEM bundle practices by 1 unit each will poten-

tially see a .0051 to .0064 percent market share

gain, as these increases were associated with .014–

.02 higher levels of racial diversity in the manage-

rial ranks in our study.

Furthermore, the results of our supplemental

analyses indicated that a more nuanced approach

to understanding the eects of these DEM practices

on the representation of various racial groups in

managerial ranks across rms is warranted. While

minority opportunity-based DEM practices had a

positive eect on overall racial diversity in manage-

rial ranks, it appears that this eect was robust on

the percentage of African American managers and

Asian Americans only. Minority opportunity-based

DEM practices are aimed at providing internships,

management tracks, networking, and mentoring

to minority employees. Our ndings suggest that

these DEM practices, which are designed to cre-

ate opportunities and a socially inclusive climate in

an organization, may be more valuable for the ad-

vancement of African American managers. Given

that African Americans frequently experience “ac-

cess to management” discrimination due to prej-

udice, stereotypes, and from having a “black”-

sounding name (Bendick, Jackson, & Reinoso, 1994;

Fryer & Levi, 2004), it is a noteworthy nding that

Figure 5. Interactive Effect of Firm Size and Manager Accountability DEM Practices on the Proportion of Asian

Managers

234 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

minority opportunity-based DEM practices result

in more access for them.

In addition, the eect of manager accountabil-

ity DEM practices on racial diversity in manage-

rial ranks was most robust for Asian managers.

Manager accountability DEM practices are aimed

at increasing racial diversity in managerial ranks

by directly motivating the actions and behavior

of managers to meet diversity goals through per-

formance appraisal and reward systems. So why

would senior managers, when held accountable

for diversifying their management ranks, select

Asian managers compared to African Americans

and Hispanics? In the face of pressures to en-

hance diversity, it is possible that senior managers

promote or hire Asian managers

as opposed to other racial groups,

as this demographic group may

be more represented in the tal-

ent pool. For example, research

suggests that Asian Americans,

more than any other minority

subgroup, are recognized by the

dominant group for their com-

mitment to educational achieve-

ment and overall success (An-

derson, 1992). In fact, whites

see Asians as the most success-

fully assimilated minority group

in American society, and evi-

dence shows that whites and

Asians have the highest within-

group participation rates (13.1

percent and 8.3 percent, respec-

tively) in management (Equal

Employment Opportunity Com-

mission, 2012; Jo, 2004). Not only

are Asians viewed favorably by

whites because of their academic

and nancial success, but they are also viewed pos-

itively because of perceptions related to their co-

operative group behavior. They are motivated to

nd a way to t in with relevant others (Markus &

Kitayama, 1991). It could be that these aributes,

whether perceived or actual, explain why man-

ager accountability DEM practices have a modest

impact on Asian representation in management.

Interestingly, we did not nd any eects on the

percentage of Hispanic managers in the managerial

ranks. Such results compound the importance of

distinguishing among various racial/ethnic groups

across various contexts. In fact, the Hispanic sub-

group is much broader relative to the other racial

categories, so there may be something unique to

the Hispanic subgroup that warrants special con-

sideration. Such research is needed given that re-

search reveals that whites also report less arac-

tion to diversity consisting of Latinos whether it be

living in communities with them or working with

them (Bendick, Jackson, Reinoso, & Hodges, 1991;

Brief, Umphress, Die, Bu, & Scholten, 2005).

Thus, we propose that future research examine the

eects of other contextual variables on the eects

of DEM practices across a variety of racial/ethnic

managerial groups.

We also examined the moderating role of rm

size to disentangle the subtle nuances explaining

when the bundles of DEM practices are valuable

to rms. We argued that smaller rms are more

exible and experience less inertia, leading to

more eective implementation of DEM practices

as well as a greater ability to adapt and change

the demographic composition of management. In

addition, we argued that while larger rms adopt

more DEM practices, the eect of DEM practices

in smaller rms would be stronger given their

greater resource dependency on these practices

and greater exibility in implementing them. Our

ndings suggest that both of our DEM practice

bundles had stronger positive eects on overall

racial diversity in the managerial ranks in small

rms relative to large rms. The eect of minor-

ity opportunity-based DEM practices was further

accentuated by small rm size when considering

the proportion of black managers as an outcome

measure. This nding is particularly valuable for

small enterprises given that research has shown

that small companies tend to hire a much smaller

proportion of African Americans than larger ones

(Holzer, 1998). A similar paern of ndings was

revealed for the interaction eects of both DEM

practice bundles and rm size on the proportion

of Asian managers. These ndings provide sup-

port for the notion that structural contextual fac-

The results of

our supplemental

analyses indicated

that a more

nuanced approach

to understanding

the effects of these

DEM practices on

the representation

of various

racial groups in

managerial ranks

across rms is

warranted.

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 235

tors shape the eects of DEM practices on diver-

sity outcomes.

Limitations and Directions for Future

Research

Our study has several limitations, which, in turn,

oer future research opportunities. First, our

DEM practices are limited to minority opportu-

nity-based practices and manager accountability

practices. Other diversity practices warrant aen-

tion. For example, minority recruitment should

indirectly impact the proportion of racial minor-

ities in management by contributing to a more

diverse pool of applicants to be eventually se-

lected for promotion. Also, various types of di-

versity training may or may not be useful in in-

creasing representation of racial minorities in

management.

Second, measurement of DEM practices should

be advanced. Our typology assessed either the ab-

sence or presence of a diversity practice or the

proportion of managers exposed to certain prac-

tices. Future research might account for how long

the practice has been adopted and the frequency

in which a practice is utilized. Fine-grained mea-

sures of minority opportunity-based DEM prac-

tices could also provide more in-depth comprehen-

sion related to their eects on overall diversity and

minority representation. For example, is corporate

mentoring for minority employees more eective

when the minority protégés are assigned to minor-

ity or majority mentors, mentors inside or outside

their immediate department, or when they receive

more career or psychosocial support? Future re-

search should welcome the opportunity to go more

in depth into each DEM practice’s frequency, in-

tensity, and formulation.

Third, we were unable to draw solid inference

on how our measures impacted the percentage of

managers who were Native Americans. Although

our percentage of Native Americans seems compa-

rable to that in the general US population, which

is less than 1 percent (www.census.gov), the lack of

representation in our sample made it dicult for

us to derive statistical signicance. One way to

overcome this problem involves targeting regions

or states with higher proportions of Native Amer-

icans in the general population (e.g., New Mex-

ico and Arizona). Nevertheless, we met the call

for previous research that called for distinguish-

ing among minority groups (i.e., African Ameri-

can, Hispanic American, Asian American, and Na-

tive American). Future research should investigate

how DEM practices inuence other types of diver-

sity such as religion, national culture, gender, and

age.

For example, companies often adopt opportu-

nity-based DEM practices targeted toward women,

which should theoretically impact the level of gen-

der diversity in the managerial ranks. Qualitative

research will also be helpful in

understanding specic employ-

ment experiences of diverse

groups of individuals undergo-

ing diversity training as well as

other diversity initiatives. Indeed,

it would be delightful to gain in-

sight into the creative, commu-

nication, and conict processes

utilizing a qualitative method-

ological framework.

Fourth, ner-grained measures

of racial diversity in the manage-

rial ranks would be valuable. Spe-

cically, we tapped into overall

racial diversity in the managerial

ranks that included top manag-

ers, middle managers, and lower-

level managers. Future research might obtain data

at all three levels of management at both the cor-

porate level and the business unit level. We con-

cur with Konrad and Linnehan (1995) when they

stated such measures seem ideal for identifying the

presence or absence of “glass ceilings” or “glass

walls.”

Fifth, the issue of causality between diversity

practices and outcomes warrants aention. It is

quite possible that companies with more racial di-

versity in the managerial ranks are more likely to

implement such DEM practices. We believe several

factors lend support to our condence in the nd-

ings reported here. First, from a theoretical stand-

Future research

should welcome the

opportunity to go

more in depth into

each DEM practice’s

frequency,

intensity, and

formulation.

236 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

point, DEM practices are adopted to meet specic

goals of increasing racial diversity in manage-

ment, improving nancial performance, promot-

ing goodwill, or reducing employee turnover. In

general, these DEM practices are implemented at

Time A and their eectiveness is assessed at Time

B. Although over a small span of time, our panel

data did allow us to investigate time invariant ef-

fects, revealing that time was not a signicant fac-

tor. While the presence of a practice in the previous

year did not signicantly predict the dependent

measures in subsequent years (within rm eects),

there were signicant ndings between rms.

Notwithstanding, the mere fact

that the measures behaved along

theoretical lines supports the va-

lidity of our research methodol-

ogy (Konrad & Linnehan, 1995).

Additionally, by introducing rm

size as a moderator, we were able

to investigate the impact of the

DEM practices in dierent con-

texts. For example, although rm

size was signicantly correlated

to racial diversity in the manage-

rial ranks (p < .05), DEM practices

were not as valuable in aect-

ing racial diversity in managerial

ranks for large rms relative to

small rms (see Figure 1). In sum,

we feel condent that our con-

structs are consistent with theory.

Finally, although rm size ap-

pears to be a key moderator be-

tween DEM practices and ra-

cial diversity in the managerial

ranks, other constructs that mod-

erate the impact of DEM prac-

tices on a broad array of eec-

tiveness measures should be

explored. For instance, organizational culture

may play an integral role in the DEM practice-to-

eectiveness relationship. We argue that a clan-

oriented culture that emphasizes group cohesion,

acceptance, and inclusiveness represents a fer-

tile ground for DEM practices to have desired ef-

fects. In addition, a decentralized organizational

structure that entails participative decision mak-

ing and less hierarchy and status dierentials

seems complementary to DEM practices. Such

an environment promotes organizational justice

and pay equality, which we believe to be essen-

tial components to reducing discrimination, ste-

reotypes, glass ceilings, women and minority mo-

bility, and other impediments, thereby allowing

certain DEM practices to bring out the creativity

of diverse organizational members. Top manage-

ment team commitment may also inuence the ef-

cacy of DEM practices, as it has been shown to

be critical to the eectiveness of human resource

and diversity-related initiatives (Konrad & Linne-

han, 1995). Future research should explore the in-

tervening role of top management team members

in both the adoption and eectiveness of various

diversity practices. Finally, a DEM practice bun-

dle will be more eective if it is integrated with

and complements the overall human resource sys-

tem (Armstrong et al., 2010). High-performance

work systems (Huselid, 1995) seem ideal for di-

versity eorts to have a strong impact on organi-

zational outcomes.

Implications for Applied Research and

Diversity Management Practice

As we have already noted, despite the growing

investments in DEM practices, there has been lit-

tle systematic eort to see whether the presence of

these practices is associated with important mark-

ers of diversity practice eectiveness. The SHRM

framework we oer in this article provides us

with a strong rationale to argue that while rms

may adopt these practices to enhance their com-

petitive advantage, they also need to examine

which of these practices are more likely to yield

optimal results in terms of improving racial di-

versity in the managerial ranks. Our study sug-

gests that rms may also undertake a cost-benet

analysis to determine which DEM practice is most

likely to yield maximum benets (i.e., ROI) to o-

set the costs of implementing and running each

DEM practice. In evaluating DEM practices, rms

Although rm size

appears to be a

key moderator

between DEM

practices and racial

diversity in the

managerial ranks,

other constructs

that moderate

the impact of

DEM practices

on a broad array

of effectiveness

measures should be

explored.

di v e R s i t y a n d e q u a l i t y Ma n a g e M e n t P R a c t i c e B u n d l e s a n d F i R M s i z e 237

must carefully choose which evaluation criteria

are more important from the standpoint of exter-

nal and internal stakeholders. In sum, our nd-

ings complement the SHRM framework that rests

on the notion that our diversity practices can be

valued within the resource-based view paradigm.

Additionally, it appears that certain DEM prac-

tices might dier in the impact they have in inu-

encing one racial subgroup compared to others.

For example, a company with goals of increasing

the representation of African Americans in man-

agement might benet more from implementing

minority opportunity-based DEM practices. These

same practices might be less eective for increas-

ing the proportion of Asian Americans possibly

because of the low participation rates of Asians in

such initiatives, as well as the well-known “model

minority” perception that these practices are

not necessary for such a well-regarded minority

group. This perception could explain why man-

ager accountability DEM practices have a substan-

tial impact on Asian American representation in

management. It could be that when given a choice

on which minority to hire, senior managers have a

natural inclination to select Asian Americans be-

cause of their “model minority” bias or their ac-

tual higher levels of educational aainment, prac-

tical experience, and other knowledge, skills, and

abilities. A combination of qualitative and quanti-

tative research might shed light on the dynamics

that account for why particular DEM practices re-

lated to some racial subgroup representations but

not others.

Concluding Remarks

In a nutshell, our ndings oer evidence that bun-

dles of DEM practices aect rms’ racial diver-

sity in managerial ranks in unique ways and vary

in strength in small versus large rms. Further-

more, our results add an exclamation point to the

notion that minority subgroups with under-rep-

resentation should be addressed distinctly. Inter-

estingly, DEM practices have a notable impact not

only on African American representation in man-

agerial ranks but on the proportion of Asians in

management, and more informatively so, as this

minority subgroup is seldom included in studies

of racial minorities in management. Companies

should not use a “one size ts all” approach to

their DEM practices and initiatives because each

entity is dierent based on specic internal fac-

tors as well as the external environment that im-

pacts them (Chavez & Weisinger, 2008). We con-

clude that those companies desiring a competitive

advantage should develop diversity program ef-

fectiveness metrics, distinguish among the vari-

ous minority subgroups they desire to target, and

consider contextual factors that will act as a hin-

drance or impediment in enabling them to meet

their diversity program eectiveness goals.

Notes

1. We considered other potential measures of rm size

such as total number of employees (e.g., Welbourne

& Cyr, 1999), but we decided not to use this measure

due to its high correlation with another size-related

measure in the model (i.e., total number of manag-

ers as a control) (cf. Haleblian & Finkelstein, 1993).

When included in the model, the total number of em-

ployees yielded a similar but slightly weaker paern

of moderating relationships compared to the results

of total assets that we report here.

2. In analyses not shown here, we conducted supple-

mental analyses on the specic racial categories by

gender and found no signicant eects of the two

DEM practice bundles on minority group represen-

tation in management of women or men.

238 Ri c h a R d , R o h , & Pi e P e R i n H u m a n R e s o u R c e m a n a g e m e n t 5 2 ( 2 0 1 3 )

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Orlando C. Richard (PhD, University of Kentucky; postdoctorate, MIT Sloan School of Manage-

ment) is an associate professor of human resource management and diversity recruitment co-

ordinator at the University of Texas of Dallas in the Naveen Jindal School of Management. His

primary research focuses on the relationship between workforce diversity and organizational

effectiveness outcomes. He also conducts research on topics related to strategic human re-

source management practices and organizational justice.

Hyuntak Roh is an assistant professor of management at Yonsei University in Seoul, Korea.

He received his PhD from the University of Illinois at Urbana-Champaign. He conducts re-

search in the area of workgroup diversity, group and interpersonal dynamics, social networks,

and human resource management practices.

Jenna R. Pieper is an assistant professor at the University of Nebraska-Lincoln. She received

her PhD in management and human resources from the University of Wisconsin– Madison and

MA in industrial/organizational psychology from the University of Tulsa. Her research inter-

ests include strategic human resource management and workplace diversity. She studies the

inuence of HR practices and diversity factors on employee outcomes at three points in time

throughout the employment relationship: entry, employment, and exit.

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