Challenges of Diversity What is workplace discrimination, and how does it affect different social identity groups? Although diversity has it benefits, there are also challenges that managers must face that can only be addressed with proper leadership. Some of the most common challenges observed in organizations and studied in research include lower organizational attachment and misunderstanding work diversity initiatives and programs. Lower Organizational Attachment Although diversity programs attract and retain women and minorities, they may have the opposite effect on other, nonminority employees. When diversity is not managed effectively, White and male employees can feel alienated from or targeted by the organization as diversity programs are put in place. A study that examined 151 work groups across three large organizations investigated whether the proportion of group membership based on race or sex affected the group members’ absentee rates, psychological attachment to their work group, and turnover intentions, Tsui, A.S., Egan, T. D., & O’Reilly, C.A. 1992. Being different: relational demography and organizational attachment. Administrative Science Quarterly, 37: 549-579. three factors that play significant roles in an employee’s attachment to their organization. Results showed a positive relationship between group heterogeneity and lower organizational attachment, higher turnover intentions, and greater frequency of absences for men and for White group members. In other words, as work group diversity increased, White employees and male employees felt less attached to the organization and were more likely to quit. Because heterogeneous groups improve creativity and judgement, managers should not avoid using them because they may be challenging to manage. Instead, employers need to make sure they understand the communication structure and decision-making styles of their work groups and seek feedback from employees to learn how dominant group members may adjust to diversity. Legal Challenges and Diversity The legal system is used to combat discrimination. Among the ways that we will cover here are reverse discrimination, workplace discrimination, harassment, age discrimination, disability discrimination, national origin discrimination, pregnancy discrimination, race/color discrimination, religious discrimination, sex-based discrimination and other forms of discrimination. Reverse Discrimination As research shows, workplace discrimination against women and racial or ethnic minorities is common. Reverse discrimination is a term that has been used to describe a situation in which dominant group members perceive that they are experiencing discrimination based on their race or sex. This type of discrimination is uncommon, but is usually claimed when the dominant group perceives that members of a protected (diverse) class of citizens are given preference in workplace or educational opportunities based not on their merit or talents, but on a prescribed preferential treatment awarded only on the basis of race or sex. Research conducted in the 1990s shows that only six federal cases of reverse discrimination were upheld over a four-year period (1990–1994), and only 100 of the 3,000 cases for discrimination over that same four-year period were claims of reverse discrimination. New York Times. (March 31, 1995). Reverse discrimination complaints rare, labor study reports. Retrieved from https://www.nytimes.com/1995/03/31/us/reverse-discrimination-complaints-rare-labor-study-reports.html Interestingly, a recent poll administered by the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health found that a little more than half of White Americans believe that White people face discrimination overall, and 19% believe they have experienced hiring discrimination due to the color of their skin. Mosbergen, D. (Oct 25 2017). Majority of White Americans believe White people face discrimination. Huff Post. Retrieved from https://www.huffingtonpost.com/entry/white-americans-discrimination-poll-npr_us_59f03071e4b04917c594209a This misperception stems in part from the recalibration of the labor force as it become more balanced due to increased equal employment opportunities for everyone. Members of dominant identity groups, White people and men, perceive fewer opportunities for themselves when they observe the workforce becoming more diverse. In reality, the workforce of a majority of companies is still predominantly White and male employees. The only difference is that legislation protecting employees from discrimination and improvements in equal access to education have created opportunities for minority group members when before there were none. Workplace Discrimination Workplace discrimination occurs when an employee or an applicant is treated unfairly at work or in the job-hiring process due to an identity group, condition, or personal characteristic such as the ones mentioned above. Discrimination can occur through marital status, for example when a person experiences workplace discrimination because of the characteristics of a person to whom they are married. Discrimination can also occur when the offender is of the same protected status of the victim, for example when someone discriminates against someone based on a national origin that they both share. The Equal Employment Opportunity Commission (EEOC) was created by Title VII of the Civil Rights Act of 1964 with the primary goal of making it illegal to discriminate against someone in the workplace due to their race, national origin, sex, disability, religion, or pregnancy status. U.S. Equal Employment Opportunity Commission. (2018). About EEOC. Retrieved from https://www.eeoc.gov/eeoc/ , and the 2020 Supreme Court decision upheld the same protections for sexual orientation and gender identity. The EEOC enforces laws and issues guidelines for employment-related treatment. It also has the authority to investigate charges of workplace discrimination, attempt to settle the charges, and, if necessary, file lawsuits when the law has been broken. All types of workplace discrimination are prohibited under different laws enacted and enforced by the EEOC, which also considers workplace harassment and sexual harassment forms of workplace discrimination and mandates that men and women must be given the same pay for equal work. Discrimination by Type. https://www.eeoc.gov/laws/types/index.cfm (Accessed February 15, 2018); Equal Pay and Compensation Discrimination. https://www.eeoc.gov/laws/types/equalcompensation.cfm (Accessed February 15, 2018) The provision for equal pay is covered under the Equal Pay Act of 1963 , which was an amendment to the Fair Labor Standards Act of 1938. Virtually all employers are subject to the provisions of the act, which was an attempt to address pay inequities between men and women. More than 50 years later, however, women still earn about 80 cents to every dollar that men earn, even while performing the same or similar jobs. Institute for Women’s Policy Research. https://www.iwpr.org (Accessed February 22, 2018) Harassment Harassment is any unwelcome conduct that is based on characteristics such as age, race, national origin, disability, gender, or pregnancy status. Harassment is a form of workplace discrimination that violates Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, and the Americans with Disabilities Act of 1990. U.S. Equal Employment Opportunity Commission. https://www.eeoc.gov (Accessed February 22, 2018) Sexual harassment specifically refers to harassment based on a person’s sex, and it can (but does not have to) include unwanted sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature. Though members of any sex can be the victim of sexual harassment, women are the primary targets of this type of harassment. Harassment. https://www.eeoc.gov/laws/types/harassment.cfm (Accessed February 22, 2018) Age Discrimination Age discrimination consists of treating an employee or applicant less favorably due to their age. The Age Discrimination in Employment Act (ADEA) forbids discrimination against individuals who are age 40 and above. The act prohibits harassment because of age, which can include offensive or derogatory remarks that create a hostile work environment. Age Discrimination. https://www.eeoc.gov/laws/types/age.cfm(Accessed February 22, 2018) Disability Discrimination A person with a disability is a person who has a physical or mental impairment that limits one or more of the person’s life actions. Disability discrimination occurs when an employee or applicant who is covered by the Americans with Disabilities Act (ADA) is treated unfavorably due to their physical or mental disability. The ADA is a civil rights law that prohibits discrimination in employment, public services, public accommodations, and telecommunications against people with disabilities. ADA at 25. The Law. https://www.eeoc.gov/eeoc/history/ada25th/thelaw.cfm (Accessed November 26, 2017). To be covered under the ADA, individuals must be able to perform the essential functions of their job with or without reasonable accommodations. Research has shown that reasonable accommodations are typically of no or low cost (less than $100) to employers. Disability Discrimination. https://www.eeoc.gov/laws/types/disability.cfm (Accessed February 27, 2018) National Origin Discrimination National origin discrimination involves treating someone unfavorably because of their country of origin, accent, ethnicity, or appearance. EEOC regulations make it illegal to implement an employment practice or policy that applies to everyone if it has a negative impact on people of a certain national origin. For example, employers cannot institute an “English-only” language policy unless speaking English at all times is essential to ensure the safe and efficient operation of the business. Employers also cannot mandate employees be fluent in English unless fluency in English is essential to satisfactory job performance. The EEOC also prohibits businesses from hiring only U.S. citizens or lawful residents unless the business is required by law to do so. National Origin Discrimination. https://www.eeoc.gov/laws/types/nationalorigin.cfm (Accessed February 27, 2018) Pregnancy Discrimination Pregnancy discrimination involves treating an employee or applicant unfairly because of pregnancy status, childbirth, or medical conditions related to pregnancy or childbirth. The Pregnancy Discrimination Act (PDA) prohibits any discrimination as it relates to pregnancy in any of the following areas: hiring, firing, compensation, training, job assignment, insurance, or any other employment conditions. Further, certain conditions that result from pregnancy may be protected under the ADA, which means employers may need to make reasonable accommodations for any employee with disabilities related to pregnancy. Under the Family and Medical Leave Act (FMLA) , new parents, including adoptive and foster parents, may be eligible for 12 weeks of unpaid leave (or paid leave only if earned by the employee) to care for the new child. Also, nursing mothers have the right to express milk on workplace premises. Pregnancy Discrimination. https://www.eeoc.gov/laws/types/pregnancy.cfm (Accessed February 27, 2018) Race/Color Discrimination Race/color discrimination involves treating employees or applicants unfairly because of their race or because of physical characteristics typically associated with race such as skin color, hair color, hair texture, or certain facial features. As with national origin discrimination, certain workplace policies that apply to all employees may be unlawful if they unfairly disadvantage employees of a certain race. Policies that specify that certain hairstyles must or must not be worn, for example, may unfairly impact African American employees, and such policies are prohibited unless their enforcement is necessary to the operations of the business. Race/Color Discrimination. https://www.eeoc.gov/laws/types/race_color.cfm (Accessed February 27, 2018) Religious Discrimination Religious discrimination occurs when employees or applicants are treated unfairly because of their religious beliefs. The laws protect those who belong to traditional organized religions and those who do not belong to organized religions but hold strong religious, ethical, or moral beliefs of some kind. Employers must make reasonable accommodations for employees’ religious beliefs, which may include flexible scheduling or modifications to workplace practices. Employees are also permitted accommodation when it comes to religious dress and grooming practices, unless such accommodations will place an undue burden on the employer. Employees are also protected from having to participate (or not participate) in certain religious practices as terms of their employment. Religious Discrimination. https://www.eeoc.gov/laws/types/religion.cfm (Accessed February 27, 2018) Sex-Based Discrimination Sex-based discrimination occurs when employees or applicants are treated unfairly because of their sex. This form of discrimination includes unfair treatment due to gender, transgender status, and sexual orientation. Harassment and policies that unfairly impact certain groups protected under sex discrimination laws are prohibited under EEOC legislation. Sex-Based Discrimination. https://www.eeoc.gov/laws/types/sex.cfm (Accessed February 27, 2018) The key diversity-related federal laws are summarized in . Key Diversity Related Legislation Title VII of the Civil Rights Act of 1964 Created the Equal Employment Opportunity Commission with the primary role of making it illegal to discriminate against someone in the workplace due to their race, national origin, sex, disability, religion, or pregnancy status. Equal Pay Act of 1963 Mandates that men and women must be given the same pay for equal work Age Discrimination in Employment Act (ADEA) Forbids discrimination against individuals who are age 40 and above. Americans with Disabilities Act (ADA) Prohibits discrimination against people with disabilities in employment, public services, public accommodations, and in telecommunications Pregnancy Discrimination Act (PDA) Prohibits any discrimination as it relates to pregnancy, including hiring, firing, compensation, training, job assignment, insurance, or any other employment conditions. Family and Medical Leave Act (FMLA) Grants new parents up to 12 weeks of paid or unpaid leave to care for the new child, and gives nursing mothers the right to express milk on workplace premises. (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) Other Types of Discrimination Beyond the key types of discrimination outlined by the EEOC, diversity and management scholars have identified other types of discrimination that frequently impact certain identity groups more than others. Access discrimination is a catchall term that describes when people are denied employment opportunities because of their identity group or personal characteristics such as gender, race, age, or other factors. Treatment discrimination describes a situation in which people are employed but are treated differently while employed, mainly by receiving different and unequal job-related opportunities or rewards. Bell, Myrtle P. Diversity in organizations. Cengage Learning, 2011. Scholars have also identified a form of discrimination called interpersonal or covert discrimination that involves discrimination that manifests itself in ways that are not visible or readily identifiable, yet is serious because it can impact interpersonal interactions between employees, employees and customers, and other important workplace relationships. This type of discrimination poses unique challenges because it is difficult to identify. For example, one study examining customer service and discrimination found that obese customers were more likely to experience interpersonal discrimination than average-weight customers. Salespersons spent less time interacting with obese customers than average-weight customers, and average-weight customers reported more positive interactions with salespeople when asked about standard customer service metrics such as being smiled at, receiving eye contact, and perceived friendliness. King, Eden B., et al. "The stigma of obesity in customer service: A mechanism for remediation and bottom-line consequences of interpersonal discrimination." Journal of Applied Psychology 91.3 (2006): 579. What is the role of the EEOC? What are the types of discrimination encountered in the workplace? What is workplace discrimination, and how does it affect different social identity groups? Workplace discrimination occurs when an employee or an applicant is treated unfairly at work or in the job-hiring process due to an identity group, condition, or personal characteristic such as age, race, national origin, sex, disability, religion, or pregnancy status. The Equal Employment Opportunity Commission enforces laws and legislation related to individuals with those protected statuses. Harassment is any unwelcome conduct that is based on the protected characteristics listed above. Sexual harassment refers specifically to harassment based on a person’s sex, and it can (but does not have to) include unwanted sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature. reverse discrimination Describes a situation in which dominant group members perceive that they are experiencing discrimination based on their race or sex. Equal Pay Act of 1963 An amendment to the Fair Labor Standards Act of 1938. harassment Any unwelcome conduct that is based on characteristics such as age, race, national origin, disability, gender, or pregnancy status. sexual harassment Harassment based on a person’s sex; it can (but does not have to) include unwanted sexual advances, requests for sexual favors, or physical and verbal acts of a sexual nature. age discrimination Treating an employee or applicant less favorably due to their age. Age Discrimination in Employment Act (ADEA) Forbids discrimination against individuals who are age 40 and above, including offensive or derogatory remarks that create a hostile work environment. disability discrimination Occurs when an employee or applicant is treated unfavorably due to their physical or mental disability. Americans with Disabilities Act (ADA) Prohibits discrimination in employment, public services, public accommodations, and telecommunications against people with disabilities. national origin discrimination Treating someone unfavorably because of their country of origin, accent, ethnicity, or appearance. pregnancy discrimination Treating an employee or applicant unfairly because of pregnancy status, childbirth, or medical conditions related to pregnancy or childbirth. Pregnancy Discrimination Act (PDA) Prohibits any discrimination as it relates to pregnancy in hiring, firing, compensation, training, job assignment, insurance, or any other employment conditions. Family and Medical Leave Act (FMLA) Provides new parents, including adoptive and foster parents, with 12 weeks of unpaid leave (or paid leave only if earned by the employee) to care for the new child and requires that nursing mothers have the right to express milk on workplace premises. race/color discrimination Treating employees or applicants unfairly because of their race or because of physical characteristics typically associated with race such as skin color, hair color, hair texture, or certain facial features. religious discrimination When employees or applicants are treated unfairly because of their religious beliefs. sex-based discrimination When employees or applicants are treated unfairly because of their sex, including unfair treatment due to gender, transgender status, or sexual orientation. access discrimination A catchall term that describes when people are denied employment opportunities because of their identity group or personal characteristics such as gender, race, or age. covert discrimination (interpersonal) An interpersonal form of discrimination that manifests in ways that are not visible or readily identifiable. Equal Employment Opportunity Commission An organization that enforces laws and issues guidelines for employment-related treatment according to Title VII of the Civil Rights Act of 1964. treatment discrimination A situation in which people are employed but are treated differently while employed, mainly by receiving different and unequal job-related opportunities or rewards. workplace discrimination Unfair treatment in the job hiring process or at work that is based on the identity group, physical or mental condition, or personal characteristic of an applicant or employee.

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Key Diversity Theories What key theories help managers understand the benefits and challenges of managing the diverse workforce? Many theories relevant to managing the diverse workforce center on an individual’s reactions (such as categorization and assessment of the characteristics of others) to people who are different from the individual. Competing viewpoints attempt to explain how diversity is either harmful or beneficial to organizational outcomes. The cognitive diversity hypothesis suggests that multiple perspectives stemming from the cultural differences between group or organizational members result in creative problem solving and innovation. The similarity-attraction paradigm and social identity theory hold that individuals’ preferences for interacting with others like themselves can result in diversity having a negative effect on group and organizational outcomes. The justification-suppression model explains under what conditions individuals act on their prejudices. Cognitive Diversity Hypothesis Some research shows that diversity has no relationship to group performance, and some shows that there is a relationship. Of the latter research, some shows a negative relationship (greater diversity means poorer group performance, less diversity means better group performance) and some shows a positive relationship. These various findings may be due to the difference in how diversity can affect group members. Cognitive diversity refers to differences between team members in characteristics such as expertise, experiences, and perspectives. Miller, C. C., Burke, L. M., & Glick,W. H. 1998. Cognitive diversity among upper-echelon executives: Implications for strategic decision processes. Strategic Management Journal, 19: 39-58. Many researchers contend that physical diversity characteristics such as race, age, or sex (also known as bio-demographic diversity) positively influence performance because team members contribute unique cognitive attributes based on their experiences stemming from their demographic background. Horwitz, S.K., & Horwitz, I.B. (2007). The effects of team diversity on team outcomes: A meta-analytic review of team demography. Journal of Management, 33 (6): 987-1015. There is research that supports the relationship between group performance and task-related diversity as reflected in characteristics not readily detectable such as ability, occupational expertise, or education. However, the relationship between bio-demographic diversity and group performance has produced mixed results. Watson, W.E., Kumar, K., & Michaelsen, L.K. (1993). Cultural diversity's impact on interaction process and performance: Comparing homogeneous and diverse task groups. Academy of Management Journal, 36(3): 590-602. For example, Watson and colleagues studied the comparison of group performance between culturally homogeneous and culturally heterogeneous groups. Groups were assigned business cases to analyze, and their group performance was measured over time based on four factors: the range of perspectives generated, the number of problems identified in the case, the number of alternatives produced, and the quality of the solution. Overall performance was also calculated as the average of all the factors. The factors were measured at four intervals: Interval 1 (at 5 weeks), Interval 2 (at 9 weeks), Interval 3 (at 13 weeks), and Interval 4 (at 17 weeks). For Intervals 1 and 2, the overall performance of homogeneous groups was higher than heterogeneous groups. However, by Intervals 3 and 4, there were no significant differences in overall performance between the groups, but the heterogeneous group outperformed the homogeneous group in generating a greater range of perspectives and producing a greater number of alternatives. This research suggests that although homogeneous groups may initially outperform culturally diverse groups, over time diverse groups benefit from a wider range of ideas to choose from when solving a problem. Based on the cognitive diversity hypothesis, these benefits stem from the multiple perspectives generated by the cultural diversity of group members. On the other hand, it takes time for members of diverse groups to work together effectively due to their unfamiliarity with one another, which explains why homogeneous groups outperform heterogeneous groups in the early stages of group functioning. (This is related to the similarity-attraction paradigm, discussed in the next section.) Other studies have shown that ethnically diverse groups cooperate better than homogeneous groups at tasks that require decision-making and are more creative and innovative. While homogeneous groups may be more efficient, heterogeneous groups sacrifice efficiency for effectiveness in other areas. Similarity-Attraction Paradigm The cognitive diversity hypothesis explains how diversity benefits organizational outcomes. The similarity-attraction paradigm explains how diversity can have negative outcomes for an organization. Some research has shown that members who belong to diverse work units may become less attached, are absent from work more often, and are more likely to quit. Tsui, A.S., Egan, T. D., & O’Reilly, C.A. 1992. Being different: relational demography and organizational attachment. Administrative Science Quarterly, 37: 549-579. There is also evidence that diversity may produce conflict and higher employee turnover. Similarity-attraction theory is one of the foundational theories that attempts to explain why this occurs; it posits that individuals are attracted to others with whom they share attitude similarity. Byrne, D. (1971). The attraction paradigm. New York: Academic Press. Attitudes and beliefs are common antecedents to interpersonal attraction. However, other traits such as race, age, sex, and socioeconomic status can serve as signals to reveal deep-level traits about ourselves. For example, numerous studies investigating job-seeker behaviors have shown that individuals are more attracted to companies whose recruitment literature includes statements and images that reflect their own identity group. One study showed that companies perceived to value diversity based on their recruitment literature are more attractive to racial minorities and women compared to White people. Perkins, L. A., Thomas, K. M., & Taylor, G. A. 2000. Advertising and recruitment: Marketing to minorities. Psychology and Marketing, 17: 235-255.; Thomas, K.M., & Wise, P.G. 1999. Organizational attractiveness and individual differences: Are diverse applicants attracted by different factors? Journal of Business and Psychology, 13: 375-390. Another study showed that when organizations use recruitment materials that target sexual minorities, the attraction of study participants weakened among heterosexuals. Lambert, J. R. (2015). The impact of gay-friendly recruitment statements and due process employment on a firm’s attractiveness as an employer. Equality, Diversity and Inclusion: An International Journal, 34, 510–526. Even foreign-born potential job candidates are more attracted to organizations that depict international employees in their job ads. Lambert, J.R., Basuil, D.A., Bell, M.P., & Marquardt, D. J. (2017). Coming to America: Work visas, international diversity, and organizational attractiveness among highly skilled Asian immigrants. The International Journal of Human Resource Management, 0, 1-27. Social Cognitive Theory Social cognitive theory is another theory that seeks to explain how diversity can result in negative outcomes in a group or organization. Social cognitive theory suggests that people use categorization to simplify and cope with large amounts of information. These categories allow us to quickly and easily compartmentalize data, and people are often categorized by their visible characteristics, such as race, sex, and age. Thus, when someone sees a person of a particular race, automatic processing occurs and beliefs about this particular race are activated. Even when the person is not visible, they can be subject to this automatic categorization. For example, when sorting through resumes a hiring manager might engage in gender categorization because the person’s name provides information about the person’s gender or racial categorization because the person’s name provides information about their race. Bertrand, Marianne, and Sendhil Mullainathan. "Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination." The American Economic Review 94, no. 4 (2004): 991-1013. Stereotypes are related to this categorization, and refer to the overgeneralization of characteristics about large groups. Stereotypes are the basis for prejudice and discrimination. In a job-related context, using categorization and stereotyping in employment decision-making is often illegal. Whether illegal or not, this approach is inconsistent with a valuing-diversity approach. Social Identity Theory Social identity theory is another explanation of why diversity may be perceived as a negative outcome. Social identity theory suggests that when we first come into contact with others, we categorize them as belonging to an in-group (i.e., the same group as us) or an out-group (not belonging to our group). Tajfel, H. 1974. Social identity and intergroup behavior. Social Science Information, 15: 1010-118.; Tajfel H, Turner JC. (1985). The social identity theory of intergroup behavior. In S. Worchel, and W.G. Austin (Eds.), Psychology of Intergroup Relations (2nd ed., pp. 7–24). Chicago:Nelson-Hall. We tend to see members of our in-group as heterogeneous but out-group members as homogeneous. That is, we perceive out-group members as having similar attitudes, behaviors, and characteristics (i.e., fitting stereotypes). Researchers posit that this perspective may occur because of the breadth of interactions we have with people from our in-group as opposed to out-groups. There is often strong in-group favoritism and, sometimes, derogation of out-group members. In some cases, however, minority group members do not favor members of their own group. Goldberg, Caren B. "Relational demography and similarity-attraction in interview assessments and subsequent offer decisions: are we missing something?." Group & Organization Management 30, no. 6 (2005): 597-624. This may happen because of being continually exposed to widespread beliefs about the positive attributes of White people or men and to common negative beliefs about some minorities and women. When in-group favoritism does occur, majority-group members will be hired, promoted, and rewarded at the expense of minority-group members, often in violation of various laws. Schema Theory Schema theory explains how individuals encode information about others based on their demographic characteristics. Fiske ST, Taylor SE. (1991). Social cognition (2nd ed.). New York: McGraw-Hill. Units of information and knowledge experienced by individuals are stored as having patterns and interrelationships, thus creating schemas that can be used to evaluate one’s self or others. As a result of the prior perceived knowledge or beliefs embodied in such schemas, individuals categorize people, events, and objects. They then use these categories to evaluate newly encountered people and make decisions regarding their interaction with them. Based on schema theory, employees develop schemas about coworkers based on race, gender, and other diversity traits. They also form schemas about organizational policies, leadership, and work climates. Schemas formed can be positive or negative and will affect the attitudes and behaviors employees have toward one another. Justification-Suppression Model The justification-suppression model explains the circumstances in which prejudiced people might act on their prejudices. The process by which people experience their prejudice is characterized as a “two-step” process in which people are prejudiced against a certain group or individual but experience conflicting emotions in regard to that prejudice and are motivated to suppress their prejudice rather than act upon it. Crandall, Christian S., and Amy Eshleman. "A justification-suppression model of the expression and experience of prejudice." Psychological bulletin 129.3 (2003): 414. Theory about prejudice suggests that all people have prejudices of some sort, that they learn their prejudices from an early age, and that they have a hard time departing from them as they grow older. Prejudices are often reinforced by intimate others, and individuals use different methods to justify those prejudices. Most people will attempt to suppress any outward manifestations of their prejudices. This suppression can come from internal factors like empathy, compassion, or personal beliefs regarding proper treatment of others. Suppression can also come from societal pressures; overt displays of prejudice are no longer socially acceptable, and in some cases are illegal. At times, however, prejudiced individuals will look for reasons to justify acting on their prejudiced beliefs. Research has shown people are more likely to act in prejudiced ways when they are physically or emotionally tired, when they can do so and remain anonymous, or when social norms are weak enough that their prejudiced behavior will not be received negatively. What are the theories that can help managers understand diversity? What key theories help managers understand the benefits and challenges of managing the diverse workforce? The cognitive-diversity hypothesis suggests that multiple perspectives stemming from the cultural differences between groups or organizational members result in creative problem solving and innovation. The similarity-attraction paradigm and social identity theory explain how, because individuals prefer to interact with others like themselves, diversity may have a negative effect on group and organizational outcomes. The justification-suppression model explains under what conditions individuals act on their prejudice. cognitive diversity Differences between team members regarding characteristics such as expertise, experiences, and perspectives. social identity theory Self-concept based on an individual’s physical, social, and mental characteristics. stereotypes Overgeneralization of characteristics about groups that are the basis for prejudice and discrimination. schema theory Explains how individuals encode information about others based on their demographic characteristics. justification-suppression model Explains the circumstances in which prejudiced people might act on their prejudices. cognitive diversity hypothesis Multiple perspectives stemming from the cultural differences between group or organizational members result in creative problem-solving and innovation. similarity-attraction paradigm Individuals’ preferences for interacting with others like themselves can result in diversity having a negative effect on group and organizational outcomes. justification-suppression model Explains under what conditions individuals act on their prejudices.

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Benefits and Challenges of Workplace Diversity How can managers reap benefits from diversity and mitigate its challenges? Much theoretical work has espoused the benefits of workplace diversity, but empirical studies have often had conflicting results, which have shown researchers that certain conditions can affect how successful initiatives to increase and enhance workplace diversity are. Managers can work to make sure that the efforts and initiatives they enact to increase diversity in the workplace come from a perspective that ensures and strives for equity and fairness, and not simply from the perspective of only benefitting the company’s bottom line. By approaching diversity and diversity issues in a thoughtful, purposeful way, managers can mitigate the challenges posed by a diverse workforce and enhance the benefits a diverse workforce can offer. Three Perspectives on Workplace Diversity Ely and Thomas’s work on cultural diversity was designed to theoretically and empirically support some of the hypothesized relationships between diversity and workplace outcomes. Their research yielded a paradigm that identifies three perspectives regarding workplace diversity: Ely, Robin J., and David A. Thomas. "Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes." Administrative science quarterly. 46.2 (2001): 229-273. integration and learning, access and legitimacy, and discrimination and fairness. The Integration-and-Learning Perspective The integration-and-learning perspective posits that the different life experiences, skills, and perspectives that members of diverse cultural identity groups possess can be a valuable resource in the context of work groups. Under this perspective, the members of a culturally diverse workgroup can use their collective differences to think critically about work issues, strategies, products, and practices in a way that will allow the group to be successful in its business operations. The assumption under this perspective is that members of different cultural identity groups can learn from each other and work together to best achieve shared goals. This perspective values cultural identity and strongly links diversity of the group to the success of the firm. Downfalls of the integration-and-learning perspective can be that White members of the work group can feel marginalized when they are not asked to join in on diversity-related projects or discussions. Similarly, workforce members of color might experience burnout if they are always expected to work on those projects and discussions that specifically deal with diversity issues. The Access-and-Legitimacy Perspective The access-and-legitimacy perspective focuses on the benefit that a diverse workforce can bring to a business that wishes to operate within a diverse set of markets or with culturally diverse clients. Work groups that operate under this perspective are doing so in order to gain access to diverse markets and because their diversity affords them some level of legitimacy when attempting to gain access to diverse markets. This type of workplace diversity is more of a functional type of diversity that does not attempt to integrate or value diversity at the business’s core. The danger of this diversity perspective is that it can limit the roles of certain minority groups by valuing members of these groups only because they can increase the access to diverse markets and clients and not because they can make other potentially valuable contributions. Ely, Robin J., and David A. Thomas. "Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes." Administrative science quarterly. 46.2 (2001): 229-273. The Discrimination-and-Fairness Perspective The discrimination-and-fairness perspective stems from a belief that a culturally diverse workforce is a moral duty that must be maintained in order to create a just and fair society. This perspective is characterized by a commitment to equal opportunities in hiring and promotions, and does not directly link a work group’s productivity or success with diversity. Many times firms operating under this perspective will have a spoken or unspoken assumption that assimilation into the dominant (White) culture should take place by the members of other cultural identity groups. One drawback of this perspective is that because it measures progress by the recruitment and retention of diverse people, employees of traditionally underrepresented groups can feel devalued. Often, assimilation is pushed on diverse employees under the guise of reducing conflict or in an effort to demonstrate that differences between cultural identity groups are unimportant. Ely, Robin J., and David A. Thomas. "Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes." Administrative science quarterly. 46.2 (2001): 229-273. shows the degrees of effectiveness and benefits for each perspective. Cultural Diversity Perspectives at Work Source: Adapted from Ely, Robin J., and David A. Thomas. “Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes.” Administrative science quarterly. 46.2 (2001): 229-273. How can managers reap the benefits of diversity? How can managers mitigate the challenges of diversity? What is the access-and-legitimacy perspective? Differentiate it from the discrimination-and-fairness perspective. How can managers reap benefits from diversity and mitigate its challenges? By approaching diversity and diversity issues in a thoughtful, purposeful way, managers can mitigate the challenges posed by a diverse workforce and enhance the benefits a diverse workforce can offer. Managers can work to make sure that the efforts and initiatives they enact to increase diversity in the workplace come from a perspective that ensures and strives for equity and fairness, not simply one that will benefit the company’s bottom line. Using an integration-and-learning perspective strongly links diversity to the work and success of the firm by viewing cultural identity, different life experiences, skills, and perspectives from members of diverse cultural identity groups as a valuable resource. integration-and-learning perspective Posits that the different life experiences, skills, and perspectives that members of diverse cultural identity groups possess can be a valuable resource in the context of work groups. access-and-legitimacy perspective Focuses on the benefits that a diverse workforce can bring to a business that wishes to operate within a diverse set of markets or with culturally diverse clients. discrimination-and-fairness perspective A culturally diverse workforce is a moral duty that must be maintained in order to create a just and fair society.

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Recommendations for Managing Diversity What can organizations do to ensure applicants, employees, and customers from all backgrounds are valued? Organizations that are committed to equality and inclusion must take steps to combat the examples of discrimination and harassment that have been covered in this chapter. And they must take steps to make diversity a goal in the pre-employment stages as well as in the post-employment stages. Anyone with managerial or supervisory responsibilities should pay careful attention to hiring and performance-rewarding practices, and make sure to rely on relevant information for making decisions and ignore race-based stereotypes. The following are examples of what leaders and organizations can do make sure employees feel valued. Interview Selection Process To ensure fairness for all applicants, organizations should use highly structured interviews during the selection process to avoid bias based on race or gender. McCarthy, J.M, Van Iddekinge, C.H., & Campion, M.(2010). Are highly structured job interviews resistant to demographic similarity effects?: Personnel Psychology, 63 : 325-359. Highly structured interviews consists of the following 15 characteristics: “(1) job analysis, (2) same questions, (3) limited prompting, (4) better questions, (5) longer interviews, (6) control of ancillary information, (7) limited questions from candidates, (8) multiple rating scales, (9) anchored rating scales, (10) detailed notes, (11) multiple interviewers, (12) consistent interviewers, (13) no discussion between interviews, (14) training, and (15) statistical prediction.” McCarthy, J.M, Van Iddekinge, C.H., & Campion, M.(2010). Are highly structured job interviews resistant to demographic similarity effects?: Personnel Psychology, 63 : 325-359, p.333.; Campion M.A., Palmer D.K., Campion J.E. (1997). A review of structure in the selection interview. Personnel Psychology, 50 , 655–702. Similarity bias can occur when interviewers prefer interviewees with whom they share similar traits. Organizations can mitigate this challenge if all 15 characteristics of a structured interview are used consistently with each job applicant. Diversified Mentoring Relationships Thanks to the rapid growth of international travel and globalization, managers are often called upon to manage a workforce that is increasingly diverse. Research has shown that racially and ethnically diverse firms have better financial performance than more homogeneous firms, because, as mentioned, employees from different backgrounds and with different experiences can give the firm a competitive advantage in various ways. It is necessary, however, that managers and those in positions of power are adequately equipped to manage diverse workforces in ways that are beneficial to all. Diversified mentoring relationships are relationships in which the mentor and the mentee differ in terms of their status within the company and within larger society. The differences could be in terms of race, gender, class, disability, sexual orientation, or other status. Research has found that these types of relationships are mutually beneficial and that the mentor and the mentee both have positive outcomes in terms of knowledge, empathy, and skills related to interactions with people from different power groups. Young, Cheri A., Badiah Haffejee, and David L. Corsun. "Developing Cultural Intelligence and Empathy Through Diversified Mentoring Relationships." Journal of Management Education (2017): 1052562917710687. Diversity Training Programs As the workforce becomes increasingly more diverse, managers will face a major challenge in understanding how to manage diversity. One of many decisions to be made is whether an organization should offer diversity training and, if so, what topics and issues should be addressed based on the organizational goals. There has been a debate over the effectiveness of corporate diversity training since the Civil Rights Act of 1964 helped prompt corporate diversity training with the organizational goal of simply being compliant with the law. Prior research shows that it can be effective, ineffective, or even detrimental for employees, but as diversity training has evolved through the years, it has become an important factor in helping employers manage diversity. In the 1980s through the late 1990s, diversity training evolved from focusing solely on compliance to addressing the needs of women and minorities as they entered the workforce at a faster rate. Unfortunately, this type of training was perceived by White people and men as singling them out as the problem; sometimes such training was even formatted as “confession” sessions for White employees to express their complicity in institutional racism. Not unexpectedly, this type of training would often backfire and would further separate employees from each other, the exact opposite of its intention. Recently, diversity training has evolved to focus on (1) building cultural competencies regarding fellow employees, (2) valuing differences, and (3) learning how diversity helps make better business decisions. This perspective toward diversity training is more effective than simply focusing on causes of a lack of diversity and the historical roots of discrimination. Understanding how to comply with the law is still important, but training has a greater effect when the other factors are also included. A recent study investigated various diversity-training methods, including having participants engage in activities on perspective taking and goal setting. For perspective-taking activities, participants were asked to write a few sentences about the challenges they believed minority group members might experience. Goal-setting activities involved writing specific and measurable goals related to workplace diversity such as crafting future policies or engaging in future behaviors. Researchers found that when these activities were used as a diversity-training method, pro-diversity attitudes and behavioral intentions persisted months later. Issues regarding employee sexual orientation have also been introduced into corporate diversity training in recent years. Because employees’ religious beliefs are protected by Title VII of the Civil Rights Act, employers should be sensitive to balancing the rights of lesbian, gay, bisexual, and transgender employees and employees’ religious rights. Attempting to protect the rights of one group and not be perceived to disrespect another is a difficult situation for managers. In order to mitigate any backlash from some employees, employers should seek feedback from all groups to learn the best ways to accommodate them, and should assess the organizational climate. Additionally, managers should explain how diversity based on sexual orientation aligns with the company’s strategic objectives and explain the company’s legal position with supportive reasoning. Lastly, based on their organizational climate and how it reshapes itself over time, some companies may wish to address diversity training on sexual orientation, gender identity, and gender expression in training separate from other diversity issues. Sources: Young, Cheri A., Badiah Haffejee, and David L. Corsun. "Developing Cultural Intelligence and Empathy Through Diversified Mentoring Relationships." Journal of Management Education (2017): 1052562917710687; Bezrukova, K., Jehn, K.A., & Spell, C.S. (2012). Reviewing diversity training: Where we have been and where we should go. Academy of Management Learning & Education , 11 (2): 207-227; Anand, R., & Winters, M. (2008). A retrospective view of corporate diversity training from 1964 to the present. Academy of Management Learning & Education , 7 (3): 356-372; Lindsey, A., King, E., Membere, A., & Cheung, H.K. (July 28, 2017). Two types of diversity training that really work. Harvard Business Review . Discussion Questions Why do you believe diversity training is resisted by some employees? Do you believe there will always be a need for workplace diversity training? How would you determine what types of diversity training are needed at your company? Visible Leadership Another key to ensure that employees are treated fairly is utilizing appropriate leadership strategies. Thoms, D.A., & Ely, R.J. (Sep 1996). Making differences matter: A new paradigm for managing diversity. Harvard Business Review. Leadership must sincerely value variety of opinions, and organizational culture must encourage openness and make workers feel valued. Organizations must also have a well-articulated and widely understood mission and a relatively egalitarian, nonbureaucratic structure. Having such a work environment will ensure that the attitudes and values of employees are aligned with those of the organization. In this way culture serves as a control mechanism for shaping behaviors. Strategies for Employees Individuals can increase positive employment outcomes by obtaining high levels of education, because for all groups education is a predictor of employment and increased earnings. Individuals can also seek employment in larger firms, which are more likely to have formal hiring programs and specific diversity provisions in place. Individuals of any race or ethnic background can also take steps to eliminate discrimination by being aware of their own personal stereotypes or biases and taking steps to challenge and address them. How can managers ensure fairness in the interviewing and selection process regarding diversity? What is the role of leadership regarding diversity? What can organizations do to ensure applicants, employees, and customers from all backgrounds are valued? Organizations should use objective and fair recruitment and selection tools and policies. Leadership should make employees feel valued, be open to varied perspectives, and encourage a culture of open dialogue. Women and racial minorities can increase positive employment outcomes by pursuing higher levels of education and seeking employment in larger organizations. All individuals should be willing to listen, empathize with others, and seek to better understand sensitive issues that affect different identity groups. Chapter Review Questions Define the three types of diversity and compare them using examples for each type. How are demographics of the workforce changing? What are some major challenges that women face in organizations? What is the model minority myth? How does it compare to how Black people and Hispanic people are stereotyped? What are some benefits of hiring older workers? Why would an employee “pass” or “reveal” at work? What are the positive and negative consequences of doing so? Explain the six benefits of workplace diversity described by Cox and Blake’s business case for diversity. Compare how the cognitive diversity hypothesis and the similarity-attraction paradigm relate to diversity outcomes. Based on the justification-suppression model, explain why individuals act on their prejudicial beliefs. Describe challenges that managers must face when managing diversity. How can employees ensure they are compliant with the laws and legislation enforced by the EEOC? What are some recommendations for managing diversity? Management Skills Application Exercises Do you agree that diversity can be a source of greater benefit than harm to organizations? Why or why not? Have you ever worked in a diverse team setting before? If so, did you encounter any attitudes or behaviors that could potentially cause conflict? If not, how would you manage conflict stemming from diversity? List three organizational goals you would implement to create an organizational culture of diversity and inclusion. Have you or has someone you know experienced discrimination? How did that affect you or that person emotionally, physically, or financially? Pick an identity group (e.g., gay, Black, or woman) other than your own. Imagine and list the negative experiences and interactions you believe you might encounter at work. What policies or strategies could an organization implement to prevent those negative experiences from occurring? Provide a concrete example of how different perspectives stemming from diversity can positively impact an organization or work group. You may use a real-life personal example or make one up. Managerial Decision Exercises As a manager for a hospital, you oversee a staff of marketing associates. Their job is to find doctors and persuade them to refer their patients to your hospital. Associates have a very flexible work schedule and manage their own time. They report to you weekly concerning their activities in the field. Trusting them is very important, and it is impossible to track and confirm all of their activities. Your assistant, Nancy, manages the support staff for the associates, works very closely with them, and often serves as your eyes and ears to keep you informed as to how well they are performing. One day, Nancy comes into your office crying and tells you that your top-performing associate, Susan, has for the past few weeks repeatedly asked her out to dinner and she has repeatedly refused. Susan is a lesbian and Nancy is not. Today, when she refused, Susan patted her on the bottom and said, “I know, you are just playing hard to get.” After Nancy calms down, you tell her that you will fill out the paperwork to report a sexual harassment case. Nancy says that she does not want to report it because it would be too embarrassing if word of the incident got out. To impress upon you how strongly she feels, she tells you that she will consider resigning if you report the incident. Nancy is essential to the effective operation of your group, and you dread how difficult it would be to get things done without her assisting you. What do you do? Do you report the case, lose Nancy’s trust, and jeopardize losing a high-performing employee? Or do you not report it, thereby protecting what Nancy believes to be her right to privacy? Recently your company has begun to promote its diversity efforts, including same-sex (and heterosexual) partner benefits and a nonharassment policy that includes sexual orientation, among other things. Your department now has new posters on the walls with photos of employees who represent different aspects of diversity (e.g., Black, Hispanic, gay). One of your employees is upset about the diversity initiative and has begun posting religious scriptures condemning homosexuality on his cubicle in large type for everyone to see. When asked to remove them, your employee tells you that the posters promoting diversity offend some religious employees. What should you do? You are a recently hired supervisor at a paper mill factory. During your second week on the job, you learn about a White employee who has been using a racial slur during lunch breaks when discussing some of her Black coworkers with others. You ask the person who reported it to you about the woman and learn that she is an older woman, around 67 years old, and has worked at the factory for more than 40 years. You talk to your boss about it, and he tells you that she means no harm by it, she is just from another era and that is just her personality. What would you do in this situation? You are a nurse manager who oversees the triage for the emergency room, and today is a slow day with very few patients. During the downtime, one of your subordinates is talking with another coworker about her new boyfriend. You observe her showing her coworkers explicit images of him that he emailed her on her phone. Everyone is joking and laughing about the ordeal. Even though it appears no one is offended, should you address it? What would you say? You work for a company that has primarily Black and Hispanic customers. Although you employ many racial minorities and women, you notice that all of your leaders are White men. This does not necessarily mean that your organization engages in discriminatory practices, but how would you know if your organization was managing diversity well? What information would you need to determine this, and how would you collect it? Your company’s founder believes that younger workers are more energetic and serve better in sales positions. Before posting a new job ad for your sales division, he recommends that you list an age requirement of the position for applicants between ages 18 and 25. Is his recommendation a good one? Why or why not? You work for a real estate broker who recently hired two gay realtors, Steven and Shauna, to be a part of the team. During a staff meeting, your boss mentions an article she read about gay clients feeling ostracized in the real estate market. She tells the new employees she hired them to help facilitate the home-buying process for gay buyers and sellers. She specifically instructs them to focus on recruiting gay clients, even telling them that they should pass along any straight customers to one of the straight realtors on the team. A few weeks later, Shauna reports that she has made her first sale to a straight couple that is expecting a baby. During the next staff meeting, your boss congratulates Shauna on her sale, but again reiterates that Shauna and Steven should pass along straight clients to another realtor so they can focus on recruiting gay clients. After the meeting, Shauna tells you that she thinks it is unfair that she should have to focus on gay clients and that she is thinking of filing a discrimination complaint with HR. Do you think that Shauna is correct in her assessment of the situation? Is there merit to your boss’s desire to have the gay realtors focus on recruiting gay clients? What might be a better solution to help gay clients feel more comfortable in the home-buying and -selling process? Critical Thinking Case Uber Pays the Price Nine years ago, Uber revolutionized the taxi industry and the way people commute. With the simple mission “to bring transportation—for everyone, everywhere,” today Uber has reached a valuation of around $70 billion and claimed a market share high of almost 90% in 2015. However, in June 2017 Uber experienced a series of bad press regarding an alleged culture of sexual harassment, which is what most experts believe caused their market share to fall to 75%. In February of 2017 a former software engineer, Susan Fowler, wrote a lengthy post on her website regarding her experience of being harassed by a manager who was not disciplined by human resources for his behavior. In her post, Fowler wrote that Uber’s HR department and members of upper management told her that because it was the man’s first offense, they would only give him a warning. During her meeting with HR about the incident, Fowler was also advised that she should transfer to another department within the organization. According to Fowler, she was ultimately left no choice but to transfer to another department, despite having specific expertise in the department in which she had originally been working. As her time at the company went on, she began meeting other women who worked for the company who relayed their own stories of harassment. To her surprise, many of the women reported being harassed by the same person who had harassed her. As she noted in her blog, “It became obvious that both HR and management had been lying about this being his 'first offense.'” Fowler also reported a number of other instances that she identified as sexist and inappropriate within the organization and claims that she was disciplined severely for continuing to speak out. Fowler eventually left Uber after about two years of working for the company, noting that during her time at Uber the percentage of women working there had dropped to 6% of the workforce, down from 25% when she first started. Following the fallout from Fowler’s lengthy description of the workplace on her website, Uber’s chief executive Travis Kalanick publicly condemned the behavior described by Fowler, calling it “abhorrent and against everything Uber stands for and believes in.” But later in March, Uber board member Arianna Huffington claimed that she believed “sexual harassment was not a systemic problem at the company.” Amid pressure from bad media attention and the company’s falling market share, Uber made some changes after an independent investigation resulted in 215 complaints. As a result, 20 employees were fired for reasons ranging from sexual harassment to bullying to retaliation to discrimination, and Kalanick announced that he would hire a chief operating officer to help manage the company. In an effort to provide the leadership team with more diversity, two senior female executives were hired to fill the positions of chief brand officer and senior vice president for leadership and strategy. Critical Thinking Questions Based on Cox’s business case for diversity, what are some positive outcomes that may result in changes to Uber’s leadership team? Under what form of federal legislation was Fowler protected? What strategies should have been put in place to help prevent sexual harassment incidents like this from happening in the first place? Sources: Uber corporate Website, https://www.uber.com/newsroom/company-info/ (February, 2017); Marco della Cava, “Uber has lost market share to Lyft during crisis,” USA Today , June 13, 2017, https://www.usatoday.com/story/tech/news/2017/06/13/uber-market-share-customer-image-hit-string-scandals/102795024/; Tracey Lien, “Uber fires 20 workers after harassment investigation,” Los Angeles Times , Jun 6, 2017, http://www.latimes.com/business/la-fi-tn-uber-sexual-harassment-20170606-story.html; Susan Fowler, “Reflecting On One Very, Very Strange Year At Uber,” February 19, 2017, https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber. diversified mentoring relationships Relationships in which the mentor and the mentee differ in terms of their status within the company and within larger society. highly structured interviews Interviews that are be structured objectively to remove bias from the selection process.

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Introduction (i_yudai/ flickr/ Attribution 2.0 Generic (CC BY 2.0)) Learning Outcomes After reading this chapter, you should be able to answer these questions: What are the basic characteristics of managerial decision-making? What are the two systems of decision-making in the brain? What is the difference between programmed and nonprogrammed decisions? What barriers exist that make effective decision-making difficult? How can a manager improve the quality of her individual decision-making? What are the advantages and disadvantages of group decision-making, and how can a manager improve the quality of group decision-making? Up, Up, and Away: How Stephanie Korey and Jen Rubio founded their luggage company Jen Rubio and Stephanie Korey faced a number of important decisions in starting their luggage company, Away—beginning with the decision to start a business! That decision came about after Rubio’s luggage broke on a trip. She found it frustrating that all the luggage options were either inexpensive ($100 or less) but low quality, or high quality but incredibly expensive ($400 and above). There was no midrange option. So in 2015 Rubio and her friend Stephanie Korey began researching the luggage industry. They found that much of the reason for the high prices on quality luggage was because of how it was distributed and sold, through specialty retail shops and department stores. If they opted instead for a model in which they sold directly to consumers, they could provide high-quality luggage at more of a midrange ($200-$300) price. After considerable research, the two were convinced that they had an idea worth pursuing. Rubio and Korey settled on the company name “Away,” which is intended to invoke the pleasure that comes from travelling. Both of the founders had prior experience working for a start-up in the e-commerce space (Warby Parker), which helped them with making sound choices. Rubio’s background was more in branding and marketing, while Korey’s was in operations and supply chain management—so each was able to bring great expertise to various aspects of the business. They raised money initially from friends and family, but within a few months they sought venture capital funding to ensure that they had enough money to get off to a successful start. A big decision that Rubio and Korey had to make fairly early in the process of establishing their business was to settle on an initial design for the product. This decision required extensive marketing and consumer research to understand customer needs and wants. They asked hundreds of people what they liked about their existing luggage, and what they found most irritating about their existing luggage. They also contracted with a two-person design team to help create the first prototype. This research and development ultimately led to the design of an attractive hard case that is surprisingly lightweight. It also boasts extremely high-quality wheels (four of them, not two) and high-quality zippers. As a bonus, the carry-on includes a built-in battery for charging phones and other devices. The two founders also had to choose a partner to manufacture their product. Because their product had a hard, polycarbonate shell, Rubio and Korey discovered that manufacturing in the United States was not a viable option—the vast majority of luggage manufacturers using a polycarbonate shell were based in Asia. They researched a number of possible business partners and asked lots of questions. In addition, they eventually visited all of the factories on their list of options to see what they were actually like. This was an important piece of research, because the companies that looked best on paper didn’t always turn out to be the best when they visited in person. Rubio and Korey ended up working with a manufacturing partner in China that also produces luggage for many high-end brands, and they have been extremely pleased with the partnership. They continue to devote time to building and maintaining that relationship, which helps to avoid issues and problems that might otherwise come up. By the end of 2015, Rubio and Korey had developed their first product. Because the luggage was not going to be available in time for the holiday shopping season, they decided to allow customers to preorder the luggage. To drum up interest, the duo engaged in a unique storytelling effort. They interviewed 40 well-respected members of the creative community about their travel experiences and created a hardcover book of travel memoirs called The Places We Return To . Not only was the book interesting and engaging, it also made lots of people in the creative community aware of Away luggage. Starting in November 2015, the travel memoir book was available for free with the purchase of a gift card that could be redeemed in February 2016 for luggage. The book project generated tremendous advance interest in the product, and the 1,200 printed copies sold out. Away generated $12 million in first-year sales. Stephanie Corey and Jen Rubio faced many important and novel decisions in initially developing and building their business. They have been successful in part because they made those decisions wisely—by relying on shared knowledge, expertise, and lots of research before reaching a decision. They will continue to face many decisions, big and small. They have expanded their product line from one piece of luggage to four, with more luggage—and other travel accessories—in the works for the future. Their company, which is based in New York, has grown to over 60 employees in the first two years. These employees include the two design-team members who were contracted to help create their first prototype; Rubio and Korey appreciated working with them so much, they offered them full-time positions with Away. Each new hire represents new decisions—decisions about what additional work needs to be done and who they should hire to do it. Each new product also brings additional decisions—but it seems Rubio and Korey have positioned themselves (and their business) well for future successes. Sources: Kendall Baker, “An Interview With the Co-Founder of Away,” The Hustle , December 5, 2016, https://thehustle.co/episodes; Bond Street Blog, “Up and Away,” Bond Street , https://bondstreet.com/blog/jen-rubio-interview/; Josh Constine, “Away nears 100k stylish suitcases sold as it raises $20M,” TechCrunch , May 19, 2017, https://techcrunch.com/; Adeline Duff, “ The T&L Carry-On: Away Travel Co-Founders Jen Rubio and Stephanie Korey,” Travel & Leisure, March 9, 2017, http://www.travelandleisure.com/; Burt Helm, “How This Company Launched With Zero Products –and Hit $12 Million in First-Year Sales,” Inc.com , July/August 2017, https://www.inc.com/; Veronique Hyland, “The Duo Trying to Make Travel More Glamorous,” The Cut , December 22, 2015, https://www.thecut.com/. Managers and business owners—like Jen Rubio and Stephanie Korey—make decisions on a daily basis. Some are big, like the decision to start a new business, but most are smaller decisions that go into the regular running of the company and are crucial to its long-term success. Some decisions are predictable, and some are unexpected. In this chapter we look at important information about decision-making that can help you make better decisions and, ultimately, be a better manager.

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Overview of Managerial Decision-Making What are the basic characteristics of managerial decision-making? Decision-making is the action or process of thinking through possible options and selecting one. It is important to recognize that managers are continually making decisions, and that the quality of their decision-making has an impact—sometimes quite significant—on the effectiveness of the organization and its stakeholders . Stakeholders are all the individuals or groups that are affected by an organization (such as customers, employees, shareholders, etc.). Members of the top management team regularly make decisions that affect the future of the organization and all its stakeholders, such as deciding whether to pursue a new technology or product line. A good decision can enable the organization to thrive and survive long-term, while a poor decision can lead a business into bankruptcy. Managers at lower levels of the organization generally have a smaller impact on the organization’s survival, but can still have a tremendous impact on their department and its workers. Consider, for example, a first-line supervisor who is charged with scheduling workers and ordering raw materials for her department. Poor decision-making by lower-level managers is unlikely to drive the entire firm out of existence, but it can lead to many adverse outcomes such as: reduced productivity if there are too few workers or insufficient supplies, increased expenses if there are too many workers or too many supplies, particularly if the supplies have a limited shelf life or are costly to store, and frustration among employees, reduced morale, and increased turnover (which can be costly for the organization) if the decisions involve managing and training workers. Deciding When to Decide While some decisions are simple, a manager’s decisions are often complex ones that involve a range of options and uncertain outcomes. When deciding among various options and uncertain outcomes, managers need to gather information, which leads them to another necessary decision: how much information is needed to make a good decision? Managers frequently make decisions without complete information; indeed, one of the hallmarks of an effective leader is the ability to determine when to hold off on a decision and gather more information, and when to make a decision with the information at hand. Waiting too long to make a decision can be as harmful for the organization as reaching a decision too quickly. Failing to react quickly enough can lead to missed opportunities, yet acting too quickly can lead to organizational resources being poorly allocated to projects with no chance of success. Effective managers must decide when they have gathered enough information and must be prepared to change course if additional information becomes available that makes it clear that the original decision was a poor one. For individuals with fragile egos, changing course can be challenging because admitting to a mistake can be harder than forging ahead with a bad plan. Effective managers recognize that given the complexity of many tasks, some failures are inevitable. They also realize that it’s better to minimize a bad decision’s impact on the organization and its stakeholders by recognizing it quickly and correcting it. What’s the Right (Correct) Answer? It’s also worth noting that making decisions as a manager is not at all like taking a multiple-choice test: with a multiple-choice test there is always one right answer. This is rarely the case with management decisions. Sometimes a manager is choosing between multiple good options, and it’s not clear which will be the best. Other times there are multiple bad options, and the task is to minimize harm. Often there are individuals in the organization with competing interests, and the manager must make decisions knowing that someone will be upset no matter what decision is reached. What’s the Right (Ethical) Answer? Sometimes managers are asked to make decisions that go beyond just upsetting someone—they may be asked to make decisions in which harm could be caused to others. These decisions have ethical or moral implications. Ethics and morals refer to our beliefs about what is right vs. wrong, good vs. evil, virtuous vs. corrupt. Implicitly, ethics and morals relate to our interactions with and impact on others—if we never had to interact with another creature, we would not have to think about how our behaviors affected other individuals or groups. All managers, however, make decisions that impact others. It is therefore important to be mindful about whether our decisions have a positive or a negative impact. “Maximizing shareholder wealth” is often used as a rationalization for placing the importance of short-term profits over the needs of others who will be affected by a decision—such as employees, customers, or local citizens (who might be affected, for example, by environmental decisions). Maximizing shareholder wealth is often a short-sighted decision, however, because it can harm the organization’s financial viability in the future. Lynn Stout. 2012. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. San Francisco, CA: Berrett-Koehler Publishers. Bad publicity, customers boycotting the organization, and government fines are all possible long-term outcomes when managers make choices that cause harm in order to maximize shareholder wealth. More importantly, increasing the wealth of shareholders is not an acceptable reason for causing harm to others. As you can see from these brief examples, management is not for the faint of heart! It can, however, be incredibly rewarding to be in a position to make decisions that have a positive impact on an organization and its stakeholders. We see a great example of this in the Sustainability and Responsible Management box. Brewing Sustainable Success The focus of a manager or a business owner is often primarily on doing well (making a profit). Sometimes, though, organizational leaders choose to pursue two big goals at once: doing well, and simultaneously doing good (benefiting society in some way). Why? Generally because they think it’s an important thing to do. The business provides an opportunity to pursue another goal that the founders, owners, or managers are also passionate about. In the case of New Belgium Brewing, the company’s cofounders, Jeff Lebesch and Kim Jordan, were passionate about two things: making great beer and environmental stewardship. So it should come as no surprise that their brewery is dedicated to reducing its environmental footprint. The brewery has created a culture that fosters sustainability in a wide range of ways, such as by giving employees a bicycle on their one-year anniversary as a way to encourage them to ride bicycles to work. The organization is also active in advocacy efforts, such as the “Save the Colorado” (river) campaign, and it works hard to promote responsible decision-making when it comes to environmental issues. In fact, in 1999, following an employee vote, the brewery began to purchase all of its electricity from wind power, even though it was more expensive than electricity from coal-burning power plants (which meant reduced profitability and less money for employee bonuses). While the brewery still relies primarily on wind power, it also now generates a portion of its electricity onsite—some from rooftop solar panels, and even more from biogas, the methane gas byproduct that is created by microbes in the brewery’s water treatment plant. The company cleans the wastewater generated from beer production, and in doing so it generates the biogas, which is captured and used for energy to help run the brewery. Brewing is water intensive, so New Belgium works hard to reduce water consumption and to recycle the water that it does use. The company also reduces other types of waste by selling used grain, hops, and yeast to local ranchers for cattle feed. The company, which has been employee owned since 2013, also works with the local utility through a Smart Meter program to reduce their energy consumption at peak times. All of these efforts at doing good must come at a cost, right? Actually, research shows that companies that are committed to sustainability have superior financial performance, on average, relative to those that are not. In coming up with creative ways to reduce, reuse, and recycle, employees often also find ways to save money (like using biogas). In addition, organizations that strive to do good are often considered attractive and desirable places to work (especially by people who have similar values) and are also valued by the surrounding communities. As a result, employees in those organizations tend to be extremely committed to them, with high levels of engagement, motivation, and productivity. Indeed, it seems clear that the employees at the New Belgium Brewery are passionate about where they work and what they do. This passion generates value for the organization and proves that it is, in fact, possible to do well while having also made the decision to do good. And in the case of New Belgium Brewery, that means working to protect the environment while also making delicious beer. Discussion Questions What challenges does New Belgium Brewery face in pursuing environmental goals? Can you think of any other examples of companies that try to “do good” while also doing well? Would you like to work for an organization that is committed to something more than just profitability, even if it meant your salary or bonus would be smaller? Sources: Karen Crofton, “How New Belgium Brewery leads Colorado’s craft brewers in energy,” GreenBiz , August 1, 2014, https://www.greenbiz.com/. Darren Dahl, “How New Belgium Brewing Has Found Sustainable Success,” Forbes , February 8, 2016, https://www.forbes.com/. Jenny Foust, “New Belgium Brewing Once Again Named Platinum-Level Bicycle Friendly Business by the League of American Bicyclists,” Craft Beer.com, February 18, 2016. Robert G. Eccles, Ioannis Ioannou, & George Serafeim, “The Impact of Corporate Sustainability on Organizational Processes and Performance,” Management Science , 60, 2014, https://doi.org/10.1287/mnsc.2014.1984. New Belgium Brewery Sustainability web page, http://www.newbelgium.com/sustainability, accessed September 18, 2017. What are some positive outcomes of decision-making for an organization? What are some possible negative outcomes? How is managerial decision-making different from a multiple-choice test? In addition to the owners of a business, who are some of the other stakeholders that managers should consider when making decisions? What are the basic characteristics of managerial decision-making? Managers are constantly making decisions, and those decisions often have significant impacts and implications for both the organization and its stakeholders. Managerial decision-making is often characterized by complexity, incomplete information, and time constraints, and there is rarely one right answer. Sometimes there are multiple good options (or multiple bad options), and the manager must try to decide which will generate the most positive outcomes (or the fewest negative outcomes). Managers must weigh the possible consequences of each decision and recognize that there are often multiple stakeholders with conflicting needs and preferences so that it often will be impossible to satisfy everyone. Finally, managerial decision-making can sometimes have ethical implications, and these should be contemplated before reaching a final decision. Decision-making The action or process of thinking through possible options and selecting one. Stakeholders Individuals or groups who are impacted by the organization. These include owners, employees, customers, suppliers, and members of the community in which the organization is located.

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How the Brain Processes Information to Make Decisions: Reflective and Reactive Systems What are the two systems of decision-making in the brain? The human brain processes information for decision-making using one of two routes: a reflective system and a reactive (or reflexive) system. Peter A. Facione & Noreen C. Facione. 2007. Thinking and Reasoning in Human Decision Making: The Method of Argument and Heuristic Analysis, Millbrae, CA: The California Academic Press. , Matthew D. Lieberman. 2003. “Reflexive and reflective judgment processes: A social cognitive neuroscience approach.” In (Eds.) Joseph P. Forgas, Kipling D. Williams, & William von Hippel’s: Social judgments: Implicit and explicit processes, 44-67. Cambridge, UK: Cambridge University Press. The reflective system is logical, analytical, deliberate, and methodical, while the reactive system is quick, impulsive, and intuitive, relying on emotions or habits to provide cues for what to do next. Research in neuropsychology suggests that the brain can only use one system at a time for processing information [Darlow & Sloman] and that the two systems are directed by different parts of the brain. The prefrontal cortex is more involved in the reflective system, and the basal ganglia and amygdala (more primitive parts of the brain, from an evolutionary perspective) are more involved in the reactive system. Adam L. Darlow & Steven A. Sloman. 2010. “Two systems of reasoning: Architecture and relation to emotion,” WIREs Cognitive Science , 1: 382-392. Reactive Decision-Making We tend to assume that the logical, analytical route leads to superior decisions, but whether this is accurate depends on the situation. The quick, intuitive route can be lifesaving; when we suddenly feel intense fear, a fight-or-flight response kicks in that leads to immediate action without methodically weighing all possible options and their consequences. Additionally, experienced managers can often make decisions very quickly because experience or expertise has taught them what to do in a given situation. These managers might not be able to explain the logic behind their decision, and will instead say they just went with their “gut,” or did what “felt” right. Because the manager has faced a similar situation in the past and has figured out how to deal with it, the brain shifts immediately to the quick, intuitive decision-making system. Malcolm Gladwell. 2005. Blink: The Power of Thinking Without Thinking. New York: Back Bay Books. Reflective Decision-Making The quick route is not always the best decision-making path to take, however. When faced with novel and complex situations, it is better to process available information logically, analytically, and methodically. As a manager, you need to think about whether a situation requires not a fast, “gut” reaction, but some serious thought prior to making a decision. It is especially important to pay attention to your emotions, because strong emotions can make it difficult to process information rationally. Successful managers recognize the effects of emotions and know to wait and address a volatile situation after their emotions have calmed down. Intense emotions—whether positive or negative—tend to pull us toward the quick, reactive route of decision-making. Have you ever made a large “impulse” purchase that you were excited about, only to regret it later? This speaks to the power our emotions exert on our decision-making. Big decisions should generally not be made impulsively, but reflectively. The Role of Emotions Being aware of the role emotions play in decision-making does not mean that we should ignore them. Emotions can serve as powerful signals about what we should do, especially in situations with ethical implications. You can read more about this particular type of decision-making in the Ethics in Practice box later in this chapter. Thinking through how we feel about the possible options, and why we feel that way, can greatly enhance our decision-making. Jennifer M. George. 2000. “Emotions and leadership: The role of emotional intelligence.” Human Relations , 53, 1027-1055. Effective decision-making, then, relies on both logic and emotions. For this reason, the concept of emotional intelligence has become popular as a characteristic of effective managers. Emotional intelligence is the ability to recognize, understand, pay attention to, and manage one’s own emotions and the emotions of others. It involves self-awareness and self-regulation—essentially, this is a toggling back and forth between emotions and logic so that we analyze and understand our own emotions and then exert the necessary control to manage them as appropriate for the situation. Emotional intelligence also involves empathy—the ability to understand other peoples’ emotions (and an interest in doing so). Finally, emotional intelligence involves social skills to manage the emotional aspects of relationships with others. Managers who are aware of their own emotions can think through what their emotions mean in a given situation and use that information to guide their decision-making. Managers who are aware of the emotions of others can also utilize that information to help groups function more effectively and engage in better group decision-making. While emotional intelligence seems to come easily to some people, it is something that we can develop and improve on with practice. A model of emotional intelligence is presented in . Emotional Intelligence (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) Explain the two systems used by the brain in decision-making. What is emotional intelligence, and why is it important for decision-making? What are the two systems of decision-making in the brain? The brain processes information to make decisions using one of two systems: either the logical, rational (reflective) system or the quick, reactive system. The reflective system is better for significant and important decisions; these generally should not be rushed. However, the reactive system can be lifesaving when time is of the essence, and it can be much more efficient when based on developed experience and expertise. Emotional intelligence The ability to understand and manage emotions in oneself and in others. Reactive system System of decision-making in the brain that is quick and intuitive. Reflective system System of decision-making in the brain that is logical, analytical, and methodical.

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Programmed and Nonprogrammed Decisions What is the difference between programmed and nonprogrammed decisions? Because managers have limited time and must use that time wisely to be effective, it is important for them to distinguish between decisions that can have structure and routine applied to them (called programmed decisions) and decisions that are novel and require thought and attention (nonprogrammed decisions). Programmed Decisions Programmed decisions are those that are repeated over time and for which an existing set of rules can be developed to guide the process. These decisions might be simple, or they could be fairly complex, but the criteria that go into making the decision are all known or can at least be estimated with a reasonable degree of accuracy. For example, deciding how many raw materials to order should be a programmed decision based on anticipated production, existing stock, and anticipated length of time for the delivery of the final product. As another example, consider a retail store manager developing the weekly work schedule for part-time employees. The manager must consider how busy the store is likely to be, taking into account seasonal fluctuations in business. Then, they must consider the availability of the workers by taking into account requests for vacation and for other obligations that employees might have (such as school). Establishing the schedule might be complex, but it is still a programmed decision: it is made on a regular basis based on well-understood criteria, so structure can be applied to the process. For programmed decisions, managers often develop heuristics , or mental shortcuts, to help reach a decision. For example, the retail store manager may not know how busy the store will be the week of a big sale, but might routinely increase staff by 30% every time there is a big sale (because this has been fairly effective in the past). Heuristics are efficient—they save time for the decision maker by generating an adequate solution quickly. Heuristics don’t necessarily yield the optimal solution—deeper cognitive processing may be required for that. However, they generally yield a good solution. Heuristics are often used for programmed decisions, because experience in making the decision over and over helps the decision maker know what to expect and how to react. Programmed decision-making can also be taught fairly easily to another person. The rules and criteria, and how they relate to outcomes, can be clearly laid out so that a good decision can be reached by the new decision maker. Programmed decisions are also sometimes referred to as routine or low-involvement decisions because they don’t require in-depth mental processing to reach a decision. High- and low-involvement decisions are illustrated in . High-Involvement and Low-Involvement Decisions. (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) Nonprogrammed Decisions In contrast, nonprogrammed decisions are novel, unstructured decisions that are generally based on criteria that are not well-defined. With nonprogrammed decisions, information is more likely to be ambiguous or incomplete, and the decision maker may need to exercise some thoughtful judgment and creative thinking to reach a good solution. These are also sometimes referred to as nonroutine decisions or as high-involvement decisions because they require greater involvement and thought on the part of the decision maker. For example, consider a manager trying to decide whether or not to adopt a new technology. There will always be unknowns in situations of this nature. Will the new technology really be better than the existing technology? Will it become widely accepted over time, or will some other technology become the standard? The best the manager can do in this situation is to gather as much relevant information as possible and make an educated guess as to whether the new technology will be worthwhile. Clearly, nonprogrammed decisions present the greater challenge. The Decision-Making Process While decisions makers can use mental shortcuts with programmed decisions, they should use a systematic process with nonprogrammed decisions. The decision-making process is illustrated in and can be broken down into a series of six steps, as follows: Recognize that a decision needs to be made. Generate multiple alternatives. Analyze the alternatives. Select an alternative. Implement the selected alternative. Evaluate its effectiveness. While these steps may seem straightforward, individuals often skip steps or spend too little time on some steps. In fact, sometimes people will refuse to acknowledge a problem (Step 1) because they aren’t sure how to address it. We’ll discuss the steps more later in the chapter, when we review ways to improve the quality of decision-making. The Decision-Making Process. (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license) You may notice similarities between the two systems of decision-making in our brains and the two types of decisions (programmed and nonprogrammed). Nonprogrammed decisions will generally need to be processed via the reflective system in our brains in order for us to reach a good decision. But with programmed decisions, heuristics can allow decision makers to switch to the quick, reactive system and then move along quickly to other issues. Give an example of a programmed decision that a manager might face. Give an example of a nonprogrammed decision. What are heuristics, and when are they helpful? How are programmed and nonprogrammed decisions connected to the reflective and reactive systems in the brain? What is the difference between programmed and nonprogrammed decisions? Programmed decisions are those that are based on criteria that are well understood, while nonprogrammed decisions are novel and lack clear guidelines for reaching a solution. Managers can establish rules and guidelines for programmed decisions based on known fact, which enables them to reach decisions quickly. Nonprogrammed decisions require more time to resolve; the decision maker may need to conduct research, collect additional information, gather opinions and ideas from other people, and so on. Heuristics Mental shortcuts that allow a decision maker to reach a good decision quickly. They are strategies that develop based on prior experience. Nonprogrammed decisions Decisions that are novel and not based on well-defined or known criteria. Programmed decisions Decisions that are repeated over time and for which an existing set of rules can be developed.

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