Importance of Diversity in Employee Retention

Published Sept. 12, 2019, 11:37 a.m. by Moderator


A thriving organization can only remain so if it does not lose part or its entire workforce. Employee retention is necessary in enhancing an organization’s strength, development and revenue. To ensure employee retention, organizations have to adopt several strategies. Organizations have to adopt open communication channels, employ a diverse labor force, employ qualified and adequately skilled people, and the organization has to offer training and development opportunities to all its employees. This paper analyses these strategies with main focus on employment of a diverse workforce and its consequent implication in employee retention especially among marginalized groups.


In a globalized economy it has never been more important for organizations to have an ‘international face’. Diversity in the workplace is crucial in increasing employee retention rates. Diversity makes employees feel appreciated. Appreciated employees stay longer in their stations than those who are dissatisfied. Diversity is good for creativity; different experiences, cultures, languages gel together to find new ways of solving problems and connecting people. Diversity is bringing down walls social barriers to better understand the employees and the wider community. Diversity shows that a company is ‘all inclusive’. A company with employees from all walks of life understands the market better than a parochial company with employees from one walk of life. If employees understand that career progression is based on merit rather than race, gender, religions then they are most likely to stay in their jobs. Diversity is good for employee retention.

High employee turnover is costly and very disruptive to the normal workings of an organization. According to Felusiak et al (2015), it costs a company between half and double the former employee’s salary to recruit a new employee. Additionally the paper cites a 2004 report by the Society for Human Resource Management SHRM that found out; more than three quarters of employees are actively looking for new jobs. This should sound alarm bells to employers who whose businesses fully depend on employees.  The survey discovered that 43% of employees searching for jobs wanted more pay, 32% wanted to further their careers and 22% were unhappy with the limited chances at their present work.

Literature Review

Racial Differences In Employee Retention: Are Diversity Climate Perceptions The Key?

This paper was published by McKay et al (2007) in the Personnel Psychology journal. It examined the employee turnover rates of Blacks, Hispanic and Whites in an American firm (McKay et al, 2007).  The study involved a sample of 5,370 managers.  The author explores the role that race plays in employee retention rates. The first hypothesis stated that pro-diversity measures would lead to low turnover rates of Black employees followed by Hispanics and then Whites. The second hypothesis stated that with organizational commitment then it is possible to achieve workplace diversity to prevent employees from leaving. The study did discover that minorities are more likely to quit their jobs than their White counterparts.  The article suggests that one of the reasons could the fact that minorities are more likely to encounter racism at work than Whites (McKay et al, 2007).

McKay et al (2007) discovered that race and diversity climate perceptions play a part in employee turnover rates. The study showed that the number of employees voluntarily quitting their jobs was 30 higher among racial minorities compared to whites. These left the firms affected with huge bills to replace lost employees. There is very limited research to explain the reason for the difference. The article cites the ‘social identity theory’ which indicates that people form groups based on inherent qualities such as race or gender. It also states that the diversity climate perceptions vary along racial lines. The author(s) further explain this using the ‘symbolic structural interactionism theory’ which states that people form groups or identities based on their interactions with people and institutions. In these interactions minorities face discrimination and they learn that the social hierarchy requires them to be subordinates (McKay et al, 2007).

The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation

This paper by Bear et al. investigates the relationship between boardroom diversity and corporate social responsibility ratings and the effect of that on corporate reputation.  The article states that corporate reputation is the public approval rating of a company over a period of time. Positive corporate reputation is important in attracting the best talent and higher employee retention rates (Bear et al, 2010). Employees who feel the approval of the public are more satisfied with their jobs and feel less urge to leave. Positive corporate reputation also leads to gains in share price, increased sales, and investment. One way of gaining a positive reputation is corporate social responsibility (Bear et al, 2010). There have been increased calls for gender balance and racial diversity in companies’ boards’ as part of the corporate social responsibility package.

The article indicates two social constructs advanced by Mattingly and Berman (2006). The first construct involves actions that target the community and diversity advocates to enhance the institutional strength of the firm. This involves actions like donations to social causes, volunteer programs, and employment of women and minorities. The second construct involves actions that target employees, customers, and shareholders to enhance the technical strength of the firm. These actions include increased pay and benefits, increased environmental awareness wellbeing and protection programs (Bear et al, 2010). The article cites Fombrun and Shanley (1990) who discovered that companies that gave more to charity had more positive public approval.  These actions showed the community that company respected and believed in their social concerns (Bear et al, 2010).

The Role of Calculative Attachment in the Relationship between Diversity Climate and Retention

The article by Kaplan et al examines the relationship diversity and employee retention. The study discovered that the more positive the diversity climate was, the less employee turnover rates were.  The paper also cites other results that showed a negative correlation between diversity and employee retention. The article explains that most employers hired a diverse workforce as a legal requirement to achieve a set quota of minority employees rather than them being perfect fits for the company.  This form of haphazard recruitment is insufficient in creating a positive diversity climate (McKay et al, 2007). Minorities or women who are hired through the ‘affirmative action’ are perceived as less deserving as they did not earn their positions on merit. A positive diversity climate is one in which all employees feel valued and their differences do not hamper career growth, and the top management plays an active role in ensuring that these policies are followed by all.

This approach has been replaced with an integrated approach which integrates the diversity measures with the company policies. This approach also focuses on the individual. These diversity programs can only succeed through understanding individual needs and with the support of top management. Calculative attachments are the benefits or perceived opportunities that make an employee stay in an organization (Kaplan et al, 2011). In cases where the company does not communicate its future outlook, employees become uncertain with their positions. Their assumptions about their future role in the company will be based on their diversity climate perceptions. Employee retention rates increase when a positive diversity climate is fostered.

Critical Analysis

       I.            Policy and Strategy

Diversity is not just about gender, race and age limits. A 2004 study by Sujansky found that workplace practices are influenced by generations. The study found that Baby Boomers preferred personal connections, Gen X preferred independence and self reliance, while the Gen Y were very curious and opinionated. The work environment changes across generations and organizations formulation policies should take this in mind. Company policies that encourage diversity in the workplace need the support of the top leadership (McKay et al, 2007). The top management has to be actively involved in implementing and promoting workplace inclusion. Without the support of managers these policies will not be effective in creating a positive, united workforce.

It is important for organizations to incorporate policies that empower women, minorities and the disabled in official company practices. For the policies and strategies to be successful employers should focus on individual employee needs rather than social demographics and legal requirements. If the policy focuses on social demographics like race or age, this ultimately leads to friction in the workplace as one set of employees feel they did not earn their positions on merit while another set believes that they earned their positions through their work ethics and qualifications (McKay et al, 2007). The ‘affirmative action employees’ will be seen as less deserving of their positions and therefore will find it hard to convince the ‘merit based employees’  that they are fully capable of performing their roles. In case of managers; the ‘affirmative action manager’ will experience challenges to their authority and their instructions will be disregarded. This creates a dysfunctional environment that lowers productivity and high employee turnover. Employees only stay in organizations where they feel valued. Diversity management practices should start from the top to the bottom for them to be effective.

    II.            Recruitment and Training

It is very important for organizations to increase the hiring quotas of women, minorities and the disabled. Prejudice and cultural stereotypes should be highly discouraged in the workplace. Discrimination is one of the leading causes of high employee turnover. Nobody stays where they are not wanted or appreciated and that includes employees. The survey conducted by the Society for Human Resource Management SHRM showed that more than 75% of current employees are actively looking for alternative jobs. Diversity and inclusion practices should be formulated by accessing an employee’s social-cultural and educational backgrounds to ascertain if they fit with the company’s corporate culture and beliefs (McKay et al, 2007). Individuals who are matched with their jobs are most likely to stay longer in their positions than individuals who are in the wrong career.

Studies also show that males are less likely to experience racial discrimination than females and so they will be less concerned about the organization’s diversity climate. This is commonly referred to as the aversive racism theory. The theory suggests that some employees may have an unconscious loathing of minorities and therefore will respond negatively to any efforts that promote recruitment of minorities and women (McKay et al, 2007). Additionally, it was discovered that some White males may perceive the firms’ all inclusive practices as an affront to the policy of hiring on merit. They perceive these actions as unjustified and counter to their self interests. Consequently they will oppose or reject the hiring on women and minorities. 

This is different when it comes to White females' attitude on diversity. White females support workplace inclusion and their concerns may align more closely with minorities. This is because they have been relegated to a lower status group based on gender and most have experienced gender discrimination. Minority females experience more racial discrimination than gender bias (McKay et al, 2007). To remedy gender and racial discrimination minorities and White females have a positive attitude towards diversity inclusion practices compared White males. For companies to have effective inclusion practices, all the recruitment policies should consider individual needs as opposed to group needs.


There is a lot of evidence that supports the inclusion of minorities and women in the workplace. Hiring of minorities and women is part of a company’s corporate social responsibility. For a company to endear itself to the community and widen its customer base, diversity management measures have to be part of the company’s corporate culture. Diversity practices have to be led by the top management for them to be successful.



Bear, S., Rahman, N., & Post, C. (2010). The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), 207-221. doi:

Kaplan, S., Rahman, Wiley W. J, and Maertz Jr .C.P (2011). The Role of Calculative Attachment in the Relationship between Diversity Climate and Retention. Human Resource Management, 50.2 (2011): 271-287.

McKay, P. F., Avery, D. R., Tonidandel, S., Morris, M. A., & al, e. (2007). RACIAL DIFFERENCES IN EMPLOYEE RETENTION: ARE DIVERSITY CLIMATE PERCEPTIONS THE KEY? Personnel Psychology, 60(1), 35-62. Retrieved from

Noe, A. R.., Hollenbeck, R. J., Gerhart, Barry, and Wight M. P. (2006). Human Resources Management: Gaining a Competitive Advantage, Tenth Global Edition. McGraw-Hill Education.

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