Hire Diversity, Make More Money (Retailers Learn From Profs)

A new business marketing study gives retailers a strong reason to hire with diversity in mind.

Yearly earnings are boosted by as much as $100,000 when they employ people who look like their customers, a new study suggests.

But this still involves more than simply playing ethnic mix-and-match, says one professor.

Temple University, Rutgers University and Davidson College profs studied 739 outlets of the U.S. department store J.C. Penney and found that where the pool of employees mirrored the ethnic makeup of the communities they served, this earned retailers an average of $94,000 more per year than stores in which staff wasn’t as representative of the wider community.

That figure averages out to $630 more per employee, and earned the company an extra $69 million last year, the study found.

The study was the first to establish such a strong link between diversity and profitability.

“In some ways the whole thing was sort of surprising,” says co-author Derek Avery, a professor of Human Resources Management at Temple’s Fox School of Management. “Even though the finding is somewhat intuitive based on social-psychological principles – similarity has got to sell. But when you look at all the literature that’s out there it really hadn’t worked. Evidence was very mixed.”

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But previous studies measured the financial effect of matching employees and customers of the same ethnic group, and Avery says his group’s study examined diversity and retail on a broader scale -- yielding a more comprehensive set of answers.

He cautions retailers and other companies not to misinterpret the study’s conclusions — setting quotas or numerical targets for employees of various ethnic groups misses the point.

Avery says customers at a mainstream retailer aren’t necessarily swayed by attempts to pander to ethnic solidarity. Instead, he says, a monochromatic sales team in an ethnically diverse area sends negative signals to shoppers of various backgrounds.

The study, titled “Is There Method to the Madness? Examining How Racioethnic Matching Influences Retail Store Productivity,” appears in the journal Process Psychology.