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What Japanese companies should be wary of when it comes to diversity

Akie Iriyama
Associate Professor, Faculty of Commerce, Waseda University

The term “diversity management” has received a lot of attention in recent years. “Diversity management” generally refers to the practice of proactively hiring from certain demographics such as women and non-Japanese. A recent initiative that is fresh in our memory is the government’s “Act Concerning the Promotion of Women's Career Activities” which was created in August to encourage businesses to employ more women.

I fully support women’s participation in society. On the other hand, however, I get the impression that the terms "diversity" and "women's participation in the workforce" have taken on meanings of their own that have not been addressed. Members of the media and others have even suggested that companies can improve their performance simply by hiring more women.

Management-related research suggests that this is not as simple as the media suggests. In this article, I will discuss how business can effectively incorporate women into their workforce while citing research findings from the field of business administration.

In the field of business administration, there are two major types of diversity: task-related diversity and demographic diversity.

Task-related diversity refers to the diversification of intangible aspects of an organization such as its members’ abilities, experience, and knowledge. In contrast, demographic diversity refers to the diversification of clear attributes such as gender, nationality, and age.

For nearly forty years, researchers in business administration have used statistical analyses for empirical studies that attempt to answer which type of diversity—task-related or demographic diversity—have positive effects on organizations. The general conclusion is that task-related diversity has positive effects on organizations but demographic diversity does not, and in some cases may have negatives effects.

Task-related diversity generally has positive effects on an organization's performance. If an organization has people with different kinds of knowledge and experience, the entire knowledge of the organization is diversified, and combinations of such knowledge and experience lead to new ideas and knowledge. This process of new ideas and knowledge stemming from combinations of existing knowledge is called “new combination.” This process enables organizations with diverse knowledge and experience to create a wide range of combinations that improve performance.

On the other side of the spectrum, the potential negative effects of demographic diversity in an organization are based on studies in fields such as social psychology and cognitive psychology.

After all, there are limitations when it comes to people’s cognitive abilities. An individual’s deep psyche will always attempt to group people based on their external appearances when there are many people before their eyes.

External appearance is the first attribute that attracts an individual’s attention. Therefore, that individual will unconsciously divide people into groups such as men and women or Japanese and non-Japanese.

If for example, a certain number of women join a company that previously only consisted of male employees, the distinction between men and women will automatically form. This eventually leads to conflicts between the groups of men and women within the organization.

Another significant issue is the possibility that internal informal information such as personnel information will only be circulated among men in the organization, leading to poor performance results. Based on this perspective, it is not necessarily advisable for organizations that consist primarily of men to establish numerical targets for women employees simply because the government recommends doing so.

I would like to reiterate that I fully support women participating in the workforce. It is important to remember, however, that it is too simplistic to argue that businesses can improve their performance by simply bringing women into their organization. If you approach the issue from a business administration perspective, you can argue that task-related diversity is necessary to improve performance.

The challenge Japanese companies now face is how to increase task-related diversity from the “perspective of women,” something they have failed in doing so up until now. It is important to hire more women to overcome this problem, but on the other hand, doing so involves a risk of generating demographic conflicts. Therefore, when male-dominated Japanese companies employ more women, they need to make all-out efforts to remove the negative effects of demographic diversity.

One interesting example is the major American IT company Google. Based on my understanding, Google greatly emphasizes diversity in its corporate vision. However, the company also stresses the importance of promoting diversity to enhance innovation, not for diversity’s sake. This makes Google an example of an organization that promotes task-related diversity.

As part of its task-related diversity initiatives, Google employs many women and people of different nationalities. However, Google states that even companies like itself, which implement advanced diversity initiatives, experience the negative effects of demographic diversity. Google calls them "unconscious biases." Google works to completely eliminate these biases through training and other programs.

Japanese companies need to reconsider their simplistic advocacy of diversity and readdress its meaning. After they implement task-related diversity programs, these companies then need to thoroughly investigate how to remove the negative effects of demographic diversity when hiring more women and non-Japanese employees.

Akie Iriyama
Associate Professor, Faculty of Commerce, Waseda University

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Akie Iriyama graduated from Keio University with a bachelor's degree in economics and earned his master's degree from Keio University’s Graduate School of Economics.
After working in consulting services primarily for automotive manufacturers and Japanese and foreign government agencies at Mitsubishi Research Institute, Inc., he obtained a Ph.D. from the University of Pittsburgh’s Joseph M. Katz Graduate School of Business in 2008. That same year, he became Assistant Professor at the State University of New York’s School of Management in Buffalo.
In 2013, he was appointed Associate Professor at Waseda University Faculty of Commerce, the post he continues to hold to the present day. He has contributed articles to major international academic journals of business administration, including Strategic Management Journal and the Journal of International Business Studies. His latest book, Business School de wa Manabenai Sekai Saisentan no Keieigaku (The World's Most Advanced Business Administration that Cannot be Learned at Business Schools), will be published by Nikkei Business Publications, Inc. in November 2015
(http://www.amazon.co.jp/dp/4822279324/).