How Racioethnic Equity Contributes To Organizational Functioning

Although diversity and inclusion have been studied extensively, equity is the relatively underexplored component of DEI. The present study addresses this gap by examining the influence of equity on organization-level outcomes through the lens of management ethnic representativeness (MER), which reflects the alignment between the racioethnic profiles of employees and management. We integrate signaling and equity theories to hypothesize that organizational equity signals elicit employee productivity, ultimately impacting the organization’s bottom line. Specifically, we hypothesize that MER has a positive indirect relationship with organizational performance through operational performance, especially in more racioethnically diverse organizations. Our model is tested through three field studies and an experiment (along with two supplemental studies). Across multiple studies including archival national survey data (Study 1), a large, US-based retail organization (Study 2), five years of professional sports panel data (Study 3), and an experiment (Study 4), we found consistent evidence that MER is associated with higher operational performance and, by extension, greater organizational performance, particularly in units with greater racioethnic diversity. Additionally, we observed that MER is related positively to perceived equity when organizations are more racioethnically diverse. We discuss the theoretical and practical implications of our study findings.