Managing diversity at work: Does psychological safety hold the key to racial differences in employee performance?

Previous diversity research has neglected the role of psychological mechanisms that underlie the relationship between diversity climate and employee performance. Drawing on social and racial identity theories, we hypothesized that psychological safety mediates the relationship between diversity climate and employee performance. Furthermore, we proposed that race moderates both stages of the mediation, whereby the relationships between diversity climate and psychological safety and between psychological safety and performance are stronger for minorities than for W hites. Results, based on a survey of employees and their colleagues, revealed that the relationship between diversity climate and employee performance was mediated by psychological safety. We also found that the diversity climate–psychological safety and psychological safety–extra‐role performance relationships were moderated by race, such that these relationships were stronger for minorities than for W hites. Further, the indirect effects of diversity climate on extra‐role behaviours via psychological safety were also moderated by race, such that these relationships were stronger for minorities than for W hites. For efficient management of diversity in organizations, research and practical implications are also discussed. Practitioner Points In the midst of increasing workforce diversity, the study highlights the importance of a psychologically safe work environment where employees feel confident in expressing their true selves without fear of being judged as inferior or incompetent. By necessitating the creation of psychologically safe work environments, the study establishes psychological safety as a principal motivator of employee performance behaviours in a racially diverse work setting. The study cautions organizational practitioners that when dealing with racial diversity, one size does not fit all. Rather, positive organizational contexts (such as diversity climate and psychological safety) hold a greater significance for minorities and are more effective in shaping their performance behaviours.