Differentiating on Diversity: How Disclosing Workforce Diversity Improves Brand Attitudes

An investigation of whether or not firm diversity disclosures help their customers’ perceptions of the firm.

Introduction

In this study,  researchers investigate the impact of disclosing and not disclosing workforce diversity on consumer perceptions, which  is particularly relevant in the current socio-political climate, as companies were increasingly expected to demonstrate their commitment to diversity, equity, and inclusion (DEI) following the growth of social movements after George Floyd’s death. As public demand for firm transparency in workforce diversity has intensified, this paper examines the effect of such transparency on customer perceptions of a brand.

Maya Balakrishnan is a Technology and Operations Management doctoral candidate at Harvard Business School. She researches business operations, including how companies can foster trust from consumers through operational change. Jimin Nam is a Marketing doctoral candidate at Harvard Business School. She researches the effects of businesses’ reactions to sociopolitical events on their relationships with customers. Ryan W. Buell is the C.D. Spangler Professor of Business Administration at Harvard Business School, and he studies companies’ interactions with their customers and how internal operational change affects customer conduct and business performance. 

Methods and Findings

The researchers conducted three study designs with nearly 1,875 participants to understand the effects of disclosing or not disclosing workforce diversity data. 

• Study 1: Measuring consumers’ perceptions about a company as a result of its overall workforce diversity disclosures
• Study 2: Measuring consumers’ perceptions about a company as a result of its disaggregated workforce diversity disclosures (e.g., measuring leadership diversity vs. workforce diversity)
• Study 3: Testing whether higher perceived commitment to DEI initiatives is a causal mechanism for how disclosing workforce diversity improves attitudes about brands. 

Diversity data can be found within EEO-1 forms, which detail the demographic breakdown of workforces. Companies with over 100 employees are required to submit these forms to the federal government. Typically, these forms are kept confidential by the federal government; therefore public disclosure of this data would be atypical  business practice. 

The study utilized a series of controlled experiments with U.S. participants who were presented with scenarios in which companies either disclosed or withheld their workforce diversity data. Participants were randomly assigned to different conditions that varied based on the level of transparency about the company’s diversity. These conditions included complete disclosure, partial disclosure, and non-disclosure of diversity statistics. Researchers collected data on participants’ attitudes towards each company based on their perceived commitment to DEI and overall brand perception.

The findings were robust to demographic and attitudinal controls across various experimental setups: transparency about workforce diversity invariably led to more favorable consumer perceptions. This was consistent even when the disclosed diversity data showed significant racial disparities within the companies. Interestingly, the positive effect of disclosure on consumer attitudes was observed and sustained regardless of the diversity level presented, which indicates that consumers value transparency over the specifics of the data disclosed. This suggests that the act of disclosing itself carries more weight in shaping consumer attitudes than the actual contents of the diversity data.

Conclusions

The researchers find that openly sharing diversity data can only improve how customers perceive a company. This positive effect on brand attitude underscores the importance of transparency in corporate DEI practices. Companies gain consumer trust and brand loyalty by being forthcoming about their workforce diversity, which in turn supports broader social accountability and progress towards inclusive practices.