Is it Spillover or Compensation? Effects of Community and Organizational Diversity Climates on Race Differentiated Employee Intent to Stay

Introduction

“Organizational diversity climate” describes the degree to which an organization’s racially and ethnically diverse members are treated equitably and inclusively. “Community diversity climate” expands this perception of collective equity and inclusion to a geographical area where the individual primarily resides (i.e., town, city). Existing research on organizational ethics and diversity climates has historically not considered the influence of community diversity climate on employee attitudes and behaviors. In this study, Singh and Selvarajan examine the effect of employee perceptions of community diversity climate, organizational diversity climate, and individual racial affiliation on employee intent to stay at an organization.

The authors investigate how diversity climates within the formal organization and broader community might impact employee retention through the lens of spillover and compensation theories. Spillover theory proposes that experiences in one part of our life influences individual behaviors in other parts of our. In comparison, compensation theory indicates that when individuals find something of value to be lacking or unattainable in one domain of their life, they turn to other domains of their life to fulfill that need. This study also examines the role of individual racial affiliations in employee intent to stay. By assessing the interactions between the diversity climate within an employee’s organization and community as well as individual racial affiliations, this study advances the existing management and community psychology literature that has traditionally evaluated these variables independently of one another.

Dr. Barjinder Singh is an Associate Professor of Management at Elon University focusing on organizational behavior, human resource management, and business ethics. Dr. Rajan Selvarajan is an Associate Professor of Management at California State University-East Bay researching  human resource management, employee engagement, and diversity in organizations.

Methods and Findings

The authors distributed an electronic survey to 500 employees at a mid-sized organization in the American Midwest and received responses from 165 employees. One hundred (61%) of these respondents were white while the remaining 65 belonged to racial minority groups. The average respondent age was 41 years, and the average tenure was 8.6 years. The majority of the respondents were male (72%) and married (66%). In the quantitative analyses, Singh and Selvarajan control for employee tenure, which is associated with intended retention. 

The study examined the following metrics: 

• Organizational diversity climate was assessed by asking survey respondents to use a four-item scale to react to statements such as “I trust this organization to treat me fairly” and “This organization maintains a diversity friendly work environment.”

• Employee intent to stay was quantified through a three-item scale that assessed individual intentions to stay with their current employer using statements such as ‘‘Under no circumstances I would voluntarily leave this organization,’’ and ‘‘I plan to stay in this organization for as long as possible.’’

• Community diversity climate was measured along a five-item community diversity climate index (CDI) that asked respondents to react to the following questions: ‘‘My community welcomes people of different races and ethnicities,’’ and ‘‘People of different races and ethnicities would want to move to my community.’’

The study found a positive relationship between a supportive organizational diversity climate and employee intent to stay, which the authors considered a proxy for retention. The authors also found a supportive organizational diversity climate was more positively related to intent to stay among individuals who perceive equity and inclusion challenges in their broader geographical area, therefore supporting the compensation theory. Contrastingly, employee intent to stay with their organization was not strong for those who perceived supportive equity and inclusion climates in their geographical area, contradicting spillover theory. Finally, the study also found that the relationship between an employee’s intent to stay and whether racially and ethnically diverse members are treated equitably and inclusively at their employer was stronger for minority employees, especially for those in adverse community diversity climates.

Conclusions

This research underscores the importance of organizational diversity climate for promoting retention among both white and non-white employees. Although the study did not find evidence supporting spillover effects of positive community diversity climate for employee intent to stay, it did indicate potential for supportive organizational climates to mitigate challenges associated with adverse community diversity climates. The study also calls attention to differences in the effects of organizational and community diversity climates based on individual racial affiliations.

The authors acknowledge that this study is limited to the lens of race and ethnicity, and propose that studying alternative forms of diversity could unveil new information about the relationship between organizational and community culture and work related attitudes and behaviors. Moreover, because the study exclusively utilized an electronic survey, common-method bias could have resulted in skewed results. To counter this possibility, the authors suggest that future researchers collect data from multiple sources. Finally, the cross-sectional design of the study prevented analysis of long-term effects, which could be addressed through future longitudinal studies.