Matchmaking: community and business unit racial/ethnic diversity and business unit performance

Past studies examining how the match between organization and community racial/ethnic proportions influences performance have relied on the social categorization perspective on diversity, but have not offered strong significant results. However, the information and decision-making perspective on diversity suggests that organizational diversity fit based on variety, rather than a match of demographic proportions, leads to greater performance. This study considered both perspectives to test how both racial/ethnic proportions matching and diversity fit influence business unit financial performance. This was tested on a sample of 51 business units of a restaurant chain in the USA. The results show that business unit diversity was associated with higher performance in diverse communities but not in homogeneous communities. This suggests that racial/ethnic diversity is a valuable human resource conducive to greater performance but this is contingent upon community diversity. Implications for organizational diversity research and human resource management are discussed.