If competitive advantage is based on effective use of resources, then managing diversity is one way to effectively utilize human resources. In an innovative study, Wright, Ferris, Hiller, and Kroll examined whether companies' records in managing diversity affected the companies' stock price valuations. Using data from 1986 to 1992, the authors used an event study method to conduct their research. In the event study approach, researchers determine whether there is a significant change in the price of a firm's stock on days immediately surrounding the announcement of a particular event.

In this study, the authors used high-quality affirmative action programs as a proxy for effective management of diversity. The U.S. Department of Labor provides awards for exemplary affirmative action programs, and the announcements of these awards were used as the event of interest. Similarly, discrimination lawsuits were used as a proxy for poor management of diversity. The announcements of damage awards from discrimination lawsuits were the other events of interest.

The results supported the authors' hypotheses. Announcement of firms' receiving the award for high-quality voluntary affirmative action programs were associated with positive stock price changes for those firms. Announcements that conveyed that firms were guilty of discriminatory practices were associated with negative stock returns for those firms.

It appears from this study that efforts toward managing diversity are valued in the marketplace. Investors bid up the price of stocks for firms who receive DOL awards for their efforts. It may be that investors realize that firms who manage diversity well attract more talented human resources and may have lower costs and better reputations with customers.

SOURCE: P. Wright, S. P. Ferris, J. S. Hiller, and M. Kroll, "Competitiveness Through Management of Diversity: Effects on Stock Price Valuation," Academy of Management Journal 38 (1995): 272-288.

ORGANIZATIONAL REALITY

Bissett Nursery Uses Imaging Technology to Gain a Competitive Edge

Bissett Nursery, (site "coming soon" as of the development of this site) a rewholesaler of nursery materials, was hit hard by the recession. Its customers, who are landscape contractors, were hit hard too. Landscape contractors had to deal with Long Island customers who were becoming more demanding, and who were having trouble envisioning what their homes would look like with plants and shrubs drawn on blueprints. The owners of Bissett Nursery came up with an idea. Why not use an imaging system to depict the landscape plans for the contractors? They hired a former landscape contractor to design the system. At first, Jim Vazanna, the designer, purchased a database of photographs. He became disenchanted with the resolution and detail of the images, and hit the road with his own 35-millimeter camera, taking pictures of trees, shrubs, waterfalls, all the parts of landscaping. Then he built his own database.

Contractors were skeptical at first, because imaging was unknown in the nursery business. Vazanna took his camera to new homes, scanned the photos into the computer, and produced a rendering of the house fully landscaped. He gave the photos to the landscape contractors and told them to pay him if they got the job. In 95 percent of the cases, the contractors did. Bissett's investment in imaging technology has generated about $7.5 million in sales for its customers and $3 million in new business for Bissett in just two years. More importantly, it provided Bissett's customers with a powerful marketing tool and tied them to Bissett more strongly than ever.

SOURCE: Adapted with permission. Inc. Magazine, February 1994. Copyright © by Goldhirsch Group, Inc., 38 Commercial Wharf, Boston, MA 02110.

ORGANIZATIONAL REALITY

Patagonia's Dirt Bag Environmental Agenda

As founder and CEO of Patagonia Outdoor Clothing, Yvon Chouinard prefers to be called a Dirt Bag. He has worn several hats in his life-blacksmith, professional surfer, climber, kayaker-and prefers to sleep on the ground with no tent (hence the name Dirt Bag). He describes working in an office as "an unnatural situation." All Patagonia employees are given an official Dirt Bag camping mug, with the words "Live, Take Risks, Die, Compost" describing their existence as a linked circle.

The head Dirt Bag's love of the environment has resulted in Patagonia's putting its money where its mouth is. Chouinard developed an environmental grants program and the company donates 1 percent of its annual revenue to groups ranging from the Sierra Club to Planned Parenthood to Earth First! Chouinard is committed to Deep Ecology, an analysis that examines the farm-to-landfill impact of every company action. This triggered an internal assessment that revealed the environmental damage that Patagonia's own products were causing. Patagonia then declared that its popular polyester fleece jackets would be produced from recycled soda bottles, and that the cotton for its T-shirts would come only from organic farmers. The company hopes to prove that business can earn reasonable profits without destroying the environment. Such environmental concern has earned Patagonia quite a following, not only for its functional products for wilderness adventure, but also for its corporate social responsibility.

SOURCE: P. Carlin, "Will Rapid Growth Stunt Corporate Do-Gooders?" Business & Society Review (Spring 1995): 36-43.

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