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Companies with LGBT-supportive policies outperform the competition

Companies with LGBT-supportive policies outperform the competition.
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Research by Shaun Pichler (left), chair and professor of management at Cal State Fullerton, has shown that companies with LGBT-supportive policies tend to outperform their competitors over time, and if those policies are rescinded, firm value, productivity, and profitability declines.

Such policies have a positive effect among all employees at a firm — not just LGBT workers — and this effect occurs even in states with anti-discrimination laws. 

Pichler’s interest in studying fairness and support in organizations was fueled by his own experience in industry, where he saw discriminatory actions and the suffering they caused.

Why do LGBT-supportive policies impact the bottom line favorably?

Pichler: My colleagues and I were among the first researchers to demonstrate a link between LGBT-supportive policies and firm performance, but we weren’t able to tease out exactly why this occurs.

However, we suspect there are two key reasons: these firms are able to attract and retain more highly qualified workers than their competitors, and they are more attractive to LGBTQ+ consumers, a community with the estimated purchasing power of $917 billion in 2016, according to Forbes magazine.

Why does discontinuing such policies lead to decreases in firm performance?

When firms discontinue LGBT-supportive policies, they are less attractive as employers of choice, which leads to less qualified applicants, job incumbents, and lower levels of retention of top talent. Moreover, they are less attractive to LGBT consumers.

Firms experience performance decrements over time as they become less attractive or less competitive in both their labor and product or service markets.

Why do the benefits of these policies persist in the presence of state anti-discrimination laws? 

This finding is something that we didn’t expect. We thought that the effects of LGBT-supportive policies would be mitigated in states with legal protections because these workers would know that they have protections at the state level.

In hindsight, though, what seems to matter to workers is whether or not they feel fairly treated and supported by their employer.

Why do LGBT-supportive policies have a positive impact on all workers at a firm?

We theorized that these policies should have a positive effect on all workers because they send the signal that the company values and supports everyone. This signal should create a more positive diversity climate and increase perceptions of organizational justice and fairness among all workers.

When employees feel that their work environment is more inclusive, fairer and more supportive, they tend to be happier, healthier and more productive.

Since there are no federal mandates for firms to support LGBT workers, when they do, they are going above and beyond to offer a strong signal to potential applicants and their workforce.

This is similar to what we have found in studies of on-site childcare — even non-parents tend to react positively to this benefit because the employer is signaling they care about their employees and want to do what they can to support them.

What are your next projects related to LGBT issues?

My colleagues and I are working on a cross-cultural comparison of LGBT equality indexes from several countries.

These indexes monitor the diversity climate and inclusiveness of firms. We want to better understand how a country’s culture influences the design and use of the indexes, and how the indexes might influence LGBT rights in their respective countries.