The effect of age diversity on firm performance

Age diversity is the extent to which and organization or a group is heterogeneous with respect to the age of its members. All over the world, age diversity among organizations is increasing significantly. With that, it is imperative for managers to understand any issues that relate to this development. For instance, such a study will provide helpful information on how to improve actual management of organizational diversity. In this study, the effects of firm strategy and country of origin on the relationship between age diversity and firm performance are revealed.

According to different researches in the past, age diversity is an important resource for organizations. Researchers suggest that age diversity improves creativity and problem solving capabilities. Additionally, age diversity can escalate financial and marketing performance for an organization. This is explained by the fact that  having a diversely aged team of employees helps an organization understand the needs of a similar group of customers. Of also great significant is the fact that both the young and old have unique values from which firms can draw to improve performance. Finding show that older employees are reliable, conscientious, loyal, hardworking and committed. On the other hand, younger employees are flexible, energetic and creative. It is no doubt that another study on the same topic found out that companies that capitalize on age diversity have a competitive advantage. Following the above line of thought, it can be hypothesized that age diversity has a positive effect on the performance of an organization.

Nevertheless, contextual variables like geographic diversification and country of origin determine the effects of age diversity on the performance of the organization. The relationship between age diversity and firm performance is moderated by the strategy of geographic market diversification, with the positive effect of age diversity on firm performance more likely to be observed in firms with a high level of geographic diversification.

The relationship between age diversity and firm performance is moderated by country of origin, and a positive effect of age diversity on firm performance will be more likely to be observed among firms from Western societies than among those from East Asian societies. This is because western governments have encouraged and even implemented policies that support age diversity unlike Asian societies where the aged are given a preference.

By analyzing the data gathered from firms competing in China’s insurance industry, this study identifies three ways in which the contextual factor of firm strategy can influence the relationship between workforce composition and firm performance. First, entering a contextual factor changes the regression model from insignificant to significant. Second, including such a factor in the regression model changes the standardized beta (in  this  case  the  effect  of  age  diversity) from insignificant to significant. Third, the contextual factor may also interact with a given dimension of demographic diversity. In this study, the interaction between age diversity and firm strategy for geographic market diversification has a significant and positive effect on firm performance. The data suggest that age diversity does not affect dimensions  of  performance  equally. The data also highlight the importance of  diversity awareness for  improving firm performance. As suggested, age diversity awareness both allows older employees to contribute and gives full play to the initiative and creativity of young people.

In conclusion, it is indeed true that age diversity can improve employee performance and the effects can be influenced differently by different contextual factors. However, this information should be interpreted with caution because it focused on a single industry in one specific country.