Workplace diversity refers to the extent to which an organization is culturally diverse. Cultural diversity includes the range of ways in which people experience a unique group identity, which includes gender, sexual orientation, race, ethnic and age. An organization’s culture tends to determine the extent to which it is culturally diverse. At companies like PepsiCo and IBM claims that increase in workforce diversity has benefited their performance. The three types of corporate culture when it comes to diversity are:

1. the monolithic organization (Mono Culture)- In the monolithic organization, the amount of structural integration (the presence of persons from different cultural groups in a single organization) is very minimal. Same culture in every location. Subsidiary has to adjust to headquarters culture. Transferred employees from the headquarters will not have to adjust to a totally different culture.
2. the plural organization (Multi culture) - The plural organization has a more mixed membership than the monolithic organization and takes steps to be more inclusive of persons from cultural backgrounds that differ from the dominant group.  Locations develop separate cultures which not necessarily need to be linked to one another. Both companies keep their own culture. Transferred employees will have to adjust to the foreign culture; also the employees working with the headquarters/subsidiary have to be aware of cultural differences
3. the multicultural organization (Mixed culture) -  The multicultural organization not only contains many different cultural groups, but it values this diversity. Harmonized company culture using synergies between the headquarters and subsidiaries culture. A new company culture is generated by combining the best of each location. Transferees do not need to adjust to a new culture but everybody in the company no matter from which cultural background will have to adjust in the beginning to fit in the new culture and therewith the corporation.

There are challenges to managing a diverse work population. Managing diversity is more than simply acknowledging differences in people. It involves learning to value differences, overcoming personal biases, and thinking inclusively. Managers must manage diversity to avoid personnel turnover and lower work productivity due to cultural clashes. Cultural bias is an additional factor which challenges culturally diverse work environments. Cultural bias includes both prejudice and discrimination. "Prejudice refers to negative attitudes toward an organization member based on his/her culture group identity, and discrimination refers to observable adverse behavior for the same reason". Another challenge faced by culturally diverse organizational environments is assimilation.