Diversity Implementation in Small and Medium Sized Enterprises - Research Paper Example

SME 0. INTRODUCTION Globalisation is a contemporary phenomenon experienced by people all over the world only within the last fifty years (Soros, 2002). Generally, the term globalisation connotes the idea of the development of global financial markets, the growth of transnational corporations, and their increasing dominions over national governments (Soros, 2002). However, globalisation is not only that. It is also about the massive migration of people, of changing national identities and cultural belongings (Suarez- Orozco & Qin- Hilliard, 2004), thus, removing internal and external boundaries among and between nations. The multifaceted connotations of globalisation embrace a variety of concepts, policies and processes that are to reflect, describe and implement increased economic interdependence among countries. Generally, these include the following: flows of goods and services across borders, reductions in policy and transport barriers to trade, international capital flows, multinational activity, foreign direct investment, outsourcing, increased exposure to exchange rate volatility, and immigration. These movements of goods, services, capital, firms, and people contribute to the spread of technology, knowledge, culture and information across borders (Fischer, 2003; Soros, 2002; Balakrishnan, 2003). Thus, globalisation has made the world accessible and smaller since “Through globalisation national borders are constantly losing their significance as limitations for human interaction in general and economic collaboration in particular. This means that for all economic actors their natural spheres of activity are expanding from national into multinational or even global.”(Supporting the Internalisation of SMEs, 2007:6). However, the challenges of globalisation are for not only macroeconomics, large enterprises, transnational corporations and multinational corporations. Rather, its challenges and demands also resonate to small and medium sized enterprises (SMEs). 1.1. THE CHALLENGE Globalisation has redefined the concept of “local” among SMEs. Since, in the framework of globalisation, for SMEs local is no longer just constrained to the ‘locale’ but that it is “constantly transformed and growing, which brings greater opportunities in the form of larger markets and new suppliers” (Supporting the Internalisation of SMEs, 2007: 7). Thus, this new framework creates new opportunities, new challenges and opening the chance for SMEs to establish its niche in the global market. However, this scenario has problems that may hamper SMEs to embark in internalisation. These problems include: greater competition and shorter product life cycles (Supporting the Internalisation of SMEs, 2007), insufficient managerial time and/or skills required for internationalization, lack of financial resources, lack of knowledge of foreign markets, mostly consequence of the previous two (Supporting the Internalisation of SMEs, 2007: 10).However, over and above these concerns, is the problem of diversity. This concern is significant as the reality of the globalised world is marked by pluralism, and diversity(Suarez- Orozco & Qin- Hilliard, 2004). As such, this predicament is not only the concern of large enterprises who are already global players, but it also involves SMEs as “the globalising and diversifying nature of regional and local communities within Europe means that “global” issues are becoming increasingly relevant for even the smallest SMEs”(Diversity for Talent and Competitiveness, 2008: 7). In this regard, this paper will try to provide arguments that will support the claim that developing diversity awareness among SMEs workforce is to the advantage of an SME weighing to develop one. As such, this paper will have the following structure: first, is the introduction, second is the presentation of the challenge posed by globalisation and diversity to SMEs. The third will be the discussion of the nature and economic role of SMEs in Europe and the benefits that maybe derived from diversity awareness and fourth will be the conclusion. In the end, it is the hope of this paper that its discussion may add to further appreciation of diversity awareness as an integral policy not only for LEs but for SMEs as well which may in turn redound to its actual implementation in SMEs workforce. 1.2. SMEs and DIVERSITY Recognising the importance and reality of diversity in the global market/economy, there has been an effort on the part of the European Commission to translate the language of diversity as used in LEs, TNCs and MNCs into a language that is applicable and understandable within the framework of SMEs in Europe. Why? 1.2.1. SMEs: ITS NATURE AND POSITION Small and medium sized enterprises are companies that are defined by EU “as those with fewer than 250 employees. Furthermore, their annual turnover may not exceed €50 million, or their annual balance sheet exceed €43 million” (Farvaque et al, 2009; Diversity, 2008). SMEs are further classified according to size. Micro-enterprises are companies which have employees less than ten and they currently employ more than one third of the European workforce and produce more than 20 % of economic value added (Farvaque et al, 2009; Diversity, 2008). While, small enterprises are those that employ between 10 and 49 employees and that in 2005 alone “this group consisted of about 1.3 million enterprises (excluding agriculture, financial services and public services) employing a workforce of around 26 million throughout Europe” (Farvaque et al, 2009: 6). Finally, medium –sized enterprises are those that employ 50 to 249 employees. “Medium-sized enterprises employ about 21 million people, i.e. nearly 17% of the private European workforce” (Farvaque et al, 2009: 7). Combined SMEs in Europe employ millions of people and as such, it is acknowledged that SMEs “contribute to employment and wealth in Europe. SMEs account for nearly 70% of European private service jobs, and in Europe’s industries, the number of those employed by SMEs is high, in particular sectors such as construction, metal products and the wood and furniture related industries. Finally, SMEs generate large portions of the wealth in the EU: in real estate, recycling and construction activities it is greater than 80%, and in the whole private economy their share in wealth creation is estimated between 55% and 60%”(Farvaque et al, 2009: 7). As SMEs play a pivotal role in the economy and wealth production in Europe, adapting to the challenges of the contemporary period -especially diversity- becomes necessary in order to maintain and sustain SMEs position, development and growth in the European economy. In this regard, a look into the advantages SMEs may accrue if it adopts a diversity awareness policy. However, what is diversity? Diversity connotes the idea of the workforce being comprised of people coming from different backgrounds, values, beliefs and perspectives. These include: age, gender, race, ethnicity, physical qualities, disabilities and sexual orientation. These are generally deemed to be unchangeable (Forbes, 2008). On the other hand, there are aspects of diversity that an individual may change and these include marital status, religious beliefs, education, income, and geographic location (Forbes, 2008). In other words, diversity is the underlying inherent or superficial differences existing among every individuals. 1.2.2. SMEs AND DIVERSITY AWARENESS: ITS ADVANTAGES Knowing that SMEs hold a significant position in European economy, SMEs should incorporate in its policies diversity awareness as its advantages outweighs the limitation set by lack of funds, lack of sufficient knowledge and lack of sufficient managerial skills. However, why? Numerous advantages may be gained by an SME if it integrates diversity awareness in its policies. These are: First, an SME that has a diversity awareness policy may utilise it as an affirmation of its corporate social responsibility. This is important as the challenges of globalisation also necessitates a shift in the nature of corporations such that it is demanded of corporations that they move beyond economic rationale of profit (Livesey & Kearnis, 2002 ) and accept their social, environmental and political responsibilities. This is based on the premiss that corporations are not separated from society but are themselves integrated in the society (Zolsnai, 2006). Thereby, making corporations actors in the public arena (Roper & Cheney, 2005; Nijhof & De Bruijn, 2008) which in turn opens for the establishment of partnership with the stakeholders (Morsello, 2006) built on trust through upholding transparency and accountability (Livesey & Kearnis, 2002).Thus, collaborative work is attained between the corporation and the stakeholders (Tencati & Zolsnai, 2009). Thus, an SME with a CSR that is focused on non-discrimination and diversity awareness increases its visibility among its stakeholders, creating and building authentic partnership based on trust with them (Diversity, 2008). Second, it provides a wider access to market (Diversity,2008).Wider access to market refers not only to the actual identification of geophysical locations of the market (Ito et al, 2007) but also to the consumers themselves. This is in recognition of the reality of ethical consumerism. Ethical consumerism pertains to consumers who have recognised that their improve quality of life creates an obligation and duty to promote the welfare of the State and they have several categories already (Memery et al, 2005). What makes this development important is that ethical consumers regardless of their principles are willing to pay for extra for their cause (Todd, 2004). And definitely, SMEs with non-discrimination policies can be highly supported by ethically and socially concerned consumers. Third, diversity awareness or non-discrimination policies create a good marketing image, which in turn can be utilised as a good marketing strategy. The marketing image is how the consumers perceive a company. And a do good that becomes a marketing strategy with which the company becomes known, necessarily entails the doing good (Hemingway, 2002), for there is a perceptible increased in brand value (Diversity, 2008). SMEs can definitely advance their competitiveness using these parameters as people are weary of TNCs and MNCs (Jeppesen, 2003). A good example is Deakon Degen GmbH. This company produces cables. It has distinguished itself from other companies by its policy of empowering women wherein women hold 67% of the decision-making process positions. And the company is benefitting from that image as it has been recognised by EU (UEAPME, 2007). Fourth, it is a win-win situation. As diversity and non-discrimination policies becomes an affirmation of CSR, it creates an image of do good for the company which convinces ethical consumers to patronise the product. And since, ethical consumers are willing to pay extra for their cause, this means doing good for the company. And doing good for the company means an increase in profit. Thus, a win-win situation both for the shareholder and the stakeholder. The unholy alliance between the interest of the company to gain profit and their social responsibility are now considered as part of the nature of corporations. Though, the tension between the two is not denied, but it is the reality of contemporary corporations (Hemingway, 2002; Todd, 2004). And SMEs have huge advantage over MNCs and TNCs in terms of sincerity in the do good part (Jeppesen, 2003). Fifth, a policy that addresses diversity awareness and non-discrimination attracts, recruits and retains best talents. Keeping the best talents has been acknowledged as one of the major problems among SMEs. Since most young graduates prefer to work for LEs (Westhead & Matlay, 2006). As such, individual governments like the current British government have come up with life-long learning programmes “promoting knowledge and skills initiatives aimed specifically at enhancing the sustainable competitiveness of small and medium-sized enterprises”(Westhead & Matlay, 2006: 94). The British government programme and policy of Higher Education system recognizes that the universities are producing more graduates than what both the private and the public sector require. In response to this, the government has looked into SMEs playing an important role in this issue (Westhead & Matlay, 2006). The government has encouraged students to accumulate the skills and the proper attitude in establishing a business enterprise. Although there is still much to be done in this project (Westhead & Matlay, 2006), the government’s initiative opens an alternative for students to work with rather than just focusing on LEs. On the other hand, SMEs necessity to attract, recruit and keep the best, challenges them to adopt policies, which are non-discriminatory, provides equality and the willingness to offer their companies to graduates despite reservation in hiring new graduates (Westhead & Matlay, 2006). Sixth, policies that recognise equality in the midst of the reality of diversity creates loyalty in its clients, since an SME mirrors the reality of the community where the company is embedded (Diversity, 2008). Globalisation thrives in a pluralist society where differences are acknowledged and respected. Furthermore, diversity is seen not as a hindrance in attaining peaceful co-existence in the pursuit of the good life but a reality. And, an SME that puts this ideal into actual human experience. Thereby, creating an authentic public arena, which mirrors genuine diversity that serves to identify cultural differences yet anchored on one commonality – the commonality of the globalised human experience (Murphy & Kraidy 2003). A good example of this is the construction industry wherein workers are mostly immigrants especially in the United States (Forbes, 2008). Another good example is Opel Willy (UEAPME, 2007), which employs ethnic minority. The same story holds for Groupe Crousti in France. The company is hotel, restaurant and catering. They employ people coming from Maghreb, Turkey, and Asia. The employer opens the door of the company to people who are the best regardless of their ethnicity (UEAPME, 2007). And this is the globalised human experience. Seventh, diversity is recognised as encouraging innovativeness and creativity (Diversity, 2008; Supporting, 2007; Forbes, 2008; Antonie & Feder, nd; Farvaque et al, 2009;Wood, 2005). Innovation and creativity entailed in diversity is not only related to technical and technological innovations that are attributed to the fast phase development in science and technology. This kind of innovation is shared across cultural differences because of the loosening of the national boundaries due to globalisation (Supporting, 2007; Suarez- Orozco & Qin- Hilliard, 2004). Innovation and creativity cuts across the tangibles and includes the intangibles such as knowledge, information, learning and trust (Wood, 2005). The innovation and creativity coming from the intangible that is made prominent by the reality and awareness of the existing diversity is a result of interactive, social dialogues wherein problems, issues and perspectives are discussed from several viewpoints. Thus, avoiding a monolithic approach towards the situation and affirming an integrative, holistic and synergistic approach to the problem (Wood, 2005; Wincent, 2004). Perhaps, a good example for this is the biotechnology industry. Removing the giant pharmaceutical companies, the industry is made up of SMEs like Immuno –Designed Molecules and Actelion in France and Switzerland (Collingham, 2004). These two companies have matured in the face of the reality of the industry – there is “limited human capital and reduced budget” (Collingham, 2004: 319). These companies, instead of succumbing to mergers, which is detrimental to the industry since much human capital are not properly recognised and are left doing nothing. They have come up with a device that creates a more consolidated, leaner and fitter organisation that recognises the fact that each person coming from different fields contribute equally to the creation of a healthier biotech enterprise (Collingham, 2004). Eight, diversity awareness in an SME recognises that the real key to the success of the company are the people (Collingham, 2004; Ruzzier et al, 2007; Klass, 2003; Yap et al, 2007; Bacon & Hoque, 2007). This is significant as the human capital in contemporary companies is the very foundation with which company survival, sustain growth and surmounting of the challenges of the global market is founded(Wood & de Menezes, 2008). The recognition of the importance of the employees regardless of age, gender, colour, ethnicity, religion, physical qualities, disabilities and sexual orientation, marital status, religious beliefs, education, income, and geographic location (Forbes, 2008) highlights the truism that acknowledging, understanding, and respecting the context from where the employee is coming from (Brewster, 2007) also affirms their human dignity. This scenario opens the fact that there is a different kind of infrastructure/relation between the employee and the employer – an infrastructure that is anchored on “strong social bonds, trust, reciprocity and co-operation” (Wolfgang & Brewster 2005, p 38). Thus, in an EU Survey it has been observed that diversity awareness in an SME “reduces absenteeism, employee turnover, reduces time wasted and time lost, an increase sense of loyalty and dedication to the job and company” (Diversity, 2008: 15) Finally, the ninth advantage, an SME that affirms non-discrimination and diversity is fresh insight in a global market that is dominated by TNCs and MNCs which are “big, profit seeking and exploitative” (Jeppesen, 2003: 463) or by state –owned companies that are “big, bureaucratic and corrupt (Jeppesen, 2003: 463). These numerous advantages point to what an SME may gain if diversity awareness is incorporated as vision, and policy of the company. However, the challenge of adopting and incorporating diversity and non-discrimination policy in an SME is not easy (Diversity, 2008). It requires the concerted effort of the SMEs – its human resource and management. A paradigm shift is necessary for them to be open and combine the attributes of innovation, pro-active behaviour and risk-seeking if they are to expand across national borders”(Antonie & Feder, n.d.: 3). Moreover, SMEs should have competencies not only in idea generation but in idea implementation as well (Yap et al, 2007). On the other side, the government should come up with policies that provide more room for SMEs in attaining their growth and in creating their niche in the global market (Wright et al, 2007). Likewise, the global institutions should further help in fortifying and making venues for the development and progress of SMEs as they respond to their local market – the global market. 1.3. CONCLUSION Globalisation loosens national borders and boundaries not only in terms of the economic market. It also pertains to the movement of people, of knowledge, of culture of national identities, and SMEs are not lagging behind. SMEs are confronted by the dynamism brought about by globalisation. Since, SMEs local market is transformed and changed. And entailed in the transformation is the challenge of diversity. In this regard, incorporating diversity awareness is advantageous for an SME because: 1. an SME that has a diversity awareness policy may utilise it as an affirmation of its corporate social responsibility 2. it provides a wider access to market 3. diversity awareness or non-discrimination policies create a good marketing image which in turn can be utilised as a good marketing strategy 4. it is a win-win situation 5. it attracts, recruits and retain best talents 6. it creates loyalty among its clients 7. it encourages innovativeness and creativity 8. 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