The Implications of Cultural Diversity on Organizations Performance - Case Study Example

Table of contents Pg no. Introduction 1 Cultural diversity literature review 3 Definition of cultural diversity 4 Perspective of workforce diversity 6 The access –legitimacy perspective 6 Discrimination and fairness perspective 7 Integration and learning perspective 7 Cultural diversity and competitive advantage 9 Cost and profitability 9 Marketing 10 Problem solving 11 Managing a diverse workforce 12 Leadership 12 Training 12 Research 13 Management system 13 Follow up 14 Conclusion 15 References 16 Introduction Cultural diversity is increasingly becoming common at the workplace with globalization and technological advancements. As per Ely & Thomas ( 2000, pp.229-273)it is beneficial for the firms as there is a variety of skills and talents and the firms get a diverse set of applicants to choose from. At the same time however, there is tough competition in skills and pay scales. Once they are hired, it becomes tough to manage employees that belong to different realms of culture and background (Fearon 2002). The management has to be unbiased and be able to understand each employee at an individual level at the same time it has to develop harmony and an overall workplace culture where there is no differentiation between the employees and they work together as a team (Engardio 2007). How the management manages the diversified employees depends upon the purpose of the firm’s hiring the diversified employees. As per Ely & Thomas ( 2000, pp.229-273) the firm may have an access-legitimacy perspective where the firm hires diversified employees because a particular target market requires an understanding which only employees of the same culture can accomplish. This is where the management doesn’t have to incorporate the diversified culture into the mainstream employee culture and can manage this diversified employee group without changing the whole culture of the firm. The firm may also hire a diversified group of employees because it wants to be fair to the society. This is called discrimination and fairness perspective (Black Enterprise 2001). This is where the firm hires diversified employees on skill basis without considering the culture of the organization and how this diversified group would fit into the organization. As Joshi (2002) says, the result may be chaos for the management. The firm may also have the integration and learning perspective where the firm deliberately hires diversified employees so that they may be able to initiate a culture of innovative learning, development and problem solving between the employees. This is where the firm is willing to adjust its culture, products and markets for these employees (Engardio 2007). Whatever the perspective of the firm may be, the management plays a key role and has to make sure that the diversified employees are harmonized so that they can work towards the company’s goals together (Greenberg 2005). Cultural diversity literature review Cultural diversity is a phenomenon that was recognized in the late 1980’s as changes in culture and human rights also brought about changes in the composition of the workforce. With globalization and development, women, people of color and immigrants began entering the workforce especially in the west (Engardio 2007). This change in the workforce mix also brought about unacceptability in the existing workforce and the management who created problems for these new entrants. As Prince & Hoppe (2000) say, like women were not promoted as quickly as men, the white skinned got better positions than the black and immigrants had difficulty in getting good positions and equality in the white majority. These differences were mainly because of the cultural differences than skills as employees had difficulties in accepting the changes in the workforce. The cultural differences were perceived by them as threats and efforts were made to make sure the new type of workforce was not easily adjusted in the organizational culture (Engardio 2007). However, there were efforts made at the governmental level to overcome these differences as firms and the state realized that a diverse workforce was essential to be competitive in a global market. Efforts were made to ease this cultural difference in the workforce where the managers played a key role. As Prince & Hoppe (2000) say nevertheless, even today the efforts do not work in most organizations where the difference in color, gender and culture still exist making it difficult for the managers and firms to create equality and a harmonious workforce. Definition of cultural diversity Cultural diversity is the differences in culture that occur in people from different areas or countries. According to Jackson & Joshi (2002) these differences include language, the way they dress, their perspectives, their moral values, religion ,thinking process and interaction with the society to name a few. In a corporate environment, cultural diversity means employees working together or in the same firm who belong to different cultures. Their capability to communicate, interact, get along, understand each other and work together as a team is the essence of cultural diversity in an organization (Greenberg 2005). This understanding is supported by Ely & Thomas (2000, pp.229-273) when they define it as cultural diversity includes mainly demographic features like race, ethnicity, social class, gender, religious beliefs and national identity. Cultural differences occur because of ones association with groups that defer on the basis of social and cultural differences. From this perspective, cultural diversity is more easily understood when we look at America today we see people different countries having diverse cultures and religion but working together under one roof. There are Chinese, Africans, Asians and Hispanics etc all working together as a team towards the same goals (Koonce 2001). As Joshi (2002) claims, this cultural diversity is advantageous for the majority but is not Benefiting the minority who are discriminated on the basis of the cultural differences. Some are of the opinion that cultural diversity is healthy and it should be encouraged while some extremists claim that it is ruining the cultural identity of the different cultures respectively (Jamieson & Mara 2000). Perspective of workforce diversity There are basically three perspectives on workforce diversity by which an organization can mange the pressures that it faces due to diversity. As per Ely & Thomas (2000, pp.229-273) claim, each of these theories gives reasoning to why the diversity of a workgroup should be increased for better output of the organization. However, each of them is different and the firm may hire a diverse workforce because of one of these reasons. The HRM of the firm has to keep in mind what the firm feels about a diverse workforce and adopt a management policy respectively. The access –legitimacy perspective This theory is based on the assumption that the target market of the organization has cultural diversity. As Joshi (2002) says, this means that the target market may have a different culture, language, values or views than the culture that prevails in the workforce of the organization. To overcome this hurdle, the firm hires a person or a group of people who have the same cultural diversity as their target audience thus creating legitimacy between the workgroup and the target audience. This is to make the customers more comfortable with the firm. As Prince & Hoppe (2000) claim, organizations with this perspective use their diversity only in a small part of their total working and do not utilize ad integrate their cultural capabilities into the core work. Discrimination and fairness perspective This is when an organization believes that it has to be unbiased and towards diversity and has a belief that it should hire a workforce that is diverse so that it can be fair and just to all the members of the society. According to Brett et al (2006), the firm attempts to abolish discrimination and aims to have a fair treatment towards all its employees. The firm does not do so to improve its workings rather it does so on a more ethical point of view and wants to be fair to all its employees by creating a culture of equality and justice in the organization where everyone is treated equally (Black Enterprise 2001). The downside of this sort of hiring may be that the firm keeps hiring people from different cultures and forgets the fact that it has to mange them as a team and make them work towards similar goals. This may be very difficult with their diverse backgrounds and thus managing them may be complicated which results in havoc in the work environment and mismanagement (Koonce 2001). Integration and learning perspective This is when the firm truly believes in diversity and is of the opinion that the ability to understand, the skills and the experiences of the employees which are an eminent part of their diversified culture will contribute positively towards the progress of the firm. According to Brett et al (2006), the firm makes changes in its products, markets, goals, strategies and business traditions to suit its diversified workforce so that it can utilize the skills of this diversified group to its fullest. The firm sees the cultural diversification as a resource and an opportunity to learn and invent new ways. It is not just to pierce new markets but it is an integral part of working by making prominent changes in the way the firm functions (Koonce 2001). Cultural diversity and competitive advantage As cultural diversity increases, firms that incorporate diversity well will have competitive advantage over those firms who cannot. Statistics show that diversity can be advantageous for firms that use it as a power Cost and profitability According to a study by Center of Strategy and Evaluation Services of Europe (2003) conducted on 200 EU firms that voluntarily hired diverse workforces and had diversity policies, had 36% of firms with a reduction in litigation costs, 42% had reduced labor turnover, 58% with improved customer satisfaction which all help in decreasing costs. 37% were able to improve market accessibility adding to the profitability. 57% had improved motivation and efficiency of employees which further add to profitability (European Commission 2003). Of course improvement in market accessibility means that the policies also improved the marketing efforts made by these firms due to a better integration of the diverse workforce. Thus according to Brett et al (2006)the research shows that those firms that actively try to incorporate diversity into their management system have curtail costs and more profitability thus giving them a competitive edge over these firms that have diverse workforce but do not have a healthy work environment for them. The firms on whom this Research was conducted had either diverse and fairness perspective or integration and learning perspective with the aim of helping the diverse workforce perform at their best. Catalyst (2004) conducted a research on Fortune 500 firms which showed that firms with top management diversity had 35% higher return on equity and 34% higher shareholder returns than other firms. Marketing With the access –legitimacy perspective, a firm which was having difficulty in piercing a particular market may now be able to gain access to it and may be able to introduce its products and services successfully in that particular market. As Prince & Hoppe (2000) claim, this helps the firm expand its customer base and at the same time have good word of mouth in a new market. The study of Catalyst (2004) shows that marketing in new markets became easier with a diverse workforce and resulted in 20% increase in market share of the firms tat made the effort. Engardio (2007) argues that hiring such a person based on his cultural diversity may be considered as being unfair to those who were more qualified for this position. They may feel that it was unfair of the firm to hire a person less qualified yet on the bases of the cultural similarities he was hired when other applicants were more experienced and educated (Koonce 2001). Problem solving A research conducted by Human Resource Institute (2003) on 1000 Fortune companies surveyed in 2001 revealed that 61% of the firms benefited with workforce diversity especially where problem solving was concerned. This was mainly because there was a wider range of ideas and solution coming from the diverse workforce and it saved time and resources thus acting as a competitive advantage. The workforce belonging to different backgrounds had different perspectives and ideas thereby helping in solving the problem. Managing a diverse workforce The management plays a key rule in managing a harmonious and healthy environment for a diverse workforce. It is a very difficult task as the people differ in understanding, language, perspectives, etc and the management has to handle them in a way that balances the whole environment creating a fair and unbiased organizational culture. Leadership The top management plays a vital rule where it has to stand up for the rights of the workforce. They have to incorporate diversity into the company strategy and provide financial and human resources etc. However, according to Brett et al (2006) some organizations even today fail to be unbiased and preferences and cultural differences trickle into the system even at the top level and thus the firm fails to have a healthy environment for its diverse workforce. Training For the managers to handle such a situation, they have to be trained to firstly know the value of diversity and its plausible valuable contributions to the firm. As Joshi (2002) says, only when the managers are aware of the advantages of a diverse workforce can they actually promote it. Also, they need have training in understanding the different cultures and be sensitive towards the cultures of the workforce. They should be able to communicate with them on a personal level, be able to resolve differences and understand their needs and for this the managers need to be trained. This training has to be an ongoing process (Black Enterprise 2001). However, training alone cannot resolve the issue unless the personal perspectives of the managers themselves are positive towards the diverse workforce. MacDonald (1993, pp. 22-25) in his research was unable to document the advantages of diversity training. Research The HRM has to conduct researches on a regular basis among the employees. This data will reveal the problems that the workforce faces, what changes can be made in the environment, the job satisfaction level, and such a research will help build a better environment for the workforce and thus help them be more productive and satisfied at work. Management system A complete review and analysis of the management system has to be done. This includes, hiring, promotion, recruitment, appraisal, bonuses etc. this analysis will reveal where the biases occur in the system for cultural diversity and whether some of the employees are creating a problem for those that have diverse cultures (Black Enterprise 2001). However, there are times when the employees hesitate to reveal their problems or are so disappointed with the system that they do not voice their problems. Also in some cases, the management hides the results of such research and doesn’t let it reach the higher management which creates further problems (Koonce 2001). Follow up There is a need for follow up where the changes are incorporated in the system so that the diverse works has a better work environment. This follow up has to be regular so that the changes can be timely and the employees know that the firm is serious about making a change and helping them overcome their employees (Koonce 2001). . Conclusion Cultural diversity in the workforce is increasing today. Firms have different perspectives of hiring such a diverse workforce. Some hire them because they want to be just and fair to the society, some hire them because they want to capture a particular market and some hire them because they want to initiate a culture of innovative learning in the firm. All these give the firm a competitive edge as it gives the firm the skills that its competitors may not have. But as Ely & Meyerson (2000, pp.105-153), claim, to manage such diversity is a challenge for the management. This is because the employees come from different backgrounds where they have different cultures, language, way of dressing, perspectives and view points etc. the management has to be trained and researches have to be conducted actively to make sure that the diverse workforce is managed well and there is no bias in the system. References Black Enterprise 2001, Managing a multicultural workforce. Black Enterprise Magazine (July). Brett et al, 2006, Managing Multicultural Teams. Harvard Business Review, November. Catalyst (2004), The bottom line: Connecting corporate performance and diversity. New York: Catalyst. Retrieved on Sep 3 2008. Available at:www.catalystwomen.org/2004fin_perf.htm. Ely, RJ & Meyerson, D 2000, Theories of gender in organizations: A new approach to organizational analysis and change. Research in Organizational Behavior, vol. 22, pp.105–153. Ely, R & Thomas, D 2001, Cultural Diversity at Work: The Effects of Diversity Perspectives on Work Group Processes and Outcomes. Administrative Science Quarterly, vol. 46, pp. 229-273. Engardio, E 2007, Managing the New Workforce. Business Week, August 20th European Commission, 2003, The Costs and Benefits of Diversity. Retrieved on Sep 3 2008. Available at: www.stop-discrimination.info/fileadmin/pdfs/CostsBenefExSumEN.pdf Fearon, J 2002, Ethnic Diversity and Cultural Diversity around the World: A Cross Sectional Data Set on Ethnic Groups. Unpublished manuscript, Stanford University. Greenberg, J 2005, Diversity in the Workplace: Benefits, Challenges and Solutions. Accessed on: Aug 1st 2008. Available at: http://ezinearticles.com/?Diversity-in-the-Workplace:-Benefits,-Challenges-and-Solutions&id=11053 Human Resources Institute. (2003). Managing diversity. Retrieved on Sep 3 2008, available at: http://www.hrinstitute.info/frameset.asp?contentpage=home Jackson, SE & Joshi, A 2002, Diversity in social context: A multi-attribute, multilevel analysis of team diversity and performance in a sales organization. Working paper, School of Management and Labor Relations, Rutgers University, New Brunswick, New Jersey. Jamieson, D & Mara, J 2000, Managing Workforce 2000: Gaining the Diversity Advantage. San Francisco. Joshi, A 2002, How does context matter? Examining the process and performance outcomes of work team diversity. Doctoral Dissertation, Rutgers University, New Brunswick, New Jersey. Koonce, R 2001, Redefining diversity: Its not just the right thing to do; it also makes good business sense. Training and Development, December. MacDonald, H 1993, The diversity Industry, The New Republic, vol. 2, pp. 22-25. Prince, DW & Hoppe, M 2000, Communicating Across Cultures. Greensboro, NC: Center for Creative Leadership. Read More