Diversity - Contemporary Business Imperative in Multinational Corporations - Case Study Example

Introduction

The composition of the workforce in the world today has been reshaped by many factors, most of them powerful trends towards the global culture of business (Bendl, et. al. 2015, p. 669). Organizations doing business have been forced to evolve and transform greatly in order to remain relevant in this time and error of dynamic change at the workplace. Employers and employees in the current business arena are being forced to reinvent their relationship, so that employees remain motivated and ready to forge the organizations objectives. Diversity has proven to be among the most effective way that the management of any business organization can forge a good workforce in the day to day running of the company business. A workforce that is varied has the capabilities of being more innovative and creating greater opportunities of success (Idowu, et. al. 2015, p. 441). This is because diversity creates an adaptation of the demands which come with market fluctuations, hence the ability to provide agile responses to new trends in the market which have proven to be diverse in nature.

Analysis: The Two Illustrative Companies

Diversity comes with rewards and challenges which need to be embraced by the management of any organization. For the purposes of this research, there are two companies that need to be compared in order to understand diversity better. Both having MNC branches in Europe, the companies greatly illustrate the nature of diversity and its direct effect on the business and performance of either organizations. Both Lucent and Shell Group of Companies operate in Europe and have subsidiaries which are governed different in terms of diversity.

Lucent Technologies Limited

As for the Lucent Technologies Company, emphasis shall be placed greatly on the Company’s base in Hilversum located in the Netherlands. The facility is home of over 2000 employees and has dedicated most of its resources on developing technology and indulging in research. The company is involved in service providing in many parts of the world, including providing network solutions in Africa and the Middle East. To begin its diversity, the management at the facility took upon itself to train their managers on proper diversification tools, with the trainees coming from diverse cultures in Indonesia and even parts of Northern Africa. The managers even created what they referred to as a diversity circle to ensure that the employees they got and retained were from different parts of the world, in order to attract market from different parts of Europe, Africa and the Middle East. The adopted diversity management ensured that most of the employees of the company did not emanate from one area, which would generally have affected the business performance of the company. The employees were therefore mandatorily allocated some time each year to conduct training and conferences on diversity, to broaden their understanding of the concept and apply it when providing services to clients, who were definitely diverse in culture, language and business prowess.

The Shell Group of Companies: Diversity Strategies

Shell Group of Companies, on the other hand, had also gone down the drain and was undergoing excessive restructuring due to poor performance and intolerable business agility. The company is originally based in the United States, but operates a subsidiary in Europe. It was determined to diversify its employees and therefore adopted a structure that greatly impacted on the management to start applying diverse culture systems at their company. This was created through the organization’s management undertaking to understand client’s issues, when they came to the true conclusion that for them to improve in business, they had to diversify their employees in order to get ideas from all their target groups. The company had to come to terms with the reality that it sold products all over the world and needed a diversified reasoning management strategy to break through their markets. It is until the Shell Group of Companies was introduced to what management referred to as the “all ways we differ” report, that the company realized its largest profit margins ever. The report outlined the need for diversity especially while conducting business in the 21st century. The company therefore proceeded to pump more resources to ensure they stabilized their employee remuneration, got new employees from diverse demographics and geographical locations and also provide proper working conditions for them. Just like Shell had adopted a just and safety approach in their company, they also endeavored to make diversity a part of their business strategy, and the management to time to develop the culture of diversity especially in the Europe subsidiaries. Just like Lucent Technologies, the first step which was taken to embrace diversity was training of the management, and the employees also underwent mandatory training.

The Effects of Diversity on Lucent and Shell

According to Mayrhofer (2012, p. 405), most of the United States multinational corporations, management has ensured that diversity is integral in their business operations. This is after most of the MNCs in the United States understand the benefits of diversifying their workforce. Though the diversification programs in the MNCs are rampant and being implemented in the companies in their home country operations, parallel decisions are also underway to ensure that the operations of the companies in their diaspora branches are adopted. All the subsidiary companies and their affiliates are gaining more benefits from diversification (Wachter, 2003, p. 67). Among the places where American MNCs are adopting diversity is Europe. This is because of the working environment in the European Union, where diversity is pushed by multi-faceted issues, such as legality, developments in the political theatrics, demographical needs and competition. Though there is a perception that the diversity programs in the United States and Europe are the same, this is not true considering Europe’s locality, integration of business and organizational objectives are somewhat different with those of the United States. MNCs such as the Shell group of companies is an example of a multinational corporation which as taken a global approach in its diversification of employees, gaining better business edge and prosperity in profit margins (Thakur, et. al. 1997).

Similarities in Diversity in Europe and United States

As for Europe, there are certain aspects that intertwine to necessitate diversity, and these factors are not as different for the United States MNCs (Warner, 2013, p. 24). It is true that the operations of United States and those of Europe are related to an extent. This is because the organizations have same ambitions in business. Also, with regards to culture adopted by the organizations, the attitude is the same especially relating to issues of discrimination and employment misconduct in both regions. The comparison is said to lead to similarities because it has been compared with geographies such as Africa and Asia (Normore, 2016, p. 701). To add on this, Europe and United States have both accepted certain standards that regulate their business arena, such as same international legal instruments, powerful political plays and diversity in demography. For both of the regions, the increase in competitiveness is causing need for diversity (Chaunda, 2012, p. 133).

Influences Causing Diversity of US MNCs in Europe

Philippe (2014, p. 23) contends that presently, MNCs in the United States cannot operate business in the European Union as they are not able to afford such business. This is because of the large population in Europe, which is way larger than that of the United States. Just in the year 1999, the European Union alone managed to contribute over 20% of the world’s GNP, which was very slightly down compared to the United States (Frost, 2014, p. 13). The two regions remain the biggest trade mates and both rely on each other for materials and resource exchange that directly affects both countries’ foreign direct investments. In the past few decades passed, there has been immense pressure on the management of the countries’ MNCs to integrate diversity. This has been made possible by the changing trends in the politics, social and legal implications. These factors have greatly influenced the operations of United States’ companies which operate in European countries. Among the most influential international organizations that have developed the law regarding to employability and diversity is the International Labour Organization, which has in the recent past conducted discrimination tests in companies to determine whether diversification of employees is justified and implemented in business organizations (Holbeche, 2012, p. 56).

There are many challenges faced by US multinational corporations in Europe, with the major issue being immigration. Many of the foreign employees in Europe are still denied European citizenship, regardless of the fact that they have been residing there for a series of years. They are therefore unable to get well paying jobs and hence discouraged from working. In most cases, diversity quagmires arise in the US companies, mostly when the situation of the companies is that of takeovers, or mergers and acquisitions. In the event of a merger, where companies that were formally European owned are now divisionally owned by the United States Company, then it means that the company is expected to have diverse employees, from both the United States and Europe. This is at the wake of business competitiveness and hence such scenarios become inevitable in the current times. There is international expansion of business and this leads to exchange programs in companies, and the need for employees to be moved from country after another, to manage corporation set outside their geographical areas. An example of instances where cross-boarder business is inevitable is through foreign direct investment and mergers (Kirton & Greene, 2015, p. 227).

Legal Developments Advocating Diversity

Both Shell and Lucent managers were expected to conform to the law to ensure that their diversity strategies were not tagged illegal. Considering both countries had their bases in both Europe and United States, they both had to abide to both countries’ laws. Across many states, the law is transforming the manner in which organizations are doing business. In the United States, for instance, both federal and state law creates prohibitions to any form of discrimination towards employees, and there is in fact need for affirmative action to be considered when getting employees of an organization. This has greatly influenced diversity in the workplace, as companies and business firms have been tasked with the responsibility of ensuring that their employees are as diverse as they can be. These are legal obligations which the organization cannot derogate from. These laws are applicable to both local and MNCs that are doing business outside the United States territories, as such MNCs are bound by the anti-discrimination policies through extra-territorial laws. Some of the laws that were enacted to ensure that the workplace is a diverse place include the Equal Pay Act, the Civil Rights Act, and age discrimination laws among many others. However, even in the event that the regulations set out are optional, there is pressure to diversify the employee base due to administrative advantage as diversifying would lead to adoption of uniform practices. The pressures lead companies to invite overseas employees from diverse backgrounds (ProQuest, 2008, p. 102).

For the case of United States MNCs operating overseas, they are also expected to fully comply with the laws that are applicable in the countries they transact businesses from. In Europe, there are many laws that provide for affirmative action and allow for non-discriminatory approach in getting employees, but the laws have for a long time lacked any provisions ensuring enforcement of the set standards. Government agencies and private enforcers therefore lack the enforcement tools required as compared to the United States. However, the recent development of laws is changing this menace and employment rights and standardization of working condition in Europe is rapidly changing for the better. The best example of developed laws that influence diversity is the European Union Treaty under Article 13, providing that action can be taken against employers who intentionally discriminate against employees or potential workers based on age, gender, sex among other parameters. Employees are also to be treated equally, despite their diverse cultures and geographical backgrounds. Member states of the EU are therefore tasked with the responsibility to institute or rather establish institutions that assist in curbing discrimination and advocating for diversity within the business organizations. Countries such as Germany and France are following suit and legislating on laws that cover diversity at the workplace, such as laws preventing vices such as harassment at work, unfair dismissal from duty, working practices that are not fair, and also insurance of employees of companies (ProQuest, 2008, p. 107).

Demographical Influences

Despite legal implication affecting greatly the diversification of employees, other factors such as demography also play a critical role in changing the perception of the workforce. There is great need to consider demography as an influencer in matters diversity, because the way business organizations retain and utilize employers in gradually changing. In European MNCs, factors such as age and gender continue to encourage the companies to become more diverse. Presently, the most of Europe’s workforce (over 20%) ranges from the age of 50 and above and this trend is expected to increase by the year 2030 according to the Bureau of Labor Statistics. However, the statistics also indicate that employees in Europe tend to retire at an earlier age compared to those in the United States. The participation of women in employment has also increased over the years, and there is immense pressure from many governmental quarters to ensure that women are not left out of employment because of their gender. There is also a dilemma as to the relation of full-time and part-time jobs, with organizations moving towards an era of allowing part-timers to work in the organization, a trend that was unacceptable for most part of the past decades (Vault, 2005, p. 189).

Most of the mentioned issues in the previous paragraph are an indication that the US MNCs which are based in Europe have to conduct recruitment and retain their employees basing their moves on not only the law, but also demographical developments. The organizations should seek to integrate diverse people who are productive and ready to bring together innovative ideas for the survival of the business. The sole end result should be the productivity of the workforce to enhance the profit margins and assist the management of the organization retains relevance in business prowess. Considering aspects such as population and age, it is conclusive thatdemography influencers reshape employer’s strategies in acquiring a diverse workforce, such as Shell Corporation. In the United States for instance, business is enhanced when managers of MNCs understand the demography of both employees and consumers, so as to enable development of products which are suitable for consumers. Staffing is also important and can determine whether or not diversification can be used as a business imperative in the contemporary business world (Falcone, 2009, p. 18).

Effects of Politics on Diversity: Lucent and Shell

Mellinger (2013) asserts that political theatrics play a great role in determining the diversification of any business organization. This is because it is through politics that decisions of integrating countries are borne, and certain incentives are triggered by politicians holding government offices. The European Union shows a great example of how politics affects business. Until 2004, some of the countries that continuously sought membership of the EU included Estonia, Slovenia and Poland. Many intense negotiations took place though the past decade to ensure that member states of the European Union expanded. Because of European Union’s rapid expansion, organizations have been forced to adopt diversity, as people within the EU are presumed to be able to work at any member state without restrictions and legal barriers. This is because inviting more countries to join an integrated community greatly affects the community’s diversity and population. When moving labour becomes free within the community, organizations ought to be ready to work with diverse persons from other countries, hence the need to restructure their workforce to a more inviting one (Holbeche, 2012, p. 145).

Standardizing Diversity Policies

Evidently, there is great need for the integration of diversity among MNCs and even local organizations. It is inevitably necessary that organizations need to adopt an international standard in diversifying their need for diversity. Standardizing of diversity policies continues to rake challenge in the international business arena. The questions that arise include the extent to which organizations should be let to acquire diverse employees, and also the uniformity which the policies are to operate within. The questions at hand are important, as they affect the management of diversity in organizations especially the MNCs and their influence on the business platform of a country. The structure and management of organizations should be of the nature that allows subsidiaries and affiliates of the MNCs to have independence and exercise autonomy when creating diverse workforces, so that the subsidiaries are able to tap the potential where they are operating from, yet retain the objectives of their mother company. It is such structures that stabilize and enhance the performance of corporations (Kirton & Greene, 2015, p. 11).

There are two major strategies that companies can adopt and implement for their success in diversification. One of these strategies is multi-domestic, while the other is a global approach. For MNCs, the multi-domestic approach would mean that the subsidiaries of the MNC are loose and independent to make there decisions and develop their own diverse cultures. In the event this approach is taken, it ensures that the subsidiary firms autonomous and can make decisions to seize opportunities and take advantage of the local business structures. In the contrary, global approach of diversification would lead to a scenario where the mother companies are in control and hence affect the decision making of the subsidiaries operating in different parts of the world. The objectives and strategies of the business organization hence do not change and are usually integrated internationally. Because of such structures, the subsidiaries become less productive and cannot tap the local market as diversity is undermined. However, such approach may lead to advantage over other local companies and hence higher probability of gaining an edge. Depending on the need of the organization, there has to be selected a model that is favoring, and the local market structures ought to be considered, so that they do not act as an impediment to diversifying the workforce and involving the locals in the running of business of the company (Philippe, 2014, p. 89).

Lucent and Shell: Implementing Diversity

To illustrate the advantages of incorporating diverse workforces in Europe and America, it is necessary to consider Lucent Technologies and also Shell Company (Normore, 2016, p. 56). While lucent technologies have been apt to adopt the multi-domestic approach, Shell Company has been adamant to change its global culture in business. Lucent has its headquarters in New Jersey, and provides services related to technology alternatives and telecommunications. Regardless of its reduced operation span, Lucent faced several merger and acquisition threats, and also had to restructure its management severally (Warner, 2013, p. 113). Because it had many subsidiaries in over 30 localities across the world, the company was under immense pressure to adopt the multi-local strategy in terms of diverse culture. This is because the management of the mother company believed that its goodwill was at their operations base, other than at their mother company base in New Jersey. The international branches were therefore let to operate independently due to the diverse requirements of the subsidiaries. This encourages locally driven incentives and the required tools were adopted. After a while, the company’s management was excited due to the positive response from the model, and diversity in the management and employees of the company progressively profited the company. Among the incentives taken was to ensure that the managers of all the subsidiaries attend training on diversity, a step that greatly benefited the company.

Shell Group of Companies, on the other hand, retains the global approach. The company is the second most popular oil company and has managed to provide services and sell products in over 120 countries worldwide. The company’s employment numbers range from 90000 to 100000 employees. It is because of its great downfall in the 1990s that the company decided to adopt the global approach of operations, where like-minded persons were given the chance to run the business, and the subsidiary companies had to be governed by the mother company in the United States. Low returns from the company triggered restructuring and reorganization of the company, and many diverse employees were struck off as an effect of downsizing. The company decided to have a universal policy with regards to diversity, though all the different companies in diverse countries create and establish their own business strategies (ProQuest, 2008, p. 67).

Conclusion and Recommendations

Diversity in an organization is critical and determines whether or not the business will flourish in this century of great competence and smart business strategies. The human resource managers need to ensure that the company has diversity in its workforce, which enables better ideas to be born, greater working motivation and also compliance with the requirements of law. Certain recommendations need to be adopted to ensure diversity is attained and used to bear fruit for the business of an organization. First, the diversity objectives of all organizations have to conform to the business structure and objectives of the organization. This therefore means that depending on the objects of an organization, decisions are to be made whether to adopt the multi-domestic or global approach to diversifying management and employees. Also, it is necessary that the decision makers consider the working environment of the company, especially for subsidiaries located in overseas countries. The host nations need to be considered and their laws abided to by the companies to avoid a scenario of lose as a result of court cases in litigation. Organizations can also opt to restructure and change their operations to acquire more diverse employees, and also ensure that they target the local markets to enhance the chances of maximizing profits. Evidently, organizations that maintain a diverse workforce have proven to be more successful, as diversity comes with its advantage of new innovative strategies for business, and also allows for better brainstorming of an issue. In creating diversity, organizations ought to seek legal advice and comply with all required laws so that booming business is not hindered by long court processes and avoidable expenses. If these recommendations are adopted, the likeliness to gain an edge in business is very high, as diversity is currently a business imperative that cannot be wished away (Mayrhofer, 2012, p. 235).