The Need for Diversity Management - Essay Example

1 Introduction By operating in more than one international market the Multinationals are able to balance out the regional imbalances caused by local macro-economic factors. As a result, they experience greater market performance since investors recognise and reward stable performance (Shaked 1986). The shareholders are favourable to those companies that are able to reap the profits by expanding or consolidating their operations in overseas markets. In addition a greater spread across international markets reduces their overall risk and in turn this has a beneficial effect on corporate performance (Caves 1982). 2 The need for Diversity Management The need for diversity management thus becomes very obvious. To have a successful consolidation or expansion this has to be professionally handled. The diversity initiatives are more widespread in industries that are highly competitive, where firms seek to hire and retain the best-performing employees regardless of race, sex, religion, etc., as their margins are always under pressure. They cannot afford to loose out on performances especially when they are dependant on employees belonging to different cultures. Firms that effectively manage their workforce through diversity management practices experience positive outcomes. For example, research indicates that firms with higher percentages of women managers report relatively higher financial performance (Shrader et al., 1997). But this requires diversity management that offers scope to the organisation to actively pursue the retention or appointment of qualified women manages and to make the other employees accept this to be in the best interest of the organisation. 3 Diversity Management What then is this diversity management that helps the organisation to overcome its diversity issues that originate out of culture differences both in employees as well as locations? It is the role of the diversity managers to educate and train managers and employees to overcome their cultural differences and to appreciate each other for harmonising their efforts for better individual and team performances. It is to be understood that globalization has thrown up several new challenges. One is to become more competitive against foreign goods. Second is to be more productive than others. Third is to be more competitive both in the home and new markets. Fourth is to hire the best talent to meet all the above challenges successfully and this means hiring people from different cultural backgrounds. A Cultural Diversity and Production Synergy In different cultures production synergies are possible when there is language or religious affinity. To find this out a study of 1,226 intra-firm and market technology transfers were carried out at thirty-two American multinationals. It was established that similarity of language and religion between countries is positively associated with internal technology transfer. (Davidson and McFetridge 1985). It is difficult to take advantage of management and technical know-how in different cultural contexts and these results in lower efficiency and performance. (Bartlett and Ghoshal 1992; Jain 1989) B Cultural Diversity and Implementation of Technology Cultural factors also influence Technological Implementations. Heiko [1989] observes that the Just-In-Time (JIT) method of inventory management has been well received in Japan, and had lead to substantial savings, but it has produced disappointing results in other countries as this is culture-specific to Japan and is not understood in other cultures. The cultural background in Japan is unique to Japan just as much as the western openness is unique to USA or Canada. So when the Japanese car makers tried to introduce their methods and systems in USA, they failed to take off as they were not understood or appreciated by the American workers. C Cultural Diversity and Organisational Transformation Processes. One of the main purposes of consolidation is reduction in labour costs and to have a more efficient organisation. This is made difficult due to cultural differences. Where there is affinity in cultures, like in language and religion, this is easily achieved, while it becomes a daunting task in culturally diversified situations. It becomes even more acute if the products are numerous requiring elaborate explanations and training. The western companies that set up factories in the South Asian countries to take advantage of cheaper labour costs face enormous difficulties in training these workers. The costs are lower but the output is nowhere near that of their counterparts in the west. This is a result of the different cultural background. D Cultural Diversity and Market Response. It has been said that cultural differences can throw up unique customer preferences that require customization of the marketing mix to promote demand (e.g., Bartlett 1986; Beamish, et al 1994). Culturally related regions like the US and Canada can be more successful in sharing market activities and know-how in comparison to say US and Indonesia. The greater ability to cross-sell products in culturally related markets reduces marketing expenses as well as market research expenses compared to markets that are diverse in cultures (Takeuchi and Porter 1986). It is more difficult and more expensive to share this in a cross cultural consolidation or expansion. USA now has a large population of people who have migrated there during the last few decades. Many of them set up businesses but they face difficulties in getting customers as they are unable to grapple with the cultural makeup of the local American population and their diverse needs. E Cultural Diversity and Interpersonal Dynamics. Conflicts, frictions, lack of cohesion and misunderstanding occour in greater magnitude in a culturally diversified organisation and leads to communication breakdowns. This hampers decision making and causes grievances among employees. It also acts as a barrier in new recruitments as prejudice comes into play due to ignorance. This results in loss of talent that could have been harnessed for the benefit of the organization. Even existed talented staff could become disillusioned on not being given proper due place in the hierarchy. Teamwork and co-operation are foundations of an effective and efficient group. Conflicts are facts of life and must be dealt with. Teamwork means having a shared vision or goal, so that leaders and members are all committed to the same objectives and understand their roles in achieving them. This makes diversity management more important to develop teams and manage conflicts in culturally different groups. F Cultural Distance and Organisational Control Systems. There is a distance in physical terms between the headquarters and the subsidiary or affiliate and often it creates barriers that are also termed as the cultural distance. This is the difference of the corporate cultures which is the byproduct of the local environment of their respective locations. This affects the control system between them. Communication often becomes difficult or misunderstood. Usually decisions of policy lie with the Headquarters and cannot be delegated and this causes friction. The challenges for the organizational control system increase proportionately with increase in distances. It becomes more difficult and expensive to obtain complete and accurate information about performances, both on organisation and personal levels. G Cultural Diversity and Human Resource Programs. Finally the most important aspect is employee appointment and retention. Managers and Supervisors have the responsibility to be fair at the workplace in offering opportunities to all. In order to have a more productive and satisfied workforce equal opportunities must be offered and appropriate communication has become a necessity in diversified cultures. The effectiveness of the human resource development programmes largely depends on the understandings developed by the HR division to understand diverse cultures and to pick and promote best talents from this vast pool available to the organisation. Compensation and rewards, performance appraisal, staffing, and labour relations all assume importance in decision making. The rationale behind this expectation is that human resource programs must be attuned to their cultural contexts if these are to be successful. 4 Conclusions As we move into the 21st century evidence shows that there is more diversity at the workplace than ever before. Old techniques of communication fail to produce the desired results in performance. Successful managers of this diverse workforce must meet two goals to become more effective. First, they must become sensitive of the communication problems commonly experienced by those who are perceived as "different” within the organisations. Secondly, they need to study and put into practice appropriate alternatives to replace old strategies for communicating with employees, alternatives that lead to awareness of communicative even-handedness by all employees. 5 Bibliography Bartlett, Christopher A. & Sumantra Ghoshal. 1990. Matrix management: Not a structure, a frame of mind. Harvard Business Review, July-August: 138-45 Beamish, Killing, Lecraw, Morrison (1994) International Management: Text and Cases. Irwin Publishers Boston Massachusetts Caves, Richard E. 1982. Multinational enterprise and economic analysis. Cambridge, Mass.: Cambridge University Press Dansereau, F., & Markham, S. E. (1987). Superior-subordinate communication: Multiple levels of analysis. In F. M. Jablin, L. L. Putnam, K. H. Roberts, & L. W. Porter (Eds.), Handbook of organizational communication: An interdisciplinary perspective (pp. 343-388). Newbury Park, CA: Sage. Davidson W.H. and D.G. McFetridge. (1985). Key Characteristics in the Choice of International Technology Transfer Mode. Journal of International Business Studies, 16, 5-21. Heiko, Lance. 1989. Some relationships between Japanese culture and just-in- time. Academy, of Management Executive, 3(4): 319-21. Jain, Subhash C. 1989. Standardization of international marketing strategy: Some research hypotheses. Journal of Marketing, 53(1): 70-79. Shaked, Israel. 1986. Are multinational corporations safer?, Journal of International Business Studies, 17(1): 83-106. Takeuchi, H, and Porter, M E, Three Roles of International Marketing in Global Strategies, in Porter, M, editor, Competition in Global Industries. Harvard Business School Press 1986 Read More