The Implications of Cultural Diversity on Organisational Performance - Term Paper Example

Table of Contents Introduction …………………………………. p. 2 Overview ………………………………….. p. 3 Effectives of cultural diversity ………………………………….. p. 5 Role of HRM ………………………………….. p. 9 Conclusion and Recommendation ………………………………….. p. 12 The Implications of Cultural Diversity on Organisational Performance and The Role of Human Resource Management Introduction In the increasingly globalised workplace, the face of the workforce has changed in many ways. There are more women in employment than ever before; so-called minority groups are advancing into higher positions; and highly responsible roles are frequently filled in by very young people. (Klasen & Clutterback , p. 86) These factors diversify the workforce and such phenomenon is an inevitable issue that confronts business organisations and their success. This paper will try to examine cultural diversity – its concepts and trends - and how it affects businesses. Particularly, the evidences that support its positive impact on the organisational performance will be evaluated. Out of all these, it is expected that the role of the human resources management will, henceforth, be successfully outlined. The discussion will work around the premise that no organisation can meaningfully progress today without efficiently responding to demands and pressures generated by cultural diversity. The adoption by human resources management of the recommendations which has been provided in this article, would contribute effectively to maximize the benefits of cultural diversity within an organisation. Specifically, an overview and analysis of important concepts in diversity will be laid out. A review of the related body of literature that addresses the topic will be covered including those that studied problematic areas of diversity in terms of its relationship to human resources management. The main discussion of this paper will revolve around the effectives of cultural diversity and the HRM’s role in using it as a tool in improving organisational performance. In addition, approaches and techniques will also be outlined as to how diversity can be addressed and integrated in a business organisation as a strategy in improving organisational performance. Overview According to the Chartered Management Institute (2004) in the published human resources management book called, Recruitment and Selection, diversity in the workplace is about selecting people who bring in a wide variety of backgrounds and experiences due to differences in their: 1) inherited characteristics such as age, ethnicity, gender, sexual orientation; and, 2) culture or the way of doing things we feel comfortable with. (p. 1) As the 1990s came to an end, diversity no longer became a buzzword and that those who argued that it is a mere human resources management fad were left scratching their heads because they were badly mistaken. As it turned out, diversity management as a concept and an aspiration for management has become deeply rooted particularly in the American organisations, spearheaded by the US federal government, wherein it receives a wide bipartisan support. Corporate diversity attitudes and programmes toward workplace diversity have evolved since. Most estimates of future employment indicate that 75 per cent of new workers will be other than white males and that in 2010 white males will represent less than 40 per cent of the American workforce. (Oliver 2004, p. 3) Diversity issues specific to the workplace include employee concerns about how they relate to each other, management issues, affirmative action, and how much the organisational culture needs to change to accommodate diversity. (Sonnenschein 1999, p. 23) Related Literature Although this seems to be an age of enlightenment in regard to the cross-cultural realities in the workforce, there are numerous instances of concern. A good number of studies, for instance, put forward the challenges relating to workplace diversity. According to Thomas and Ely (1996), barriers to managing diversity can arise from a number of areas, which include: inexperience with the process, the nature of communication and decision-making in organisations, misdiagnosis of management issues and attitudes – including thinking of diversity in terms of identity group representation. (p. 80) These variables seem to stem from one fundamental flaw, which is the misunderstanding of the process. This is particularly highlighted by the fact that diversity is often difficult to implement in the management level of a company and that organisational decision-making and management selection acts to prevent the entry of managers with diverse personal characteristics. In borrowing Kanter’s (1993) perspective, managers prefer working with individuals similar to themselves because of ease of communication and sense of comfort. She argues: “We expect a direct correlation, then, between the degree of uncertainty in a position… and a reliance on ‘trust’ through ‘homosocial reproduction’ – selection of incumbents on the basis of social similarity.” (p. 54) Solomon (1991) points to the suppression of issues such as age, lifestyle preference and priorities with respect to families among employees in order to fit in. (p. 91) Unfortunately, this poses a difficulty for organisations not just in developing diversity policies but also in the assessment of these diversity programmes. Galagan (1993) cited six challenges that prevents a successful diversity management: prejudice (equating difference with deficiency); poor career planning; a lonely, hostile or unsupportive environment for non-traditional managers; lack of organisational know-how by HR managers; people more comfortable with their own kind; and, difficulties in balancing family and career. (p. 38-44) Effectives of Cultural Diversity Positive Effect One way to illustrate the effect of diversity to organisational performance is through what Stahl et al. (2006) referred to as the linear hypothesis. In this model, diversity management is hypothesized to moderate the relationship between diversity and organisational performance so that this relationship is positive in the presence of diversity management, but negative in the absence of diversity management (see figure 1) The conceptual argument is that, “in order to take advantage of diverse perspectives and diverse access to networks, organisations need to manage carefully the potential conflicts and tensions resulting from diversity.” (p. 227) This is particular true when employees, through diversity management, become aware of the unique value that demographically different colleagues can offer. Here, there is a huge potential of taking the benefits of divergent perspectives. Fig. 1 Source: Stahl et al., p. 277 From Stahl’s model one can see that the potential benefits of workplace diversity are clear and logically sound. There are breakthrough studies that provide us evidence establishing workplace as positively related to effectiveness. For instance, there are two researches that studied 291 and 410 US firms, respectively. First is the study undertaken by Frink et al. (2003), which demonstrated that organisations with about equal number of women and men have displayed better financial performance than organisations with either a predominantly male or a predominantly female workforce. Secondly, an investigation by Richard (2000) found that racial diversity was positively associated with the financial performance of 63 US banks pursuing a growth strategy. Various avenues of research have also suggested that an element of diversity serves as an important ingredient in creative problem solving. For example, experimental groups who were composed of members with unlike characteristics including ethnicity outperformed groups of homogenous members in terms of solution quality. (Cox et al., 1991) There is a competitive advantage in an organisation that implements diversity programmes as evidenced by the numerous studies. Most of these point to a significant improvement in terms of problem-solving and increase in creativity because of a steady access to a greater variety of viewpoints. In addition, diversity provides adequate representation of the psychology of diverse consumer groups, in effect, achieving for the organisation better insights that help in successful product development or in improving services. Finally, going back to the issue of globalisation, it is useful to examine the degree of immigration or geographical mobility of peoples. More and more minorities are employed and organisations might as well take advantage of the positives that they bring to their productivity and performance. The positives of diversity as outlined in this section tell us that organisations that are effective at recruiting a diverse workforce will have better access to top quality talents among historically excluded groups. Negative Effects Of all the efforts – time, personnel and money – involved in integrating diversity in a business organisation, it is disheartening to find some studies suggesting that diversity have no impact whatsoever in organisational performance. Take, for instance the study by Kochan et al. (2003), which after comparing performance, group process, and financial results from four major US companies, concluded that diversity was unrelated to positive organisational performance. The most notable negative effects, however, is that workforce diversity efforts are prone to misinterpretation, misunderstanding and mismanagement, resulting to less cohesion and, therefore, less performance. The negative effect seems to come often from the leadership’s end. For example, Richard, Barnett, Dwyer, and Chadwick (2004) found that the association between racial diversity in top-management teams and firm performance was curvilinear and complex. This brings us back to the notion posited earlier by Kanter: Managers are biased towards diversity within their ranks because it is beyond the comfortable and perceived ease in policy and decision-making. Here, the lack of diversity in the higher levels of the organisation threatens the success of a diversity programme because of the lack of managerial insight on the realities of diversity of the workers. Effective diversity management requires managers to have a rich awareness and understanding of contemporary identity group dynamics, an openness to continuous learning and development as new identity groups and issues emerge, as well as an exposure to rich variety of organisational responses that can provide a foundation for developing effective solutions. (Konrad 2005, p. xii) In regard to training, mentoring is a difficult problem in diversity. For example, Marlene Fine (1995) argued that women and people of color often have difficulty finding mentors. According to her: Organisational studies show that people generally feel most comfortable with the members of their own sex and/or race... The paucity of women and people of color in senior positions substantially decreases the likelihood that women and people of color will informally find mentors. (p. 316) There are several issues that are highlighted underlying the “mentoring” dilemma. For example, an employee from an ethnic minority or a woman, might not become productive due to the stress brought about by the lack of support and alienation from co-workers. This stress is further aggravated by the fact that other workers may become resistant and worse, feel negative, to the diversity program. Say, the company offers additional training and incentives to minority workers. The employees that do not enjoy such benefits might feel slighted and this could lead to tensions in the organisation and the working relationships. The disruption itself is difficult for the company, the traditional workers and the minority workers. For the latter, Fines explained that there is a tremendous difficulty borne out of numerical isolation and cultural differences requiring organisations to invest further on programs such as establishing structured formal networks and bodies that would provide social and emotional support for these workers. (p. 317) It is also these factors in diversity management that led Williams and O’Reilly (1998) to suggest that demographic diversity could, in fact, weigh an organisation’s performance down. The abovementioned variables will continue to reinforce and challenge human resources managers as the globalisation of business and pressures from historically underrepresented groups emerge. They underscore the necessity of diversity in order for an organisation to succeed and be competitive. According to Konrad, “effective organisations manage to embrace an ever-increasing diversity of identity groups while at the same time establishing and achieving appropriate organisational objectives.” (p. xii) Role of HRM For business organisations an understanding of culture and its dynamics is important managing a diverse workforce. Diversity management techniques should be well understood and well applied by HR and business leaders. This is important as in working globally or in working in a highly diversified workplace, the dynamics of the management techniques change. There is the additional nuance of differences in culture and values, among other factors that sometimes lead to changes that do not stick, or even worse, change initiatives that backfire. An HR administration that knows how to work through the cultural differences helps to make sure that aligned programs produce transformational changes in the organisation. According to Effron et al. (2003), looking at different cultures does not imply a normalcy for you or your group and that it does call for suspending judgments when dealing with groups that are different from one’s own as culture exists at national, gender, generational, social and corporate levels. (p. 164) Diversity management will provide an opportunity to manage a heterogenous workforce that will probably include a higher proportion of minorities and female workers at the same time increase organisational performance. This approach to human resources management requires building a culture that supports diversity among organisational contributors through strategic processes such as a cultural audit. As a human resources management tool, it is underpinned by a set of values that recognise differences between people as a strength for the organisation. In order to address the challenges posed by the HR structure and policies, as well as recruitment and training, it is important to use four approaches in the management strategy: managing the differences and similarities between individuals; the specification of the dimensions of diversity; management of a collective, all-inclusive mixture of differences and similarities along a particular dimension. Here are the reasons why: Diversity management involves the management of both the differences and similarities of the workforce. (Leslie & Kramar 1995, p. 194) The dimensions of diversity - the immutable characteristics like gender, age, race, among others and those characteristics that can be changed educational background, geographic location, income, experience – they shape individuals’ perception of their environment and their method and style of communication. (Loden & Rosener 1991, p. 21) Diversity is about managing a collective mixture of differences and similarities and not merely a dimension or piece of it. (Nicholas 2008, p. 328) For example, there are employees that have responsibilities and there those who do not have. This dimension, among others, might not be sufficiently addressed in mainstream diversity. Specifically, diversity can be used by HR in changing its own organisational structure, policy-making as well as in recruitment and training. In a diverse organisation, the logistics of how a training program gets delivered or how a performance appraisal is reviewed is critical. An understanding of the difficulties associated with basic communication between field and headquarters puts human resources practices in context. (Jackson 1992, p. 253) Without clear communications and understandings, as previously mentioned, the opportunities for misinterpretation are increased. In line with diversity, Susan Jackson suggested a mature decentralisation in the HR structure. Here, decentralisation does not mean total freedom to do whatever the local manager wants; it means constantly sharing ideas and looking for ways to improve. (p. 253) A multinational corporation’s global operation is a simple illustration as to why this structure will work. For instance, the firm is headquartered in London and it has offices in various European and Asian cities. A local office is free to pursue local opportunities because it knows the local realities. Similarly, its management, along with the others based in different locations, contributes to the HR management in London different perspectives that are beneficial in terms of customer response, for example. The idea is that local managers have a better understanding of local issues and decentralising this aspect of human resource management enables the business organisation to be flexible in dealing with issues and challenges locally. Ideally, diversity is expected to facilitate the organisational competence and performance in this globalised organisational setting. In regard to recruitment, an emphasis on diversity is obviously critical to achieving adequate minority representation. Researchers have outlined three major issues in the attraction of and recruitment of potential minority employees. They are: 1) using proper communications media and messages; 2) increasing job seekers’ perceived fit between themselves and the job organisation; and, 3) maintaining the job seekers’ motivation to apply and remain during the selection process. (Dipboye & Colella 2005, p. 307) Targeting minority, indeed, makes sense. For instance, it becomes an effective strategy for diversity enhancement because it allows organisations to attract the most talented applicants. Having a diversity program or equal employment opportunity policy could also save a company millions of dollars from discrimination suits. An example of an HR management approach to increasing positive performance in the context of diversity is the reward program. Patricia Arredondo outlined two important recommendations in integrating rewards to diversity management: conducting acknowledgment that are appropriate to the spirit of the work at hand; and, rewards should celebrate education and training and other endeavors that contribute to systems change by infusing varying degrees of seriousness. (p. 203) Approaches to diversity through these reward initiative models could encourage the employees’ involvement as well as their loyalty to the organisation. Failure to do so “creates mistrust, lowers morale and demotivates the non-traditional workforce.” (D’Netto & Sohal 1999, p. 534) Conclusion and Recommendation Clearly, workplace diversity does not automatically translate into positive performance, and it is likely that effective management is needed in order to address the challenges and initial barriers such as the surface-level stereotyping and longer term issues. Both of the positive and negative effects have been sufficiently outlined in this paper. There is a significant level of documented successes in terms of the improvement of organisational performance due to diversity programs. On the one hand, there is also sufficient evidence that diversity could become a liability once it is misinterpreted or not implemented properly. The good news, however, is that from the period of extensive study of the diversity trends in the workplace in the 1990s, organisations have now found ways to address the negative impact of diversity. The collective experience, which hopefully will be documented extensively, provides us an opportunity to avoid if not surpass the problems that the diversity may pose. In closing, this paper would like to underscore a statement that perhaps defines workplace diversity in a single statement: “Without an environment that works well for all employees, diversity works against you, simply because you do not have an enabling environment.” (Thomas 1991, p. 49) Diversity must, therefore, be adopted not because it is politically correct to do so or that it is part of the organisation’s social responsibility. Diversity has become a necessity in order for companies to be productive in a world increasingly shrank and made more competitive by global trade. References Arredondo, P. (1996). Successful Diversity Management Initiatives: A Blueprint for Planning and Implementation. SAGE. DNetto, B. and Sohal, A. (1999). "Human resource practices and workforce diversity: an empirical assessment." International Journal of Manpower, 20, 8, 530-547. Chartered Management Institute. (2004). Recruitment and Selection. Elsevier. Cox, T.H., Lobel, S.A., and McLeod, P.L. 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