The development of workforce diversity as a scholarly concept and as a managerial reality resembles in many ways the global development of corporate cultures throughout the last two decades. Broadly establishing a preface to the ideas discussed below, HR departments’ responsibility for building and maintaining a heterogenic workforce in their organizations has greatly changed: evolving from the necessity to confirm with external pressures, the well-diversified workforce is considered today as a source of competitive advantage for companies at almost all places and sizes.
This research paper discusses several main issues that follow from the basic assumption given below, whose key outcome is the unique role of workforce diversity as a leading component in strategic HRM:
- First, the different elements and interpretations of workforce diversity will be categorized and distinguished according to the diverse sets of needs that brought about each of the diversification methods and strategies.
- Second, it will compare and contrast different approaches to workforce diversity as presented by empirical studies, while giving special attention to the differences between and within American and Japanese multinational companies in that matter.
- Third, based on the identification of the relevant needs and their corresponding strategies, the final part on this research will suggest a critical analysis of the means in which contemporary HR managers carry on their responsibility to diversity the labor. Thus, this section develop the descriptive approach that was taken in the former two sections into a practical set of tools, which should help current and future managers to cope better with the state-of-the-art in the matters under question.
Motivators and Trends in Workforce Diversity
Diversity is an ambiguous and somehow elusive term. While financiers can set a finite degree of portfolio diversification and maintain their individual level of exposure to different risks, HR managers lack any reliable measurement of that kind.
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When we examine a given company’s diversity, we must surely discuss some degree of heterogeneity in terms of some human characteristics, which can be demographic, socioeconomic or inherent in the organization, such as managerial hierarchy. It would be awfully wrong, however, to limit diversity to the relative weight of minorities and women in the workforce. This can be found, for example, in Fortune Magazine’s rating of the best companies to work for: following Fortune’s (rather ethnocentric) doctrine, sectors such as nursing and hospitality have the most diversified workforce companies; the obvious truth, however, is that such companies are usually ranked quite low in the other factors, as they typically employ low-paid labor, which can be characterized as having more women and minorities than white men. So if this is not diversity, what is?
The Growth in World Trade and the Transformation of Companies
As issues of international trade are not included in the scope of this paper, it is enough to mention the significant growth in international trade since WWII, far more rapid than the growth of production. In short, international trade is now more than twenty times higher as it was sixty ago, although a great deal of this growth is closely linked to „regional” trade, as at least a half the exports within NAFTA, APEC and the EU are traded within their respective economic zones (Harzing 2004, 10).
Multinational companies differ in their global strategies. Besides common (though irrelevant) examples such as franchising and licensing, the most important organizational forms for our discussion are the global (ethnocentric and centralized) organization; the multidomestic (polycentric and decentralized) organization; the transnational (borderless, geocentric) organization and the „born-global,” the organization that looks for the best practices and implement them globally.
Indifferent for labels and focus only on what is right, born-global organizations, „who are gradually becoming a typical type of an international firm” (Knight and Cavusgil 2005, 17), underlie a new approach to global business administration and arguably represent to exact opposite from Fortune Magazine’s anachronistic view of workforce diversity.
The Role of Workforce Diversity in Holistic Marketing
As marketing is changing its role from selling products, services and experiences to delivering value, it is the HR manager’s duty to ensure that the firm’s collective will share similar characteristics to the markets for which value is delivered. From here it follows that the HR manager will diversify its personnel to the degree of smooth interaction between the varied sellers and the heterogenic buyers (both between and within target markets).
It all makes sense, of course, nonetheless, what should a multinational’s HR manager do when marketing gurus Kotler and Keller demand that customers should „see a single face and hear a single voice” (2006, 696) in their interactions with the firm?
The answer is that both methods work very well together. In fact, the greater an organization’s workforce diversity, the weaker is the link between employees’ demography and their organizational responsibilities, views and behavior. Hence, even if initially conducted in an artificial manner, a comprehensive diversification of the workforce would most probably lead to an assimilation of the different backgrounds into the predominating multidimensional culture of the organization.
Outsourcing, Off-shoring and IT: Diversity by Natural Selection
Without repeating any of the clichés about the Internet revolution, it is clear that communications dramatically affects work structures. Today’s HR manager is very likely to work with people that he or she never met – at least not personally. In his quest for the flattening world, Thomas L. Friedman provides an anecdote from the field of radiology, which demonstrates just how complicate the global HR manager’s job is:
In many small and some medium-size hospitals in the US, radiologists are outsourcing reading of CAT scans to doctors in India and Australia!!! Most of this evidently occurs at night (and maybe weekends) when the radiologists do not have sufficient staffing to provide in-hospital coverage. While some radiology groups will use teleradiology to ship images from the hospital to their home (or to Vail or Cape Cod, I suppose) so that they can interpret images and provide a diagnosis 24/7, apparently the smaller hospitals are shipping CAT scan images to radiologists abroad. The advantage is that it is daytime in Australia or India when it is nighttime here—so after-hours coverage becomes more readily done by shipping the images across the globe. […] the radiologists on the other end […] must have trained in [the] US and acquired the appropriate licenses and credentials […] The groups abroad that provide these after-hours readings are called „Nighthawks“ by the American radiologists that employ them.
(Friedman 2007, 16)
As an interim summary to the argument discussed above, let us consider the degree of workplace diversity in one of those medium-sized American hospitals:
- First, we assume that the medical institution’s HR policies fall within the standard of US companies and thus is adequately diversified as of demographic factors.
- Second, as a result of long-term basic diversity program, new types of distinctions between employees (see section 2.2) appear – and give a predominant weight to organizational factors (e.g. hierarchy and departmentalization) on the relations within the workforce and between the latter and the customers.
- Finally, by allocating jobs outside of the hospital’s immediate premises, the term „workplace diversity” receives a new meaning, namely the diversity of places in which tasks are done. The same holds true, of course, to other sorts of outsourcing and off-shoring, as long as the employee (or the contractor) has some part of the company’s life as a culture and an organization (regardless of non-participating member economic value).
Research Findings on Workplace Diversity in the US and Japan
Though beneficial to the company in many ways, ensuring workplace diversity is an obligatory task of the HR managers, which may pose them and other executives difficult managerial dilemmas. Those managers’ concerns relate to fact that they have to learn new „type” of employees, with a presumably predetermined habits and values. Hence, the major complexities arouse in the framework of organizational behavior and relate to issues such as motivation, communication and promotion.
Workforce Diversity in the US Companies
A country of immigrants with a developed set of anti-discrimination laws, backed up with curious media, American companies have arguably one of the strongest sensitivity to the equal rights at the workplace.
The rapidly growing weight of minorities in the general society gives immigrants and people with immigration background the legitimacy not to comply with the basic „melting pot” doctrine – another ethnocentric theory, which stipulates that new members of a group will adapt themselves to the group’s currently dominating culture. Today, with the backwind of their ethnic communities (the same holds true, of course, for homosexuals, religions, cults, and many other subcultures) and the general support towards individualism, people stand up for who they really are. And corporations, of course, have learned to use such phenomena to get some „good press.”
Moreover, as minority populations grow, they also increase their collective purchasing (and bargaining) power, thus the necessity to reinforce the company with people who have deeper understanding of the subculture in question. Another advantage of the American relatively greater openness towards personal differences is that people do not need to put so much effort in cultural adaption. They remain who they are and can thus think independently and creatively at work.
Ford Motor Company, Coca-Cola and many other US companies strive to become more diversified. Their managers apparently consider that an organization can be more effective when its workforce reflects the diversity of its customers. This view is supported by an article from Wall Street Journal, which identified the number of benefits of diversified workforce for the American and global companies:
- Improves corporate culture
- Improves employee morale
- Leads to higher retention of employees
- Leads to an easier recruitment of new employees
- Decreases complaints and litigation
- Increases creativity
- Decreases interpersonal conflict between employees
- Enables the organization to move into emerging markets
- Improved client relations
- Increases productivity
- Improves the bottom line
- Maximizes brand identity
- Reduces training costs (Bennett, 2001, B18).
As an example of recent trends in the United States, online shopping by Hispanics is growing three times as fast as overall online shopping. As a result, many companies, among which are JetBlue Airways, Nissan North America, Office Depot, and Honda Motors, are launching Spanish language website and hire Spanish-speaking customer representatives. Despite that only 16 Hispanics chief executives of Fortune 1000 companies, corporations are determined to attract, develop, and retain Hispanic leaders. PepsiCo, for example, has increased the number of its Latino executives by around 75 percent during the last five years. Some companies have adopted a rather extensive, values-based code of conduct, which reflects among others precise policies regarding discrimination and diversity of workforce.
A further example of successful workforce diversity in the United States is IBM. In 1995, when Gerstner took over IBM, a diversity task-force program that became a foundation of IBM’s HR strategy was launched. IBM created eight task forces, each focused on a different minority group such as Asian, homosexuals, and women. The goal of the program was to overcome and comprehend the differences among the groups and find ways to attract broader set of employees and customers. As a result of the diversity initiative, the number of ethnic minority executives born in the United States has increased by 233 percent. The increased diversity not only broadens employee pool for IBM, but it also helps the company to understand its market better. As Gerstner explained it, „We made diversity a market-based issue….It’s about understanding our markets, which are diverse and multicultural.”
IBM acknowledged a necessity of regularly held meetings aimed to identify and solve the most vital problems and diversity concerns raised by the members of the minority groups. For example, Asian employees admitted that they are concerned with stereotyping, networking and mentoring, employee development and talent pipelines, while African American saw potential areas of improvement in such areas as representation, retention, and networking, education and training. Target advertising and marketing was an issue of concern for both groups. As a result of monthly held meetings, employees identified ways to solve the problems and improve cooperation. IBM helped its executives to deepen their awareness and understanding of diversity. The initiative continues and has lasting impact, helping to shape business leaders of the company. (Thomas, 2006, 748-764)
Workforce Diversity in Japanese Corporations
Japan has achieved substantial economic and political development in the past decades, however problems in political and business environment are still present. Inflexible and closed systems for employment and promotion still exist without necessary improvements in human resource management. Presently, Japan is behind other developed countries in its diversity practices; the nation even lags behind other Asian countries. In this respect, Japanese government paid recently serious attention to new challenges such as globalization and informatization and the issue is increasingly discussed in the society.
Japanese and US companies, in their strivings to achieve organizational and quality excellence, differ considerably in a variety of aspects of management and work culture. Spiritual teachings, such as Shintoism and Buddhism, have shaped the Japanese people’s concept of human relations and management philosophy. The West, on the other hand, highly advocates freedom and creative thinking, and has created competitiveness promoting a culture of entrepreneurship and diversity.
Unlike United States, Japan is almost racially homogeneous and has a long history and culture that excludes certain groups of people from equally participating in the workforce. Japan is still male-dominated country. Comparing Japan and the United States, Japan is just now having the same discussions that the U.S. had in the 1960s and 1970s concerning women’s rights in the workplace.
Japan is more reluctant to accept foreigners as a part of their workforce because, unlike the U.S., there is no melting pot culture in the country. Even China is more diverse and historically more adaptive to changes. At the same time, Japan may soon face shortage of employees, since baby boomers are starting to retire. To improve the situation, employers are increasingly turning to women.
Over the last two decades, the environmental conditions surrounding the Japanese economy have changed substantially, making a significant impact on its labor market. Inflow of foreign labor increased and employment practices became more diversified, for example, by use of temporary employment contracts. Human resources management in Japan started to adapt to the variety of environmental and structural changes that were taking place.
Because Japan wants to stay ahead in the global economy it has to begin working through its diversity. For example, Toyota has committed around $8 billion over 10 years to make its workforce more diverse and to use more minority suppliers. Mitsubishi Electric is also striving for diverse workforce and equal opportunities. The basic employment policy of the company is: „Hiring a diverse array of people with respect for human rights and without regard for gender, age, nationality or race is essential to the ongoing business development of a multinational corporation.” Diversity is becoming an increasingly important issue in Japan at the moment. Retaining key talent has become more vital for companies as Japanese workers have become more mobile, and thus more likely to change jobs.
All over the world, organizations now see diversity as an asset that offers valuable opportunities for innovation, networking, marketing, and similar benefits. If correctly applied, the power of diversity will bring a company to the forefront by enhancing creativity and efficiency. The focus of diversity management is to promote people as a necessary factor to the organizational success. The mission of organizations in the 21st century is to create new models for workplaces that motivate and access the potential of each of those diverse workforces, thus striving toward the common goal of the organizational success and personal achievements of the employees.
The multicultural approach benefits an organization in many ways, such as attracting and retaining talented people in the company, gaining and keeping greater market shares, reducing costs and increasing productivity, improving the quality of management, increasing organizational flexibility, solving problems more effectively, and contributing to social responsibility.
Over the last decade, many American corporations have expanded their organizations globally. Corporate success, more than ever, depends on managing their diversified workforce properly inside as well as outside the United States. The ever-growing complexity of diversity issues demands active and innovative adaptation and implementation of new human resources strategies to survive and succeed in business today and in the future. Despite of the homogeneous society and historically closed culture, Japanese companies as well are faced with the necessity of diverse workforce in order to maintain global competitiveness.
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Friedman, T. L. (2007). The world is flat: A brief history of the twenty-first century. New York: Picador.
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Thomas, D. (2006). Diversity as strategy. In Gallos, J.V., Organizational Development (p.748-764). San Francisco: Jossey-Bass.