Diversity Management - Turning Differences into Opportunities to Sustain Competitive Advantage
The consequences of globalisation in the 21st century have brought about unique challenges for organisations to ensure that internal processes are capable of meeting organisations’ needs in a constantly evolving business environment (Wilkinson, Redman and Dundon, 2015). An increasing diversity both within and beyond the workplace is becoming an observable phenomenon in most parts of the world as geographical distances that once prevented the movement of labour and limited firms’ expansion are no longer perceived as barriers (Martinez-Lucio, 2013). From an HR perspective, the major implication is that managers and leaders need to understand the principles of managing an organisation consisting of members with different backgrounds to reach business objectives as dictated by external and internal expectations (Martinez-Lucio, 2013). The assignment examines the case for workplace diversity and diversity management to appreciate if and how organisational efforts to benefit from a diverse workforce contributes to firms’ competitive advantage.
The Case for Diversity Management
The ultimate value proposition of HRM is to ensure that organisations are capable of providing such circumstances that are conducive to maximising employees’ performance, based on the assumption that the HR department considers employees as assets instead of cost centres (Armstrong and Baron, 2002). Therefore, if HRM issues are addressed on the strategic level, it is indispensable to implement policies to ensure that organisations are able to attract and retain talents to the organisation (Huselid, 1995). To achieve this HRM imperative, organisations have a variety of options, including but not limited to diversity management (Kochan et al., 2003). Many organisations offer an attractive compensation and benefits package to employees, based on the assumption that financial incentives are sufficient to motivate employees to deliver their maximum performance at work. However, such approaches that apply a one-size-fits-all method to sustain work motivation and to provide a work environment that is conducive to maximising employees’ performance is not likely to be sufficient in the 21st-century diverse work environment (Hays-Thomas, 2015).
While financial and other extrinsic sources of motivation may offer short-term solutions to HR issues in the organisation to improve and sustain employees’ performance, such remedies may not be more than symptomatic treatments to staffing problems in an increasingly diverse workforce (Cox and Blake, 1991). For instance, an attractive compensation package well above the industry average may be sufficient for certain individuals perceiving monetary rewards to be sufficient to incentivise them to invest efforts at work. However, a standardised motivation strategy solely resting on financial incentives may not be necessarily compatible with diverse workforce expectations, as influenced by individuals’ unique background rooting from their age, gender, sexuality, socioeconomic status, religious views and other distinctive factors that may set particular employees apart from others (Cox and Blake, 1991). Organisations have two choices when it comes to factoring in these differences: managers could either decide to disregard employees’ unique characteristics entirely and apply a standardised approach to managing human resources or could perceive these differences as opportunities instead of threats to organisational integrity (Roberson, 2015).
The benefit one-size-fits-all approach to managing human resources (and disregarding differences in employees’ background and its implication for HR processes, such as recruitment and selection or performance management) is that once internal procedures are established, managers’ workload is substantially reduced, and as long as there are no apparent signs that the HR strategy requires adjustment, the organisation does not need to change (Williams and Wade-Golden, 2015). Despite the false sense of complacency of not addressing diversity management issues, there may be several consequences for the organisation, which are exceedingly apparent if organisations’ performance is heavily dependent on their motivated staff members (e.g. the service industry) (McKay, Avery and Morris, 2008). The one-size-fits-all approach is based on the assumption that employees’ needs at work are the same (e.g. to earn a salary) (Phillips and O'Connell, 2004). However, an inherent issue with this approach (especially in shrinking labour markets whereby organisations are indeed at war for talents) is that those employees whose background and/or workplace expectations are less compatible with the standardised HRM procedures may lower their performance (Williams and Wade-Golden, 2015). If problems are not addressed, talents will eventually leave the organisation that could demoralise employees and launch a series of other staffing problems for the organisation (McKay et al., 2007).
The above hypothetical scenario reveals that organisations disregarding individual differences may only attain efficiency in the very short-term, so if workplace diversity and employees’ unique needs are disregarded, HR practices’ effectiveness is expected to decline (Jayne and Dipboye, 2004). Llopis (2011) recommends that while having a diverse workforce and fostering diversity in the organisation may introduce some unique challenges, if the advantages of a diverse workforce are weighted against the costs of managing a diverse workforce, it is apparent that diversity management is an essential ingredient to business success in the 21st century. The next section discusses the probable short-term barriers to diversity management and the possible arguments introduced against the case of diversity. Then, in the light of the challenges of managing a diverse workforce, the author discusses if and how a diverse workforce could contribute to firms’ performance.
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Probable Issues Managing a Diverse Workforce
Earlier in the paper, it was suggested that one probable obstacle to achieving diversity in organisations is that an entirely new approach is needed to manage diverse employees. Amidst intensifying competition, organisations are innately interested in maximising internal efficiency to retain clients, though this efficiency may reduce opportunities to take advantage of employees’ different perspectives to maximise firms’ performance (Özbilgin, 2009). The first and perhaps the most obvious barrier to diversity management is employees’ and managers’ lack of appreciation of the benefits of a diverse workforce, especially in the beginning of the implementation of diversity management plans often accompanied with a temporary performance decrease and conflicts (Dass and Parker, 1999). Naturally, when different perspectives are introduced to an established setting, conflicts are inevitable, thus decision-making processes may take substantially longer in a diverse workplace (Olson, Parayitam and Bao, 2007). As long as employees/managers do not acknowledge that conflicts are unavoidable, it would be difficult to communicate the merits of diversity management and to perceive differences as opportunities. Therefore, while on one hand, the organisational benefits of diversity are apparent, individuals may resist adopting a new approach to work to consider differences (Gröschl, 2016). Thus, the implementation of diversity management policies in an organisation could be a significant change for employees, especially for older generations accustomed to a more homogenous workforce (Gröschl, 2016). Nevertheless, as workplace diversity is expected to increase in the future, organisations and leaders have no alternative to developing such practices that converts diversity into a source of competitive advantage (Gröschl, 2016).
Diversity as a Source of Competitive Advantage
Despite the initial difficulties in harmonising the different interests in a diverse workforce, theorists have identified several benefits of diversity. One of the most frequently cited benefits is an enhanced creativity and better decision-making outcomes in diverse organisations as a result of considering different perspectives to an organisational problem (Premuzic, 2017). In an overly homogenous workforce, organisational members may not have the capability to think ‘outside the box’ and to challenge existing assumptions, whereas if employees are encouraged to share their different perspectives, chances are that the organisation will identify novel solutions to problems (e.g. a new product design). In addition to improved decisions, organisations with an already diverse workforce can position themselves favourably in labour markets when recruiting talents (Ng and Burke, 2005). In addition to this, reflecting on an earlier statement that a one-size-fits-all HRM approach may lead to staff retention problems, a well-implemented diversity policy can support organisations in engaging and retaining talents (Mor-Barak, 2017).
However, empirical research findings produced mixed results supporting diversity management’s contribution to organisational performance (Anderson and Metcalf, 2013). On one hand, the inclusion of a diverse workforce is certainly justified from a social justice perspective, so there is indeed a case for organisations to embrace diversity (Anderson and Metcalf, 2013). On the other, the fact that empirical research findings found inconclusive evidence for diversity’s contribution to firm performance makes it less apparent if and how deliberately recruiting and retaining diverse employees have a well-defined business case, especially if diversity slows down decision-making processes and yields to more conflicts. Therefore, while theory clearly shows that diversity management is a critical component of organisational success in a global business environment, the benefits of diversity may not be readily realisable in practical settings (Kulik and Roberson, 2015). For instance, there are several moderating factors of diversity management, such as the industry served, the organisational culture, the adopted leadership style and the innovativeness of the industry (Bell and Berry, 2007). Though only a few papers concluded that workforce diversity adversely impacts firm performance, the vast majority of research found no or minimal impact on organisational productivity in the short-term (Calvard and Cornish, 2016). However, in parallel to the central statement of this paper, Mor-Barak (2017) also notes that effective diversity management is likely to be indispensable in the 21st century, so despite the current barriers to align diversity management with firms’ strategy to obtain competitive benefits, organisations are advised to explore specific solutions to turn differences into opportunities.
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Diversity management is an innately controversial area in the 21st century, though if a broad perspective is taken to appreciate the problem, it is evident that a differentiated HRM approach is indispensable to align diverse employees’ interest with that of their organisation. The immediate (but otherwise temporary) problems in a diverse workforce coupled with mixed research results connecting diversity management with firm performance could be used as excuses to disregard workplace diversity. Nonetheless, if global tendencies (i.e. increasing diversity in the population) is considered, it is unquestionable that HR professionals need to critically examine the case for diversity and its effect on firm performance.
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