A Criteria Based Literature Research - Approaches, Achievements and Experiences of the Concept of Cultural Diversity in Multicultural Organizations

Bachelorarbeit von Nike Fischer

Introduction:

These days a current newspaper without an article in the business section covering the issue of globalization and the effects involved is unthinkable. Due to that fact, cultural diversity is often mentioned, and its presence within the media grows increasingly as does its value within our society as well as in our policies and economy.

The globalization of markets and companies has been the driving force of change over the past decade. Its process affects every nation worldwide and represents a challenge because worldwide competition between national economies is engendering and the degree of international intertwining is increasing.Consequently, the current trend is leading to a growing internationalization of corporate activity that is reflected not only markets but also in development. Besides increasing competition on the domestic markets, it opens up opportunities to enter new markets and to benefit from location advantages in production and development processes. A company that is operating on a global scale today has to assert itself in various markets with various cultures. Due to this, cultural differences can be seen as a side effect of globalization prompting structural workforce change. Globalization, as well as changes in demographics are two reasons causing change in the structural workforce. Through the internationalization of employees, the aspect of cultural differences is increasingly significant because the organizational corporate structure has to adjust itself to a very dynamic and heterogeneous environment. Whether help-wanted ads in the newspaper or current journal articles, the shortage of experts in some fields is identified as a rising issue and major challenge companies have to face over the coming years. Some companies already answer to this issue by hiring foreign employees because ‘As a consequence, different qualifications, life styles, needs, values and experiences emerge. This heterogeneous mix through the labour market has to be taken into account when recruiting and appointing staff’. According to the process of managing heterogeneous workforces, a certain fit needs to be achieved which has to be coordinated. This is where Cultural Diversity Management, a concept that originated in the American Civil Rights movement, comes in.

The increasing relevance of this topic, and its high presence within the media raised my interests regarding this subject. Even the specific article in the Oldenburger Sonntagszeitung entitled ‘Kulturelle Vielfalt nutzen” verifies its widespread appearance and awareness. Even in this non well-known newspaper is the importance of cultural diversity highlighted. Within the article, Gesine Multhaupt, a member of the Bundestag, calls attention to this topic and appeals to organizations and public institutions as well as public authorities to enter the contest ‘Cultural Diversity at the Workplace”. This contest has no restrictions. Organizations employing a workforce with migration background and, thus benefiting from the heterogeneous mix, are able to participate. The main purpose of this contest is to popularize and award those organizations who are practicing cultural diversity. Even though I could find a lot of literature in which a positive light is cast on cultural diversity, one should keep in mind that there are also those who adopt a critical attitude. Today the understanding of the effects and impact of cultural diversity on company performance remains controversial.

While some experts and authors view culture diversity as ‘Chance’, ‘competitive factor’ or an ‘Instrument to reach synergy’, some detractors clarify that implementing cultural diversity in organizations can be also very risky and complicated.

Taking the above-mentioned facts into consideration, it indicates that there is a clear need for research into the theory behind cultural diversity management. Because of this, I have chosen to elaborate on the concept of cultural diversity within my Bachelor thesis, thus the focus of the study is geared to fill this gap within the bound of probability. More precisely, the purpose of my work is to expose by means of a catalogue of criteria, whether Germany’s multicultural organizations efficiently implement cultural diversity, and thus are capable of enhancing organizational performance. Accordingly, I refer to a statement given by the Bertelsmann Stiftung ‘Germanys Culture Diversity needs to catch up’ and reappraise as to whether this statement is right or wrong on the basis of some practical examples.

Taking the topic of my bachelor thesis and its objective into account, it is clear that this study is geared toward practical experiences. Thus the methodology procedure is not only to conduct an examination of theoretical hypotheses, but also to examine how a multicultural organization applies cultural diversity in reality. This requires, however, a basic understanding of cultural diversity using certain methods. This basic understanding will be given by systemizing existing theoretical approaches of cultural diversity by means of a literary review. Further, I will refer to journals, interviews of experts and empirical studies dealing with this topic in which current practical results are described and discussed.

Enlightening the theoretical framework of cultural diversity enables the development of a practical frame of reference. The concept of cultural diversity is new and represents a relatively unexplored research field. After developing a theoretical and conceptual framework, I will continue with some specific practical experiences of organizations practicing cultural diversity.

The structure of this work and the way in which it addresses its topic is largely determined by its objective. After the introduction, I would like to elaborate on culture diversity by scientifically utilizing the initial questions such as ‘What”, ‘Why” and ‘How’.

First, a general overview to the basic understanding of culture diversity is given. This overview encompasses on the one hand, general information pertaining to the feature cultural diversity such as its meaning, development and achievements, and on the other hand, essential definitions which determine this topic to a certain extent.

I will then refer to ‘Why” by giving reasons for its rising importance throughout organizations. Therefore, I will enlighten the different approaches of organizations for practicing cultural diversity and explore the impact of the phenomenon in greater detail, particularly in view of its relevance to a business entity. The focus will, therefore, be on both the negative and positive effects.

After describing my theoretical framework, I will continue with the conceptual framework, in which I will develop a catalogue of criteria pertaining to cultural diversity. This analysis serves as a foundation for the further elaborations contained in this work.

My next Chapter is dedicated to the ‘how’ which concentrates on cultural diversity within Germany, and examines how this new strategy is implemented and experienced within some German multicultural organizations. By means of some practical examples, I intend to appraise whether Germany fulfills all of the above-mentioned criteria. Subsequently, I will evaluate the results by referring to the statement given by the Bertelsmann Stiftung ‘Germanys Culture Diversity needs to catch up’.

My work ends with a reflection and conclusion towards cultural diversity responding to my initial question from the introduction.

Table of content:

2.	Introduction	1
3.	Culture Diversity	4
3.1	Overview	4
3.1.1	Culture	8
3.1.2	Corporate Culture	10
3.1.3	Culture Difference(s)	12
3.1.4	Communication	16
3.1.5	Multicultural Organisation	17
3.2	Theoretical Framework:Cultural Diversity outlook – a literary review	19
3.2.1	Basic Approaches to Cultural Diversity	19
3.2.2	Fairness- and discrimination- approach	20
3.2.3	Access-and-legitimacy-approach	22
3.2.4	Learning- and Effectiveness- Approach	24
3.3	Impact of Cultural Diversity on multicultural organizations	26
3.3.1	Positive effects	26
3.3.2	Negative effects	30
3.3.3	Evaluation of the effects of Cultural Diversity	33
3.4	Conceptual Framework: Catalogue of Criteria for effectively managing CulturalDiversity	34
3.4.1	Leadership	36
3.4.2	Research &Measurement	38
3.4.3	Education	39
3.4.4	Changes in Culture and Management Systems	40
3.4.5	Follow-up	41
4.	Research : Culture Diversity in Germany	43
4.1	Foreword	43
4.2	Germanys’ development of cultural diversity	43
4.2.1	Germanys’ approach	45
4.2.2	Example 1: Ford	46
4.2.3	Example 2: IKEA	49
4.3	Evaluation	54
5.	Conclusion	60
6.	Bibliography	63
7.	Declaration	73

Text Sample:

Chapter 3.3, Impact of Cultural Diversity on multicultural organizations:

In the preceding section I discussed the existing approaches to cultural diversity. I also stressed that there are many environmental forces that have combined to make managing diversity, in particular cultural diversity, a high priority issue for contemporary organizations. With the implementation of cultural diversity, an organization expects to increase organizational performance, and thus their economical success. However, the strategical approach and the method of implementation are dependent on the organizational perception and understanding of cultural diversity.

This section explores the impact of the phenomenon in greater detail, particularly in view of its relevance to a business entity. The focus will, therefore, be on the both the positive and the negative effects of the phenomenon. The purpose is to provide a comprehensive overview of the impact of cultural diversity on an organization. The previous discussion also clarifies how diversity in an organization may indirectly determine organizational performance.

3.3.1 Positive Effects:

Within my research I noticed that most of the references I have chosen for my Bachelor thesis address cultural diversity as a competitive advantage. In this chapter I will list potential arguments supporting this thesis, and clarify why cultural diversity means a new cultural philosophy to many organizations. However, in view of the restricted number of pages with regard to my Bachelor thesis, I will not be able to reflect all arguments in detail. Instead, I intend to highlight the coherence between organizational success and practicing culture diversity by focusing on the economical viewpoint. The major arguments revolve around six areas: (1) Cost argument, (2) Resource- and Acquisition argument, (3) Marketing argument, (4) Creativity argument (5) System flexibility argument and (6) problem-solving argument. Each of these will be addressed forthcoming.

Cox and Blake divided the areas into two categories. While the cost and resource- acquisition argument belong to the ‘inevitability of diversity’ category, they place the remaining four arguments in the ‘value in diversity hypothesis’ category. Under inevitability of diversity, the author explains that on account of the demographic composition of a workforce, it will be necessary to handle the question of diversity in order to remain competitive.

Cost argument:

The cost argument represents the economical viewpoint in which ‘ …the potential cost savings of organizational initiatives to effectively manage diversity must be judged against the investment necessary to implement them’. Even if the implementation of the Concept of Cultural Diversity within an organizational structure always meant expenses would be incurred, it is evident that managing diversity, especially cultural diversity, efforts have been successful in improving performances on absenteeism, turnover, and productivity. Contrarily, dissatisfaction and less motivation among employees will impair the organizations’ productivity and lead to more costs. Thus, the cost of not managing cultural diversity will be higher than compared to an organization that effectively manages it. ‘In diesem Zusammenhang sind nicht nur die direkte Kosten zu erwähnen, die durch die konsistente Umsetzung vermieden werden. Auch positive Imageeffekte sowie die Vermeidung negativer Publicity sind Aspekte der Kostenverringerung durch Diversity’.

From an organizational angle, utilizing individuals from different cultural backgrounds will gain a competitive cost advantage, particularly on a long-term basis.

Resource- and Acquisition argument:

According to the Resource- and Acquisition argument, a major competitive factor for organizations is to attract and retain the best available human resource talent. Especially in regard to the current workforce demographic trend, does this argument represent a decisive advantage because it becomes increasing important for organizations to be successful in hiring and retaining the best workers from different countries. If an organization is committed to cultural diversity, it will improve its reputation among customers and employees. As a result, the number of applicants is enhanced within those organizations, which leads to a better selection of personnel.

Moreover, it is said that marketing success was largely attributed to the presence of people from a wide variety of cultural backgrounds. Thus, a culturally diverse workforce referred to different points of view, because people of different backgrounds have different experiences shaped by their group identities. ‘ The recruiting factor has gained significantly from the recent flurry of published accounts of the best companies for women and minorities’.

Marketing argument:

An organization with a strong commitment to cultural diversity by tapping into the insights and understanding of people of different backgrounds stands out positively. Thus, practicing culture diversity enables an organization to build up a positive image and gain a good reputation among customers, which leads to increased product sales.

A culturally diverse workforce also assists in approaching customer needs and requests resulting in more customer satisfaction and, thus, loyalty. Altogether, this argument reinforces benefits within all areas regarding sales and marketing. Due to the fact that Germany’s buying power has maintained increasingly by minority groups like the Turkish population, the integration of those minority groups within organization helps to understand culture effects on buying decisions and in mapping out strategies to respond to them. Thus, market relations can be improved and intensified and ‘…can …give a company a competitive edge in a global economy by facilitating understanding of other customers, cultures and marketplaces’.

Creativity argument:

The creativity argument, however, ties in with the marketing argument. Heterogeneity in work teams also promotes creativity and innovation because of their multiple points of view. According to this, a recent study of ethnic diversity and creativity supports this phenomenon. In this study quantity and quality of ideas generated during a brainstorming task by diverse groups of Asians, Black Anglos, and Hispanics were compared to the ideas generated by homogenous groups of Anglos. No significant difference were found in the quantity of ideas, but the ideas produced by the ethnically diverse groups were rated an average of 11 percent higher than those of the homogenous groups on both feasibility and overall effectiveness. This verifies that increased cultural diversity in organizations will often lead to more creativity and innovation.

Flexibility argument:

There are further assertions that cultural diversity enhances organizational flexibility. In contrast to homogeneous workforces in monolithic organizations who have more difficulty in adapting to environmental changes, heterogeneous workforces in multicultural organizations are more adaptable. In this term, it is said that members of minority groups, in particular foreign employees, have divergent thinking, and thus highly flexible cognitive structures. The cognitive flexibility of an organization rises by the inclusion of minority groups such as culturally diverse employees in the workforce. Due to that, managing a culturally diverse workforce requires tolerance for alternative points of view and an openness to new ideas which are to be fostered by cultural diversity management. This can only be achieved by less standardization which will increase fluidity and creates a greater flexibility to react to environmental changes. ‘Je flexibler eine Organisationsstruktur ist, desto besser kann sie sich auf Veränderungen einstellen und ‘ Neues’ und ‘ Altes’ als Wert erkennen’. Due to this, the flexibility argument alludes to cultural diversity having a positive effect.

Problem –solving argument:

Cultural diversity also has the potential for competitive advantage through problem solving and decision making. The problem-solving argument implicates that diverse workgroups have a broader and richer base of experience from which to approach a problem because Researchers show the culturally diverse oranizations to exhibit expanded meanings, multiple perspectives and multiple interpretations. When a diverse workgroup is managed effectively, they invent more options and create more solutions than homogenous groups do.

In this context a Bosnian –german forewomen working at Dailmer Crysler refers to cultural diversity and its effects supporting the problem-solving argument by saying:

‘Wie könnt man es am besten beschreiben? Es ist grad durch die Kulturen ist es vielleicht( -) gar nicht schlecht, daß Deutsche und grad zum Beispiel Türken, Griechen, weil ja alle eigentlich eine andere Kultur haben, zusammen schaffen, weil (-) der eine sieht’s beim anderen, (-) was der macht…’. This comments approves the assumption ‘ daß man von den Kollegen mit der anderen kulturellen Zugehörigkeit gewinnen kann in dem Sinne, dass man ihre kulturspezifische Verhaltensweise erkennen lernt (‘der eine sieht’s beim anderen’) und so sein eigenes Repertoire an Lösungsmöglichkeiten anreichert’ which eneables to enhance employees’ horizons.

Further Cox contributes: ‘…several studies discovered that heterogeneous groups produce better quality solution to assigned problems than homogenous groups…’. Consequently, critical analysis in decision groups is enhanced by member diversity.