Introduction and Background
Today, in the increasingly multicultural and ferociously competitive business environments, more people come to realise the role of diversity management in a company’s success. The creation of new social policies aimed at protecting equality and promoting diversity was the first sign that diversity management brings numerous benefits and can be a source of competitive advantage (Llopis 2011, para. Today many companies seek to integrate diversity strategies into their management models in order to capitalize on the benefits of this management approach. While it is particularly true for companies seeking global market growth, local businesses should also recognize the importance of diversity management.
Diversity management is a complex issue. While workforce diversity has been linked to improved business results, managing diversity is a challenging task which requires multifaceted approach (Bassett-Jones 2005, p. 170). The objective of this paper is to contribute to the existing knowledge of this management approach by providing the overview of diversity management as an integral part of strategic people management. The researcher seeks to address the benefits of diversity management, as well as the challenges the implementation of diversity management practices poses in today’s multicultural environment.
The Concept of Diversity and Diversity Management
The concept of diversity has been used to describe a range of individual differences which make every person unique. In the context of this paper, diversity encompasses variations in demographics background, such as ethnical background, gender, sexual orientation, and also includes the differences in cultural and intellectual capabilities.
The pivotal point in management practices evolution is diversity management. The term diversity management is generally recognized as “the systematic and planned commitment on the part of organizations to recruit and retain employees with diverse backgrounds and abilities” (Bassett-Jones 2005, p. 170). In other words, the concept of diversity management deals with such management practices, which recognize diversity and aim to create inclusive workplace environment.
The development of diversity management as a concept is related to historical changes in the American economy. Since late 20th century, the number of ethnic minorities in the United States has been on the rise (Bassett-Jones 2005, p. 170). The trend of shifting demographic balance continues and ethnical minorities are expected to comprise 47 percent of the United States population by 2050 (Brach & Fraserirector 2000, p. 181). As such, while the equality of opportunity has been recognized by all developed countries, greater social consequences in the United States prompted the growing interest towards diversity paradigm. Similar trends have been observed in other developed nations, necessitating the recognition of diversity management as the foundation of today’s management practices (Bassett-Jones 2005, p. 170).
The growing number of minority populations and the migration of young, skilled labour mean that traditional management practices are no longer effective. Such practices do not address the role of individual differences, the opportunities of employee diversity and the challenges of establishing effective management practices in such multicultural settings. As such, traditional management practices which ignore these important aspects of business should be abandoned in favour of new, innovative approaches.
In its essence, management reflects the changing nature of business: when business settings change, management has to innovate and implement new practices in response to these changes. Diversity management is the response to the change in the labour market, as well as societal change. Today’s business settings require companies to adjust their management model to better address workforce diversity.
The Impact of Effective Diversity Management Strategies
Both the supporters and opponents of diversity in business settings wanted to know if research can support the argument of diversity management. The growing interest in the subject of diversity management prompted a large number of researchers to assess the influence effective diversity management strategies have on a company’s performance. A number of these studies show that a cooperative company effort to implement diversity management is directly related to improved business performance.
One study which seeks to address the effect a diverse workforce has on business performance uses National Organizations Survey data to test value-in-diversity thesis (Herring 2009, p. 208). According to this hypothesis, exploiting diversity is “the key to prosperity” (Herring 2009, p. 210). The researcher concludes that there is a positive association between increased workforce diversity and improved business performance. In particular, diversity of the workforce is associated with “increased sales revenue, more customers, greater market share, and greater relative profits” (Herring 2009, p. 208).
Another study focused on such aspects of diversity management, as diversity training, pay and promotion among of minority groups, and their effect on business performance (Armstrong et al. 2010, p. 977). The researchers used quantitative data from Irish companies to evaluate the effect diversity interventions have on business performance. The authors conclude that diversity management practices result in improved workforce productivity, higher levels of creativity, and reduced voluntary turnover (Armstrong et al. 2010, p. 977). The researchers claim that those firms which succeed in integrating diversity management into their business strategy continuously exhibit increased financial performance. The data analysis suggests that the widespread implementation of diversity management practices results in sales increase by € 60,420 on average (Armstrong et al. 2010, p. 992).
The Challenges of Diversity Management
There is little doubt that diversity management as a part of effective people managing has a positive impact on business performance. Research suggests that companies “may also find competitive advantage through more effective approaches to managing employee diversity and equality” (Armstrong et al. 2010, p. 992). In addition, the continuing trend of increasing workforce diversity necessitates the application of diversity management in modern business settings. However, the implementation of effective diversity management practices is a challenging process.
The major challenge is the discrimination which may occur in multicultural organizations. One study suggested that prejudice and bias are a major issue which should be addressed to incorporate diversity (Jabbour et al. 2011, p. 58). Another challenge is stereotyping, or using widely held erroneous notions to describe a certain population. Such challenges as bias, prejudice, and stereotyping are related to a number of characteristics, such as gender, age, and racial background (Jabbour et al. 2011, p. 58). Specific corporate policies are to be established to facilitate inclusive organizational culture. A legalistic compliance approach can be used to eliminate discrimination and help in sustaining such culture.
Other challenges are associated with ineffective communication, which is the result of language barrier and the lack of cross-cultural competence (D’Netto et al. 2013, p. 1243). Such challenges require additional training of the personnel to have a better understanding of other cultures and improve intercultural communication.
Historically diversity management was mainly the responsibility of human resources management; however, with the shift towards integrated organizational communication, cross-functional implementation of diversity management is necessary for a business to fully embrace diversity (D’Netto et al. 2013). This proves another challenge since diversity management should be implemented across an entire organization, which is comprised of many isolated units. In order to overcome this challenge, it is important to recognize the role of employees in facilitating change, and align corporate messaging on various management levels. Employees are integral to the process of organisational change since their scepticism and resistance may slow down the process of change. As such, active involvement of employees in the implementation of diversity management practices, as well as the alignment of corporate messages across all departments, will help overcome these challenges.
Diversity management is a concept which describes a company’s commitment to creating and sustaining the inclusive working environment. Recent changes in social policies and the need of businesses to remain competitive require the implementation of diversity management practices as a part of corporate strategy. There is more diversity among workforces of different companies, and with increased migration, the trend is likely to continue. This fact necessitates managers to change their approaches to better address the diversity among employees. Workplace discrimination, the lack of cross-cultural competence, and ineffective communication all pose a major challenge toward establishing an inclusive culture. Nonetheless, protecting equality and promoting diversity brings the company numerous benefits and can be a source of competitive advantage. Failing to implement diversity management can not only damage a firm’s reputation but also put the whole business at risk.
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