This article talks about managing work force diversity within the organisation. It has been co- authored by Dr. Uday Salunkhe, Director of the prestigious Welingkar Institute of Management and Research.
1MANAGING WORK FORCE DIVERSITY - Need for a Contingency Approach in IHRMProf. Dr. Uday Salunkhe Prof. Dr. P. S.RaoDirector DeanPrin. L. N. Welingkar Institute of Prin. L. N. Welingkar Institute ofManagement Development & Research Management Development & ResearchMatunga , Mumbai – 400019 Matunga , Mumbai – 400019ABSTRACT :The attitudes, beliefs, values and customs of people in a society are an integralpart of their culture. Naturally, their culture affects their behaviour on the joband the environment within the organization, influencing their reactions towork assignments, leadership styles, and reward systems. Like the externaland internal environments of which it is a part, culture is undergoing continualchange. HR policies and procedures therefore must be adjusted to cope withthis change. In this paper an attempt was made to examine the workforcediversity and cultural diversity and discussed the role of IHRM and itschallenges in International Business and also how Inter country culturedifferences affect HRM with Indian perspective.Work Force Diversity -what it means?Work force diversity means those organizations in general and MultinationalCorporations (MNC’s) in particular, which are becoming more heterogeneousin terms of gender, race, and ethnicity. One of the most important and broad –based challenges currently facing these organizations is adapting to “people”who are different. The traditional “melting pot approach” to differences inorganizations conveniently assumed that people who were different wouldsome how automatically want to assimilate. But it is now increasinglyrecognized all over the world that employees do not set aside their culturalvalues and life style preferences when they come to work. The challenge (and
2also opportunity) for organizations, therefore, is to make themselves moreaccommodating these diverse cultural groups of people by addressing theirdifferent life styles, family needs, and work styles. However, the melting potassumption is being replaced in recent years by one that recognizes and valuesdifferencesWork Force Diversity –Management Implications:Work force diversity has important implications for management practices.Managers will need to shift their philosophy from treating everyone alike torecognizing differences and responding to those differences in ways that willensure employee retention and greater productivity – while, at the same time,not discriminating. Workforce diversity is a “doubled-edged sword”. It cutsboth ways. If positively managed, diversity can increase creativity andinnovation in organizations as well as improve decision making by providingdifferent perspective on problems. When diversity is not managed properly,there is potential for higher turnover, more difficult communication, and moreinterpersonal conflicts.Review of Literature:Dramatic increases in international activity in the last decade have raisedattention on the management of human resources in firms operating acrossborders. Much literature discusses IHRM in terms of how it differs fromdomestic HRM. Morgon (1986) discusses three factors:1. Type of employees (local nationals, expatriates, third country nationals);2. Countries of operations (host, home, other); and3. Human resources function operations (procurement, allocation, utilization).4. Others (Flokowski and Nath, 1990; Kidger, 1991; Gronhaug and Nordhaug, 1992) argues that IHRM differs from and is more difficult to manage than domestic HRM because of macro environmental factors such
3 as cultural, socio-economic, institutional, and political dissimilarities across countries. Schuler et al. (1993) define IHRM as, “human resource management issues, functions, and policies and practices that result from the strategic activities of multinational enterprises and that impact the international concerns and goals of those enterprises.” In a multicultural context, IHRM comprises four critical components : 1. A firm’s various environments or context (both inside and outside of the firm); 2. The IHRM function (activities of finding, allocating, developing and valuing human resources plus supporting systems and processes); 3. Employees involved in work that transcends borders (mode of international interaction. Level / type, and “source) and 4. Outcomes or contribution of HRM.These components of IHRM create a three-part framework or process ofdiagnosing organizational environments, designing and managing humanresources activities, systems, and processes in organizations that operateacross borders and evaluating IHRM’s contribution.In a multicultural context, IHRM function focuses on activities, polices andpractices of managing human resources. Four types of human resourceactivities include: Finding, allocating, developing and valuing employees.1. Finding consists of planning for, recruiting, and selecting employees (Kane and Stanton, 1991).2. Allocating includes issues relating to staffing, promoting, demoting, and transferring employees (Gregersen and Black, 1992).3. Developing employees embraces policies and practices associated with preparing employees for current and future jobs in terms of formal and informal training, development programmes, and career management (Evans, 1992).
44. Finally, valuing employees entails appraising, rewarding maintaining strong relations with, and assessing benefits and costs associated with employees (Waston, 1992;Pennings, 1993)Milliman et al. (1991) use organizational life cycle more specifically as ameans to asses what various units will need in term of IHRM practices.Firms and IHR managers must acknowledge the impact of external andinternal influences on the way IHRM is developed and managed. Dowling etal. (1994) contend that as firms grow or develop over time, they requiredifferent types of IHRM practices.Cultural Diversity and its Management:Management is no longer constrained by national borders. For instance,Exxon, a so-called American company, receives almost 75 per cent of itsrevenues from sales outside the United States. Toyota makes cars inKentucky; General Motors makes cars in Brazil; and Ford (which own part ofMazda) transfers executives from Detroit to Japan to help Mazda manage itsoperations. These examples illustrate that the world has become a globalvillage’. In turn, managers have to become capable of working with peoplefrom different cultures. The dictum in a multicultural context is “thinkglobally and act locally”.Cultural diversity from the point of multiculturalism management can beexamined at two levels – international diversity and intranational diversity.International level of analysis assumes that people from different countrieshave common characteristics that differentiate them from people in othercountries (cross-national differences). On the other hand, intranationaldiversity which synonymous with the tem ‘work force diversity’, recognizesthe importance of differences within any specific country.
5International Diversity:The familiar phrase “When in Rome, do as the Romans do” captures theessence if why it is crucial to understand international diversity. Thosemanagers who understand and appreciate cross-national differences and canadjust their managing styles appropriately when working with people fromother countries will be more effective than those who naively assumes “allpeople are alike.״Managerial styles and practices will have to be tailor-made to fit into the crossnational differences in a specific country. For instance the British protecttheir privacy and avoid asking personal questions. In contrast, askingpersonal questions in Greece is a sign of showing interest. In Denmark, theywould use professional titles when addressing people; but avoid it in Greecewhere such a formality is frowned upon. In Japan, all business transactionsbegin by the formal exchanging of business card; but knowledgeablemanagers know not to expect this practices in Italy. While August may belike any other month in most countries, managers should know not to dobusiness during this month in France. It should be noted that the British arevery prompt in sticking on to the schedules, managers who understandnational differences would not be wondered if an Indian turned up 20 or 30minutes late for an appointment.Intranational Diversity:From the above discussion it follows that it is relatively easier to say ”Whenin Rome, do as the Romans do” than it is to know exactly what it is that “theRomans do”. Managers should also understand the characteristics common topeople within a specific country in order to manage successfully in a globaleconomy.
6Multinational corporations (MNCs) maintain significant operations in two ormore countries simultaneously. They are a natural outcome of the globaleconomy. MNCs use their worldwide operations to develop global strategiesand gain sustainable competitive advantage. For instance, a photocopyingmachine might be designed in Toronto, have its microprocessing chips madein Taiwan, its physical case manufactured in Japan, be assembled in SouthKorea, and then be sold out of warehouses located in Melbourne, London, LosAngeles, and India.A global economy presents challenges to managers that they never had toconfront when their operations were confined to within national borders.They face different legal and political systems. They confront differenteconomic climates and tax policies. Besides, they must also effectively dealwith varying national cultures the primary values and practices thatcharacterize particular countries - many of which are nothing like those inwhich they have spent their lives.Sometimes, it is agued that the creation of a true global village is making theconcern over cultural differences irrelevant. It is predicted that in the longrun, the global village will become a single homogeneous culture – a worldmelting pot in which cross-cultural differences will all but disappear.Research demonstrates that organization strategies, structure, and technologiesare becoming more alike. However, there are still differences among peoplewithin organization in different cultures. In other words, culture continues tobe a powerful force in explaining a large proportion of culture–specific andcontingency approach in managing culturally diverse organizations. Since thevarious components of an organization–people, structure, task, technology,environment – interact in a highly complex manner, multiculturalismprospective in management intends to establish, develop and sustainsynergistic and symbiotic relationships among these components by adopting
7a cross-cultural approach to management. If people were becoming morehomogeneous, one could take a culture-free approach to management. Butsuch an approach does not appear to hold water at present owing to thefollowing reasons:1. There are differences in managing people at work across national cultures;2. Their differences explain a large proportion of the variance in attitudes, values, belief and behaviour pattern; and3. For now at least, and probably for a number for years to come, these differences are not decreasing at any significant rate. Despite the tremendous increase in cross-cultural communication, these continue to be unique country-specific traditions and customs that shape the attitude and behaviours of the people in those countries.Characteristics of Multicultural Organization:The true multicultural organization is characterized by core cultural valuesand an ongoing commitment to eliminate social oppression throughout theorganization. All members of diverse cultural and social groups are involvedin the decisions that shape the mission, structure, technology, psychologicaldynamics, and products and services of the organization.The foundation and point of departure for effectively managing diversity isthe development of a truly multicultural organization (Nemetz andchristernsen, 1996). A multicultural organization has been described byJackson et al. (1992) as one that1. reflects the contribution and interests of diverse cultural and social groups in its mission, operations, and product or service;2. acts on a commitment to eradicate social oppression in all forms within the organization;3. includes the members of diverse cultural and social groups as full participants, especially in decisions that shape the organization; and
8follows through on broader external social responsibilities, including supportof other institutional efforts to eliminate all forms of social oppression.Role of HRM and its challenges in International Business:When researchers asked senior international HR managers in eight largecompanies, “What are the key global pressures affecting human resourcemanagement practices in your firm currently and for the projected future?”The three that emerged were:1. Deployment. Easily getting the right skills to where we need them, regardless of geographical location.2. Knowledge and innovation dissemination. Spreading state-of-art knowledge and practices throughout the organization regardless of where they originate.3. Identifying and developing talent in a global organization and developing his or her abilities.How Intercountry culture differences affect HRM?Companies operating only within the borders of the United States generallyhave the luxury of dealing with a relatively limited set of economic, cultural,and legal variables. The United States is a capitalist, competitive society. Andwhile the U.S. workforce reflects a multitude of cultural and ethnicbackgrounds, shared values (such as an appreciation for democracy) help toblur potentially sharp cultural differences. Although the different states andmunicipalities certainly have their own laws affecting HR, a basic federalframework helps produce a fairly predictable set of legal guidelines regardingmatters such as employment discrimination, labour relations, and safety andhealth.
9A company operating multiple units abroad isn’t blessed with suchhomogeneity. For example , minimum legally mandated holidays range fromnone in the United kingdom to 5 weeks per year in Luxembourg. And whileItaly has no formal requirements for employee representatives on boards ofdirectors, they are required in Denmark for companies with more than 30employees. The point is that the need to adapt personnel policies andprocedures to the differences among countries complicated HR managementin multinational companies.For example consider the following :American, European and Asian Experiences:The findings of Hofstede (1991), Trompenaars (1993), and other have made itclear that management theories and practices are constrained by nationalcultures. National culture shapes behaviours and structures the perceptionsthat managers have of the world. Managers are guided by implicit theoriesof managing and organizing that can neither be divorced form society norguided by universals ( Hickson, 1993). HRM impacts directly on culturallyspecific ways of doing things and is buttressed by national institutions andvalue system, so HRM researchers need considerable historical and culturalinsight into local conditions to understand the processes. Philosophies, andproblems of national models of HRM (Hofstede, 1993).Countries differ widely in their cultures – in other words, in the basic valuestheir citizens adher to and in the ways these values manifest themselves in thenation’s arts, social programs, politics, and ways of doing things.Cultural differences form country to country necessitate correspondingdifferences management practices among a company’s subsidiaries. Forexample, in a study of about managers from Hong Kong, the People’sRepublic of China, tended to be most concerned with getting the job done.
10Chinese managers were most concerned with maintaining a harmoniousenvironment, and Hong Kong managers fell between the se extremes.10 Aclassic study by Professor Geert Hofstede identified other internationalcultural differences. For example, Hofstede says societies differ in powerdistance – in other words, the extent to which the less powerful members ofinstitutions accept and expect an unequal distribution of power. Heconcluded that acceptance of such inequality was higher in some countries(such as Mexico) than in others (such as Sweden).Studies show how such cultural differences can influence HR polcies. Forexample, compared to U.S. employees, “Mexican workers expect managers tokeep their distance rather than to be close, and to be formal rather thaninformal. “ Similarly, compared to the United States, in Mexicanorganizations “formal rules and regulations are not adheredto unless someone of authority is present.” In Mexico, individualism is notvalued as highly as it is in the United States. As a result, Some workers don’tplace as much importance on self-sufficiency. They tend to expect to receivea wider range of services and benefits (such as food baskets and medicalattention for themselves and their families) from their employers.In fact, the list of cultural differences is endless. In Germany, you shouldnever arrive even a few minutes late and should always address senior peopleformally, with their titles. Such cultural differences are a two-way street, andemployees from a broad need orientations avoid the culture shock of comingto work in the United States. For example, in the Intel booklet “ Things YouNeed to Know About Working in the U.S.A.,” topics covered include sexualharassment, recognition of gay and lesbian rights, and Intel’s expectationsabout behaviour.
11Reanalyzing his IBM data for European subsidiaries along the four statisticaldimensions of individualism, uncertainty avoidance, power distance, andmasculinity, Hofstede (1993b) pursues two themes : first, culturally Europedoes not exist; and second, Europe is becoming a cultural laboratory for theworld. Europe is not becoming more similar but is, rather, learning tocollaborate. Cultural accommodations, not assimilation, is the key tounderstanding European management practices.European managers approached during 1990s with a number of differentcultural assumptions about some of the most value-laden aspects of HRM,such as the role of collectivism, the definition of managerial skills, attitudestoward authority, need for interpersonal feed back, assumptions about rewardsand equity, and the social and cognitive constructs that mangers use to thinkabout organizations and their careers (Sparrow, 1995). The most obviouslinks between national culture and HRM in a country are to be found throughthe following mechanisms:1. the attitudes and definitions of what makes an effective manager and their implications for the qualities recruited, trained, and developed.2. the giving of face-to-face feedback, levels of power distance, and uncertainty avoidance and their implication for recruitment interview, communication, negotiation, and participation processes.3. Readiness to accept international assignments and expectations of what will get you promoted4. Expectation of managers – subordinate relationships and their implications for performance management and motivation.5. Pay systems and differential concepts of distributive justice, socially healthy pay, and the individualization of reward.6. The mindsets used to think about organizational structuring or strategic dynamics
12Empirical studies in the recent past reveal that significant differences stillexist between European countries in terms on centralization and verticalhierarchy, role of flexible work practices, emphasis on rewarding customerservice, rewards for innovation and creativity, and an emphasis on corporateresponsibility (Sparrow, Schuler, & Jackson, 1994). Britain, Germany, andItaly, however appeared to be on a path of convergence in their overall patternof HRM, although France can be expected to continue to diverge. A largenumber of common emphases and convergent areas of HRM were emergingsuch as: promoting an empowerment culture, an increased role ofcommunication, the need to improve horizontal management processes, theuse of IT to help structure the organization, the role of recruitment, theimportance of training and career management, and the increasing link beingforged between pay and performance.Multiculturalism and IHRM – Indian Perspective:Compared with U.S. concepts for HRM, an Indian perspective needs to takethe following into account:1. More restricted levels of organization autonomy in HRM decisions such as recruitment, dismissal, and training:2. A history which has produced a lower exposure of organizations to market process;3. A greater emphasis on the role of the group over the individual;4. The increased role of social patterns (trade unions and employee representatives) in the management of the business and the people within it.
13Indian managers and academic researchers need to appreciate four major setsof factors:1. Cultural factors, such as national understanding of distributive justice and manager – subordinate relationship.2. Institutional factors, including the scope of labour legislation and social security provisions and role of trade unions.3. Differences in business structure and system, such as the degree of state ownership and fragmentation of industrial sectors.4. Factors relating to the roles and competencies of HRD professional.Similarly, there is no such thing as a single European pattern of HRM, and,marked differences exist between countries in terms of their practice (Sparrowand Hiltrop, 1994). The field of comparative HRM is long on description butshort on analysis.Conclusion: IHRM- Need for contingency approach:These discussions lend credence to the fact that a multicultural, multinationalorganization cannot impart and implement “best practices” in HRM withoutsuitably modifying or aligning them to the firm’s internal and external culturalenvironment. The belief that there is an identifiable set of best practices formanaging employees (the universal approach to IHRM) that have universal,additive, positive effects on organizational performance seems to be a mythrather than a reality. There is, of course, one level at which IHRM isuniversal. All organizations operating across the borders have to utilize, andhence to manage, human resources. In the ultimate analysis it could be statedthat IHRM philosophy, policies, procedures, programmes, and practiceswould substantially influence the organizational performance when alignedwith nation and culture – specific IHRM strategies, there by supporting acontingency view of IHRM in the multicultural context.
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16Author’s ProfileProf. Dr. Uday Salunke Director - Welingkar Institute of Management isa mechanical engineer with a management degree in Operations, and aDoctorate in Turnaround Strategies. He has 12 years of experience in thecorporate world including Mahindra & Mahindra, ISPL and other companiesbefore joining Welingkar in 1995 as faculty for Production Management.Subsequently his inherent passion, commitment and dedication toward theinstitute led to his appointment as Director in 2000. Dr. Salunkhe has beeninvited as visiting fellow at the Harvard Business School, USA and EuropeanUniversity, Germany. He has also delivered seminars at the Asian Institute ofManagement, Manila and has been awarded "The Young Achievers Award-2003" in the field of Academics by the Indo American Society recently.