Diversity and business performance

Business Strategy, Organizational Culture and Diversity

Does diversity have a positive, negative or neutral impact on organizational performance?  What are the conditions that lead to success or failure?  My previous article introduced the research on cultural diversity and team performance.  But now, I introduce research on broader implications of diversity and organizational culture. Specifically, do cultural difference impact business performance?  Is there a relationship between strategy, organizational culture and diversity?  And what does that mean for Cross Cultural Leadership?

So I would like to introduce my research paper:  Cultural Diversity and International Business Strategy (2010).

In this project, I integrated my finding on culturally diverse teams with research in the fields of International Business Strategy and Human Resource Management.   And as I discovered, there are many different levels and inter-dependencies between strategy, organizational culture and diversity.  So I grouped my research into several categories as follows:

The relationship of National culture on team performance

As individuals within a Nation generally share history and language, we might expect this to influence the development of common values and perceptions within each culture.  Based upon theories such as Hofstedes’ Dimensions of Culture, we might expect that differences in:

  1. Uncertainty avoidance
  2. Power distance
  3. Task/relationship orientation
  4. Individualism/collectivism

These differences in values within a cross-cultural team could lead to difficulties in communication.  And perhaps increase conflict due to differing expectations and interpretations.  On the other hand, these differences may also lead to advantage through cultural arbitrage and enhanced creativity.

The relationship between the individual, their environment and work performance

My literature review reveals that behaviour (and ultimately the performance) of organizations are guided by the underlying values on individuals.   While some firms may value efficiency and high productivity, others may value relationships and creativity.  So we would expect that by imposing strategy which is inconsistent with the organizational culture, conflict and decreased performance may be experienced as individuals experience difficulties in adaptation.

Therefore, a firm considering international entry in to a foreign environment must consider not only the economic and legal implications of their strategy, but also the Human Resource factors which may have significant impact on successful implementation.

Alignment of Cultural Diversity and Organizational Culture

Multinational Enterprises (MNEs) must consider the “target culture” required for strategy implementation.  And then they must consider the impact of differences in cultural, organizational and personal values.   We would expect that performance increases where organizational culture is aligned or complimentary to the individual values.  Conversely, we would expect that performance decreases where values conflict.

Therefore, if the goal of the organization is to implement Parent cultures and processes, they must consider the National and Organizational Culture differences between the Parent and Subsidiary.  In particular –  complimentary or conflicting values.

For example, if the goal is to develop global knowledge, MNEs must consider the target culture of the new venture and recognize that alignment of values between partners or Parent/Subsidiary will facilitate integration and effectiveness.

In either case, organizations must ensure that staffing practices, organizational structure, control, performance measures and reward systems are aligned with desired strategic outcomes, and are realistic within operational constraints.

What Does This Mean for Cross Cultural Leadership?

While my research focused on larger Multi-National Enterprises, the concepts can certainly be applied to other types of organizations.  In particular, we need to be consciously aware of our business strategy and the type of organizational culture (“target culture”) which supports the strategy.  And then consider the role of diversity in in that target culture.  From there, we can begin to align our processes and structure to develop our desired organizational culture.

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