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The purpose of this report is to review all literature available on workforce diversity and to bring forth the understanding and complexity of this issue. It is to discuss different views and perspectives of researchers of both who favour diversity among employees and consider it as key factor in the success of multinationals.
With HRM perspective what is its significance of workforce diversity for MNC's and how HR professional coup with this issue and how they mould heterogeneous groups into successful cohesive teams and vibrant corporate culture.
Why diversity has become important for multinationals? How they manage it? What are the benefits of diversity and what are the disadvantages associated with it? Why it has become essential in context of international expansion and globalization? These questions have to address the issue of diversity generally in this report and diversity at Ford Motors as a particular case.
Today people around the world are so much socially connected with each other as never before and these social networks and connections exist just because of latest developments in information technology. The people have access to the latest information regarding to different happenings and incidents within few seconds and clicks. They are well aware about others' cultures, trends and living styles. This radical change in the flow of information deeply impacted on the global business environment. Across the border and cross cultural transactions are increasing. The world businesses practices are taking place in a multicultural environment in which national cultures have their significance and they need to integrate into a single corporate culture in order to bring team work and harmony among diverse workforce in MNCs. The changing work environment of MNCs has its impact on operational requirements to find talents, to generate economic values and to fulfil the needs of customers with multicultural backgrounds. Such kind of working environment requires unprecedented level of interaction, coordination and cooperation among the individuals of diverse workforce who have diverse cultural values, beliefs and perspectives.
Globalization has changed the world businesses operation practices. The multinational corporations are exploring the new markets and establishing their operation setups there in order to get competitive advantages and capturing market share. As MNCs are going to operate in across the borders, the International Human Resource practices are changing. One of the major challenges for HR professionals is to deal with the issue of work force diversity that persists due to the cultural differences between the home and the host countries' cultures. The domestic HRM is unable to address this challenge. This report will focus on the issue of cultural differences that influence the process of formulation and implementation of HRM policies and strategies in MNCs. In this dynamic global business environment there is a requirement to develop flexible policies and practices that are effective in multicultural business environment and settings (Sims 2002). This study will help to understand whether workforce diversity makes the organizations more productive who embrace it and what is its impact on those organizations that resist against diversity. If workforce diversity brings progress in the organization than what are factors behind this that lead to this progress and why these factors are important for MNC's to operate in cross-cultural settings.
Diversity at work place has both opportunities and challenges for management. It has prime importance for HR practitioners that how they manage individuals opportunities of divergent perspectives to create and interpersonal collaboration among the team members. They must understand the new shape of the business environment and to manage the diversity for the best benefit of the organization and as well as for the people belong to that organization.
Ford Motors is operating in many international markets in order to compete with its competitors. It has her business settings in USA, Latin America, Asia Pacific and Africa. In international setting the HRM becomes more heterogeneous and it involves constantly changing perspectives in order to successfully manage the diverse workforce with multicultural backgrounds. Diversity at workplace has ample opportunities of success for the organization and for its people as well. Ford Motors developed very lucrative HR policies to address the issue of diversity and it has changed diversity into success and innovation for the company.
2.1- Literature Reviews:
Different researcher and writers have different view on workforce diversity. Some consider it vital for the overall success of organization and they argue that in the era of globalization when firms are expanding across the border and multicultural employees are getting together at same platform. The writer who favour this thesis, argue that organizations who embrace diversity they become more innovation and productive and they suggest that organizations' should welcome it.
There is another group of researchers who have who see workforce diversity with an opposite perspective. They think that it increases cost and creates conflicts in the organization and it becomes difficult for the management to handle diverse people.
According to Tomervik (1995), workforce diversity based on following basic ideas, first, broad range of differences in the employees, age sex, ethnicity, demography, religion and education. Second, the meaningful aspects of diversity are how affect the individual and the organization. Third, the broader definition of diversity change within organization such as in management style, human resource and approaches, and there is an emphasis on communicating a concept of diversity as more than race, gender, affirmative affection and equal employment opportunities. There is no one definitive definition that fully describes the broad range of differences diversity includes, the evolutionary of the process it represents, and the far reaching impact it has on individuals and corporations (Tomervik, 1995).
In today business environment the changing workforce is one of the most important and significant challenge facing the organization. According to Morrison (2000), "as the companies are relaying on more and more global strategies, they require more and more global leaders," Morrison (2000).
When people of different back grounds and cultural values get together in an organization, the differences of opinion occur and there is a need to manage these differences efficiently and effectively. Graen and Hui (1999), argue that in order manage cross national differences effectively, organization need to develop global leadership by enhancing the level of trans-cultural skills and using these to help resolve the complexity of cross cultural management.
The work force diversity management attain the importance and attention with globalization and in the business environment where organizations are expanding their business across the borders to serve global markets and the customers across the globe. It's very important to deeply understand divergence in work force, because it's more complex than what we see at surface level. It gives an understanding to HR professionals that how they can stream line of teams of diverse team members. During the last decades of 20th century, the organizations witnessed new trends in their human capital management in the form of workforce diversity mainly because of liberalization and globalization of markets (Jain & Verma, 1996).
Broadly speaking the basic purpose of workforce diversity management is to provide a systematic and planed procedure to the organizations to recruit and select and promote a heterogeneous mix of work force into successful and cohesive resource. Different theories and techniques have been developed by HR professionals, HR trainers, diversity consultants and academics to address this issue (saji, 2004). Diversity has both advantages and disadvantages for the organizations. It can improve organizational effectiveness. The organizations that have developed systematic and planed commitment and reputation for managing work force diversity, they usually attract the best personnel (Carrel et al., 2000). Managing diversity refers to enable the diverse employees to perform in a cohesive and in an equitable work environment where there is no individual or group has an advantage or disadvantage (Torres & Bruxelles, 1992).
According to Triandis et al. (1994), "managing diversity means changing the culture, that is, to adopt the standard operating procedures. It requires data, experimentation and the discovery of the procedures that work best for each group. It is more complex than conventional management but can result in more effective organizations" (p.773).
Thomas (1992) describes that diversity management is to empower employees. Diversity management lay down approaches that are philosophically broad enough to include all aspects of diversity. Henderson (1994a) links managing diversity to meet the organizational objectives. According to him it focuses on managerial skills and policies that are needed to maximize every employee's contribution towards organizational objectives efficiently and effectively. There are important factors that have shaped and still continue to shape diversity (Simons, 1992). Among these factor, International business is the major and pioneer factor that valued it. In international business diversity has emerged as a critical point for the success and survival of the organizations. Multinational Corporations are compelled to formulate and implement policies and strategies that would help them to capture and retain diverse multi domestic consumer markets throughout the world (Fernandez, 1993). In order to serve in such kind of multi domestic markets they are also required to recruit and retain a workforce with diverse back grounds that would meet diversified requirements of customer in such markets.
In the last couple of decades diversity has become a hot issue in global business environment for multinational corporations and it is one of the most difficult and challenging issue for MNC's to manage diverse work force. Conventional ways, to deal with demographic differences, were related to team level out comes (Williams & O'Reilly 1998). It is the prime importance, for the managers who deals with human resource both in public and private sectors, to have the courage and ability to understand the complexity and nature of diverse workforce. In the modern business environment the organization are forced to welcome diverse workforce in order to operate successfully in diverse markets, but on the other hand there are still other organizations that considered it a legal issue. Historical perspective of the workforce diversity describes it as to provide a base of legal defence against any discriminatory convictions and just show a representation. But this concept has radically changed now because many renowned organizations seek that workforce diversity has benefits for the organizations. Now business professional considered that diverse workforce provides competitive edge because of innovative views of thinking and doing things come through different ideas and opinions. It brings creativity and innovation which boost up the performance of the organization (Allen et al., 2004). Early and Moakowski (2000) argue that it has potential organizational benefits and it brings greater creativity and innovation in HRM development. It's the responsibility of the management to consider wide range of diverse behaviours, attitudes and values of staff and asses the potential ways in which staff of different socio-cultural backgrounds could interact within organization (Adler, 2002) because its very helpful to develop organizational development process both in the context of culture and behaviour and also to achieve the potential benefits. According to Watson et al. (1993), heterogeneous and culturally diverse groups are more productive and effective both in interacting with others and job performance as compare to homogeneous working groups. These benefits took place when a diverse group has been performing together for a specific span of time. The corporation that are working with the diverse work force can provide better services because they have the better ability to know and understand the needs of the diverse customers. The work force diversity issue will get more importance as the economies are shifting from manufacturing to services, because in a service economy communication and interaction among the people are essential and play a pivotal role in the success of business (Wentling and Palma-rivas, 2000).
Beside the benefits of Workforce diversity has serious challenges for the organization generally and HR departments particularly. Research on work force diversity predicts that a greater diversity can create a higher level of dissatisfaction and turn over (Miliken and Martins, 1996). It increases the cost of training that is associates with training programs to deal the issue of diversity. These programs develop the ability among diverse individuals to deal with conflicts and prejudices in a professional way (White, 1999). It's very important for HR professionals to deal with issue of diversity effectively because of mismanagement diversity can have long lasting effects on employees performance and satisfaction. The individuals in an organization who perceive themselves as a valued member of their organization they work hard and show a higher degree of commitment and innovation. The other side of the picture shows that the minority groups usually have the sense of deprive and less valued. In such cases an unfair treatment from management side can be resulted in the form of negative consequences. This leads to reduce the level of motivation, satisfaction and job performance. When an organization does not give importance to workforce diversity, a clash of opinion can emerge and in such conflicting environment neither the corporation nor its employees would be able to realize their actual potential (Goetz, 2001).
3.1- Theoretical Analysis:
Evolutionary changes are taking place in multinational corporation structures with the extent of global business competition increasing. The organizations are forced to restructure themselves and their systems as they position themselves to compete with other organizations within their specific industry both in home market as well as in foreign markets where they are operating. These structural transitions in MNC's have HR implications of culture and diversity of employees in international business environment.
Ford is the second largest auto mobile manufacturer of the world and its operating in more than thirty four countries across the globe and it has a diverse work force with more than 62 nationalities with different ethnic, religious, cultural and demographic backgrounds having a very diverse workforce, the company is developing its policies to manage its diverse work force in accordance with the view that it brings innovation and competitiveness (Allen el al., 2004). And it considers that a heterogeneous and culturally diverse (Watson et al., 1993) groups are more productive and effective as compare to the homogeneous working groups.
Henry Ford and the family of Ford employees have welcomed and valued workforce diversity and Ford is fully considered as first company who reflects the growing diversity in its workforce. It is among the top 50 companies of the world who have highly diverse workforce. Bill Ford said valuing diverse employee backgrounds and skills makes the company more responsive to the market place. "In the end Ford Company is more success full. And Ford employees, our customers, our share holders, and our business associates, they all benefit, "Ford said. "In other words, diversity is not a favour to the world. It's a richness that strengthens us as a company and gives us a competitive advantage." Femandez (1993) argues that MNC's are forced to have a diverse work force in order to serve in multi domestic customers. Alex trotman, chairman and CEO of ford motor company, describes to follow the same guide lines of Femandez (1993) and says "it's very important for our people to understand the different consumer tastes around the world. Our performance is global and our work force has to global."
The Ford Motor key strategy of workforce diversity is not just representation but inclusion and involvement at all functional and decision making levels. It provides opportunities to everyone in the organization to participate that helped to bring a change in organizational cultural. In Ford motors, African and Asian served and still many professional are serving at key positions with different cultural and ethnic back grounds. Company is developing a global leadership with the view to implement global strategies successfully in international markets as laid down by Morrison (2000).
According to Miliken and Martins (1996) greater diversity can create a higher level of dissatisfaction and turn over, it contradicts in the case of Ford where we see the company has keen focus on welcome workforce diversity and it is developing strategies that embrace diverse employees, being among the top diverse workforce employer in the world, Ford Motor running its global operations in different cultural settings. Ford Motor is a global business where there are lot of diverse talented people working at the same settings and their performance is measured by their inclusion. The top management of Ford consider that more the diversity we haveÂÂÂ, the better we able to deliver to our customers what they expect from the company.
Ford management has very intelligently linked its diversity strategies with the performance assessment structure of the organization. Managers are also assessed on the basis whether they have balanced and appropriate representation of minority ethnic groups in their departments. This linkage between diversity and performance assessment enables the policy makers to review each manager's work plans with a same criteria. Surinder Sharma, diversity director for Ford of Europe, states, "The inclusion of diversity targets into managers' scorecards ensures that responsibility for delivering diversity is a mainstream business issue for line managers, and not just contained within the province of HR personnel and the diversity teams".
Ford has a very comprehensive diversity monitoring system to assess the progress on equal opportunities to its employees. Employees' ethnic origin is regularly monitored to evaluate the effectiveness of company's diversity strategy. Ford is using Balanced Score Card to measure and monitor diversity. It has included different areas of business like policy and planning, selection and retaining, corporate image and citizenship in diversity balanced Score card. This Score Card helps the company to integrate diversity strategies into action plans at all levels and to check the level of diversity achievement in all areas. This practice is being exercise yet in Briton only. This diversity management process provides company with a clear picture about its policies, targets and achievements and also it provide an opportunity of organisational learning and to review its strategies.
Researchers treat workforce diversity as a complex and difficult task to manage. They consider that it increases conflicts and prejudice among the individuals of the organization. Difference of opinion among two minority groups create a lack of acceptance for each others comments and it results in the form of stereotyping and cultural clash. And as a consequence organizational productivity suffered. But on the other hand Ford is very successfully addressing this issue and it has brilliantly diverted all differences into innovation and prosperity at the same time when many organizations are scared to face the challenge of diversity.
There is no single definition that fully covers all the characteristics of diverse population that it brings to workplace. In a broader sense workforce diversity is inclusion and recognition of all employees in an organization. There are many factors in global business environment that forced MNCs to bring diversity in their workforce. Some organizations welcome it and some resist but in future those organizations will be more successful who welcome diversity in their employees.
There are many forces that are driving diversity in organizations. In case of MNCs, a closer collaboration is required between headquarters and subsidiaries in order to bring smoothness in operations and to create standardization while maintaining an identity of local culture and values. In international business environment increasing interaction of employees with multicultural backgrounds have serious implications for management. The dynamic changes in the composition of employees have critical significance in context of international HRM. HR professionals and business leaders must understand this composition of diverse workforce and its consequences for the organizations as more and more MNCs becoming multicultural in nature.
It's very clear that in future global business success, diverse workforce will play an important role and organizations with greater acceptance of diversity will more productive. Though diversity management has costs for the organizations with reference to training programs but its benefits are greater than its cost. Its responsibility of HR managers to bring harmony and integration among more heterogeneous characteristics through their strategies and training programs for the best benefits of individuals as well as for the organization. Ford is doing excellent job in his regards. Ford management has developed different training programs and strategies to address this issue and it highly valued its diverse workers through their recognition and inclusion. Ford management consider diversity as a symbol of success and it measure and monitor it regularly and they are operating very successfully in African and Asian markets which shows efficiency and commitment of their HR department. Now when world has become a global village and it will be more closer in future so MNCs should accept diversity as a reality and they should not only welcome it but recognize it at all levels because it has become a key factor in future success and they only need to bring uniformity among their diverse workers while maintaining their local interests.