Effect & Implications of Understanding Cultural Diversity

Better decision making

Diversity is not government mandated. But managing and valuing diversity gives an organization a competitive edge.  According to Simmons, Clemons, and Bennett, “The more diverse your workforce, the better your decision-making”

Decision-making groups that are characterized by higher levels of diversity are more likely to generate a higher number of possible solutions and consider a higher number of alternatives before finalizing their decisions and such processes are generally associated with higher quality decisions.

It enhances the creativity and problem-solving abilities of the organization. Once an organization can incorporate difference, previously unexplored talent and energy will be focused on achieving organizational goals.

Future legal requirement

It is a legal requirement. In the U.S., equal opportunity is supported through laws such as the Civil Rights Act, Equal Pay Act, Pregnancy Discrimination Act, Age Discrimination Act, and Americans with Disabilities Act. Organizations, especially the ones that receive government funding, maintain affirmative action programs in an effort to comply with these laws (Cox).

This is another reason why organizational cultural diversity is important. It may be more economical in the long term. When an organization is perceived as not complying with equal opportunity laws, fines and costly litigation are often the result. In the long run, it may be more economical to invest in incorporating multiple perspectives in an organization before the need for litigation arises.

New opportunity

According to Alpert “The workforce will be increasingly composed of “minority” populations.  By the year 2005, projected changes in the ethnic composition of the American Workforce include 51% of new entrants into the workforce will be minorities.  Looking at women alone (minority and white) will make up 62% of new entrants.  These demographic changes will significantly alter the composition of the population as a whole and the workforce.  In addition, these changes will have a major affect on who has “buying power” and the definition of the markets that will provide growing business opportunities. IBM, for example, accounts its dramatic expansion in minority markets to the promotion of diversity within its own workforce resulting in a virtuous circle of growth and progress.

Human Resource Issue

Employees are an organization’s most valuable asset. These are the people who are going to carry out strategic plans, business plans and company policy thereby making them the most precious possession within the organization. Personal qualifications, characteristics and talents make employees the bloodline of the company, regardless of age, gender, ethnicity or sex. What an employee contribute to the company with respect to experience, thoughts, opinions and actions is vital to the business environment.  Because of this, retaining employees from diverse backgrounds is critical.  Evidence suggests that a diverse workforce leads to profitability and minimizes the cost of employee replacement.

According to C. K. Prahalad, and G. Hamel, “Estimates of the cost of replacing an employee vary, but a good rule of thumb is that replacing an employee costs four times that worker’s salary.  These costs include such factors as the time involved in recruitment, hiring and training, as well as the dollars lost to production while the position is unfilled.  Such calculations, moreover, do not take into account the costs of lost accumulated company knowledge and the current and future potential of contribution of the employee who has left.  If turnover is high, poor morale also increases the real cost of attrition.

Measuring how diversity contributes to an organization’s profitability raises difficulty, but evidence shows there is a link between profitability and a sound diversity program. 

Conclusion

Although some people think that diversity does nothing but create problems and challenges, it offers remarkable benefits. If the corporate society does not address the issue by learning how to manage diversity, they will fail.

As demographics continue to change, the importance of successfully managing workplace diversity will continue. Ignoring diversity within organizations does have its consequences.  The inability to manage diversity in the workplace can be extremely harmful and costly to a business.  Many aspects of business can be damaged with this attitude resulting in discrimination suits, litigation time and money, legal fees/settlements, high employee turnover and a negative community image.  Furthermore, productivity, morale and the organizations’ ability to recruit high quality individuals will suffer.  All of these aspects can be detrimental to the success of an organization. Supervisors, managers, directors and leaders should educate themselves comprehensively so that they can be role models for their personnel.