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THE IMPACT OF CULTURAL DIVERSITY ON ORGANIZATIONAL PERFORMANCE

CHAPTER ONE

1.1    INTRODUCTIONAdvances in technology and the advent of a global economy bring the people of the world closer together than ever before. Business has become global and in the next 15 to 20 years, work will be shaped globally by demographic changes, technology, innovation and economic expansion (Salami, 2010). Diverse workforce (diversity) refers to the co-existence of people from various socio-cultural backgrounds within the company. Diversity includes cultural factors such as race, gender, age, colour, physical ability, ethnicity, etc. (Kundu and Turan, 1999). Diversity includes all groups of people at all levels in the company. Diversity requires a type of organizational culture in which each employee can pursue his or her career aspirations without being inhibited by gender, race, nationality, religion, or other factors that are irrelevant to performance (Bryan, 1999). Increasing globalization requires more interaction among people from diverse cultures, beliefs, and backgrounds than ever before. People no longer live and work in an insular marketplace; they are now part of a worldwide economy with competition coming from nearly every continent. For this reason, organizations need diversity to become more creative and open to change. Therefore maximizing and capitalizing on workplace diversity has become an important issue for management today. Since managing diversity remains a significant organizational challenge, managers must learn the managerial skills needed in a multicultural work environment. Supervisors and managers must be prepared to teach themselves and others within their organizations to value multicultural differences in both associates and customers so that everyone is treated with dignity.Diversity issues are now considered important and are projected to become even more important in the future due to increasing differences in the population of many countries. Companies need to focus on diversity and look for ways to become totally inclusive organizations because diversity has the potential of yielding greater productivity and competitive advantages. Managing and valuing diversity is a key component of effective people management, which can improve workplace productivity. Unmanaged diversity in the workplace might become an obstacle for achieving organizational goals. Therefore diversity can be perceived as a “double-edged sword”.The diverse workforce has become a reality today. The impact of cultural diversity varies with the type of environment and firm’s overall strategy. As more and more number of firms move from domestic, multi-domestic, multinational strategies to operating as a truly global firm, the significance and impact of cultural diversity increase markedly (Adler, 1997).Management of cultural differences has become more important for creating advantages and getting competitive edge. Managing diversity means enabling diverse workforce to perform its full potential in an equitable work environment where no one group has an advantage or disadvantage (Torres and Bruxelles, 1992). Dynamic companies look for people who are different from us because the diverse workforce may bring different talents, interests, and viewpoints (Simmons, 1996). The organizations which failto embrace diversity effectively and do not take a holistic approach to eliminate discrimination and injustice will adversely affect both employees and customers. Organizations must concentrate on holistic strategies that address broader human resource issues, and value diverse employees. This is because “as globalization, technological imperative, the extent to which a nation manages the challenges of diversity will determine innovation and adjustments related to knowledge-driven economy become more its social and economic success in the 21st century (Salami, 2010).”

1.2 RESEARCH PROBLEM

Over the past few decades, a substantial body of research has been undertaken to examine the relationship between cultural diversity and Organizational outcomes.  Research has produced mixed, and often contradictory, results. Most qualitative reviews of the field of diversity look at all dimension of diversity, including gender, age, and function, as well as culture and ethnicity. These reviews conclude that studies’ results are inconsistent with each other (e.g., Harrison, Price, & Bell, 1998; Joshi &Roh, 2007; Kirkman, Tesluk, & Rosen, 2004). This has created a gap that needs to be filled.Moreover, organizational leaders become embodied in organizational policies and practices that systematically disadvantage some employees. In fact, some scholars argued that  if left un-managed, employee cultural diversity is more likely to damage morale, increase employee turnover, and cause significant communication problems (Loriann and Carol, 2007; Jackson, 1991; Jehn et al., 1999; Tsui, et al., 1992; Zenger and Lawrence, 1989), in Eugene et al., (2011). The above mentioned negative effect of diversity is prevalent to organizations today, but requires solutions for organizations to perform optimally. This Project therefore seeks assess the extend to which diversity programs can enhance productivity and promote competitive advantage.

1.3 RESEARCH OBJECTIVE

The general objective of this study is to determine the impact of cultural diversity and organizational performance. The specific objectives are stated bellow:1        To determine the relationship between Age diversity and organizational performance.2        To examine the relationship betweenEthnic diversity and organizational performance.3        To assess the relationship between Gender diversity and organizational performance4        Todetermine the relationship between educational background diversity and organizational performance.

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