Blog 2: The Challenge of Managing Diverse Teams

This blog will discuss the advantages and challenge in managing diversity, the importance of this skill in Finance industry as well as how manager can use the knowledge to manage diversity effectively.

Managing Diverse Team: A Double Edged Sword

“Research has consistently shown that diverse teams produce better results, provided they are well led. The ability to bring together people from different backgrounds, disciplines, cultures, and generations and leverage all they have to offer, therefore, is a must-have for leaders”

(Ibarra and Hansen 2011: 71)

Currently, there are 8 million people or 14% of UK population is from ethnic minorities, and accounted for 80% of UK’s population growth (dailymail.co.uk, 2014). The statistic shows how the dynamic keep on changing, in which it will affect global economy. Thus, managing diversity within organisation becomes a very interesting topic to be discussed.

Analysis from Hunt, et al (2015) stated that the greater ethnical diversity in companies is 35% more likely to have financial return above the industry medians, whereas gender-diverse company has 15% likelihood.

Figure 1. Correlation Between Diversity and Company’s Financial Performances

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Source: Hunt et al (2015)

Furthermore, the research learned that diversity within organisation benefited the company shown in below table:

1.     Have advantage in talent and recruitment

 

Company secure access to more pool of talent, gain a competitive recruitment advantage and improve global relevance

 

2.     Improve customer orientation

 

Company react more effectively toward market shift and customer needs. Moreover, they will be able to respond the market development more quickly and creatively

 

3.    Increase employee’s satisfaction

 

It increases employees’ positive attitudes and foster good behavior within organisation.

 

4.     Improve decision making

 

Diversity brings different and less biases views, which enables objectives and alternatives to be explored more effectively

 

5.     Enhance company’s image

 

Company that empowers diversity will show their open-minded nature, and boost company’s impression.

 

 

However, another study argues that diversity between organisational members will bring social categorisation, which resulted in intergroup biases. This may disrupt information elaboration in which the member reduce willingness to share and discuss information, have tendency to see the diverse other as less trustworthy and pay less attention to diverse point of view (Nederveen et al, 2013). Moreover, people from different cultural backgrounds may have different values, priorities, perception, information-processing method, which leads to the difficulties for managers to assess the people with correct task, engage with them, as well as giving the information the correct way (Ely and Thomas, 2001; Nederveen, et al, 2013).


Is Managing Diversity Important in Finance Industry?

“The ability to bring together people from different backgrounds, disciplines, cultures, and generations and leverage all they have to offer, therefore, is a must-have for leaders”

(Ibarra & Hansen 2011: 71)

Miller and Tucker (2013) stated that although minority group in has increased their representation from 11.1% in 1993 to 17.4% in 2008 and 19% in 2011, the overall workforce diversity in management position in Financial Industry did not change substantially.

Figure 2. The Diversity in Financial Service Industry Management Level from 1993 to 2008

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Source: Miller and Tucker (2013)

Moreover, UK Financial service sector experienced diversity gap in which only 19% of UK contractors in the industry are woman, much lower compared to Italy (25%) and Spain (33%) in 2014 (ibtimes.co.uk, 2014).

Figure 3. Proportion of Female Contractors in Finance Sector

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Source: ibtimes.co.uk (2014)

The need of more diversity in Financial Service industry, however, is important as it will help the company to achieve its full strength and potential. Moreover, recent financial crisis has put focus and attention on financial industry’s commitment to workforce diversity (Miller and Tucker, 2013). In my previous experience working in one of the audit firm in Indonesia, even though there is only little diversity within my company, it has bring advantages to our whole division since it brings new perspectives, knowledge and dynamic into the team. I believe that more diversity within the company will bring further advantages.

 

How a Manager Uses the Knowledge of Diversity to Produce Better Results?

As discussed above, it is important for managers to be able to utilise diversity to bring benefit for the company. One of the very useful models that can be used by manager to analyse and determine individuals’ value in workplace based on their culture is Six Dimension Model by Professor Geert Hofstede. This will help managers to be able to form an effective team and use correct approach to each team member.

In this blog, I’ll use an example of Indonesia, my home country, United Kingdom and India, as comparison in Hofstede’s Cultural Dimension represented in below diagram. I choose United Kingdom since I’m currently studying in London and has many interaction with English people, whereas I choose India because in my class, the majority of the students are from India, and I’ve had worked in group with many friends from India since term 1.

Figure 4. Hofstede’s Countries Comparison Between Indonesia, United Kingdom and India

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Source: geert-hofstede.com (2016)

A huge difference can be seen in Power Distance, which is high in Indonesia and India and low in United Kingdom. This shows how Indonesian and Indian employees are dependent toward hierarchy and will not question authority, which I can confirm based on my previous working experience in Indonesia. On the contrary, UK employees will value equality. This information, along with other tools such as Myers Briggs Personality Trait and Belbin Team Roles will help managers to identify employees’ personal value and preferences, which resulted in ability to manage diversity in team more effectively. Belbin Team Role Models will help manager to identify each individual role within the team and create a balanced team through developing the strength and manage the weakness (Belbin, 2016).

Figure 5. Belbin’s 9 Team Roles

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Source: Belbin (2016)

One of the examples of leader who have successfully promotes and manages diversity in her company is Patricia David, the managing director and global head of diversity for JPMorgan Chase, an American multinational banking and financial services company with 240,000 employees working in 60 countries. Through her strategic implementation in strategy and various initiatives, she received Woman Achievers Award in 2005. In 2015, Black Enterprise named JP Morgan Chase and Co as one of the most diverse company in 2015 (jpmorganchase.com, 2016).

Another example of successful diversity management is Rabobank Group, in which top management realised the change in demographic composition of labor market in Netherlands due to increase of ethnic minority group since 1960. The company quickly changes establish Diversity Network to promote cultural diversity and embracing minority groups within company, as well as provide information for company’s diversity policy, development and activities. This leads to the increase of company’s competitive advantage (Subeliani and Tsogas, 2005).

 

Conclusion

Diversity within organisation in financial industry is really important to increase company’s global view and maximise their strength. In order to increase diversity within the industry, several issues that can be addressed includes the need of critical mass of role model to increase personal connection in woman and minority employees, constant promotion and initiative of diversity within organisation, and enhance employee’s individual contribution and value within company.

Word Count: 850

Reference:

Belbin, (2016) Belbin Team Roles | Belbin [online] available from <http://www.belbin.com/about/belbin-team-roles/&gt; [26 March 2016]

dailymail.co.uk. (2014) Ethnic Minorities ‘Will Make Up Third Of Britain By 2050’ [online] available from <http://www.dailymail.co.uk/news/article-2620957/Ethnic-minorities-make-one-population-2050-Britains-melting-pot-continues-grow.html&gt; [20 February 2016]

Ely, R. J., & Thomas, D. A. 2001. Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes. Administrative Science Quarterly, 46: 229–273

Hunt, V., Layton, D. and Prince, S. (2015) “Diversity Matters”. McKinsey Report

Ibarra, H, & Hansen, M (2011), ‘Are You a Collaborative Leader?’ Harvard Business Review [online], 89, 7/8, pp. 68-74

Ibtimes.co.uk. (2014) UK Financial Services Sector Faces Gender Diversity Gap [online] available from <http://www.ibtimes.co.uk/uk-financial-services-sector-faces-gender-diversity-gap-hold-embargo-0001-monday-25-august-1462270&gt; [20 February 2016]

Geert-hofstede.com. (2016) Indonesia – Geert Hofstede [online] available from <http://geert-hofstede.com/indonesia.html&gt; [19 February 2016]

Jpmorganchase.com. (2016) Why Diversity Matters | Jpmorgan Chase & Co. [online] available from <https://www.jpmorganchase.com/corporate/news/insights/patricia-david-diversity-matters.htm&gt; [19 February 2016]

Miller, SK, & Tucker III, JJ (2013), ‘Diversity Trends, Practices, and Challenges in the Financial Services Industry’, Journal of Financial Service Professionals, vol. 67, no. 6, pp. 46-57.

Nederveen Pieterse, A, Van Knippenberg, D, & Van Dierendonck, D (2013), ‘Cultural Diversity And Team Performance: The Role of Team Member Goal Orientation’, Academy of Management Journal, vol. 56, no. 3, pp. 782-804. Available from: 10.5465/amj.2010.0992. [20 February 2016].

Subeliani, D. and Tsogas, G. (2005) “Managing Diversity In The Netherlands: A Case Study Of Rabobank”. The International Journal of Human Resource Management 16 (5), 831-851Cover Picture Source: law.vanderbilt.edu

Blog 1: Leadership and Ethics

building_ethical_leaders

Ethical Leadership is defined as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement and decision-making”… [and] the evidence suggests that ethical leader behavior can have important positive effects on both individual and organizational effectiveness”

(Rubin et al 2010: 216-17).

The study of ethical leadership has been keenly explored by scholar as well as general public due to unfolded scandals in corporate business. This blog will discuss about two principles of ethics, the importance of ethical leadership in Finance industry as well as discussion about 4V Ethical Leadership model. Furthermore, the blog will discuss two contrasting example from Deontological and Teleological point of view.

The Two Sides

In discussing Ethical Leadership, there are two principal theories of ethics: Deontological and Teleological. Deontological focus on the inherent righteousness of a behavior, whereas Teleological focus on amount of good or harm resulted from consequences of behavior (Hunt and Vitell, 1986). As an example, Deontologist will always believe that giving a bribe is always wrong, whereas Teleologist will agree in giving a bribe as long as it produces a greater balance of good and evil (Vitel and Davis 1990).

This theory is important in understanding an individual’s decision and action regarding ethics. However, there is limitation in this theories since most individuals may not fall into only one category, and more likely to have a mixed deontological-teleological system of ethics (Hunt and Vitell, 1986).

 

Ethical Leadership

There has been extensive amount of research and literature to determine the definition of Ethical Leadership. Fehr et al (2015) define Ethical Leadership as “the demonstration and promotion of behaviour that is positively moralised”

From various model available, I am personally intrigued by the 4-V Model of Ethical Leadership developed by Dr. Bill Grace, founder and executive director of Center of Ethical Leadership. The model, which becomes the vision and mission of the organization, is described as follow:

Figure 1. The 4-V Model of Ethical Leadership

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Source: ethicalleadership.org (2016)

In this model, Dr. Bill Grace explained that Value and Vision becomes the most essential dimension in this model, since it gives the purpose and direction, whereas Voice creates the dynamic. A leader must be able to articulate their vision to be able to enliven them into action. Finally, Virtue is a combination of the other three dimensions, and a blend of principle, sensitivity to relationship and commitment of common good.

In my opinion, this model properly highlighted dimensions required in ethical leader. A good leader must have a strong Virtue as foundation, and ability to communicate value and vision in order to motivate and inspire followers.

 

Fehr et al (2015) further suggested the model on how leader’s ethical behaviour influences the followers’ behaviour and organisational culture, which leads to followers’ motivation to have ethical value and integrated action. Finally, the followers have the consistent behaviour based on the ethical value. The diagram is as follow:

Figure 1: The Moralisation of Leader’s Behaviour and Its Effect on Followers

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Source: Fehr et al (2015).

Ethical VS Unethical Leaders

The evidence suggests that ethical leader behavior can have important positive effects on both individual and organizational effectiveness 

(Rubin et al 2010: 216-17).

In today’s business, the easiness to get information creates the opportunity for misuse and ethical abuse despite numerous guidelines and ethical conducts which has been developed from many years in accounting and finance industry. Knights and O’Leary (2005) suggested that it is plausible that a failure of ethical leadership creates an account for corporate scandal. Therefore, the importance of ethical leaders in corporate resources and practice become very crucial.

One of very good example of ethic leader, which follow deontological principal in financial industry is Michael Hershman, the president and CEO of leading risk management company in USA: the Fairfax Group. He is acknowledged for his transparency, integrity and honor in leading his firm, which has been passed on as code of conduct guiding staff and workers in the company. He Co-Founded transparency international non-profit organization, and in 2012 was Appointed governance committee for the FIFA corruption scandal. Fairfax demonstrates the importance of trust and reputation in leading a successful organization.

Michael_Hershman_OEA-OAS (1)

Picture 1: Michael Hershman, the CEO of Fairfax Group

On the other hand, Enron’s Cases has become the representation of the failure of ethical leadership even years after it has been unfolded. Cruver (2002) stated that the unethical behaviors of Enron’s leader are the product of individual and situational factors, which is mostly fueled by greed. Their CEO, Jeff Skilling and Ken Lay, display their Teleological approach by abusing their power and privilege, acted irresponsibly by manipulating the balance sheet to hide their debt and prop up its share prices. Furthermore, the company established “rank and yank” system which driven the employees to intense competition resulted with negligence toward company’s code of conduct (Johnson, 2003). This case perfectly represents how unethical leaders could lead to the unavoidable company failures and even, bankruptcy.

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Picture 2: Ken Lay and Jeff Skilling, CEO of Enron

Conclusion and Recommendations

Based on discussion above, ethical leaders become very important in determining the direction and sustainability of a company. An ethical leader will incorporate own values and vision into the company, and lead the company to success.

My previous experience in working as an auditor in big-four accounting firm make me realize how important it is to understand and implement ethics in everyday working life. Therefore, it is essential for the management to keep on giving examples, communicating and encouraging their ethical values toward the employees. It is also important to create conducive working environment for the employees to empower employees’ ethical behavior.

Word Count: 762

References:

Cruver, B. (2002) Anatomy of greed: The unshredded truth from an Enron

insider. New York: Carroll & Graf.

ethicalleadership.org (2016) Concepts And Philosophies [online] available from <http://www.ethicalleadership.org/concepts-and-philosophies.html&gt; [12 February 2016]

Fairfax Group (2008) Michael J. Hershman: President and CEO [online] available from <http://www.fairfaxgroup.us/bio_hershman.php> [10 February 2016]

Fehr, R, Kai Chi, Y, & Dang, C (2015), Moralized Leadership: The Construction And Consequences Of Ethical Leader Perceptions, Academy of Management Review, vol. 40, no. 2, pp. 182-209. Available from: 10.5465/amr.2013.0358. [26 March 2016].Hunt, Shelby D. and Scott Vitell: 1986, ‘A General Theory of Marketing Ethics’, Journal of Macromarketing (Spring), pp. 5–16

Johnson, C. (2003) “Enron’S Ethical Collapse”. Journal of Leadership Education 2 (1), 45-56

Knights, D. and O’Leary, M. (2005) “Reflecting On Corporate Scandals: The Failure Of Ethical Leadership”. Business Ethics: A European Review 14 (4), 359-366

Rubin, R, Dierdorff, E, & Brown, M (2010), Do Ethical Leaders Get Ahead? Exploring Ethical Leadership and Promotability’, Business Ethics Quarterly, 20, 2, pp. 215-236, Business Source Complete, [12 February 2016]

Vitell, S. and Davis, D. (1990) “Ethical Beliefs Of MIS Professionals: The Frequency And Opportunity For Unethical Behavior”. J Bus Ethics 9 (1), 63-70