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
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
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
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
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
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).
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.
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Belbin, (2016) Belbin Team Roles | Belbin [online] available from <http://www.belbin.com/about/belbin-team-roles/> [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> [20 February 2016]
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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> [20 February 2016]
Geert-hofstede.com. (2016) Indonesia – Geert Hofstede [online] available from <http://geert-hofstede.com/indonesia.html> [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> [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