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Diversity as a competitive advantage

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Kenneth MooreKenneth W. Moore, M.S. is the president of Ken Moore Associates, a management consulting group based in Schenectady, NY. He is retired Human Resources executive and a US Army officer. In addition to his consulting work, he is at professor at the State University of New York at Albany where he teaches business courses in strategic management.

Here, he comments on diversity and competitive advantage.

In today’s global and hyper-competitive world, most managers recognize that the new game of business requires speed, flexibility and continual self-reinvention. Executives understand that skilled and motivated people from diverse backgrounds and experiences can lead to a significant competitive advantage over other organizations.

Diversity, in one form or another, has been an operating and integral part of our professional and personal lives since the founding of our country. As a modern philosophy, it is difficult to argue with Martin Luther King’s desire to see his children judged on the content of their character rather than on the colour of their skin. Yet philosophical agreements do not necessarily mean that actions will happen and that changes will result. There has to be a compelling reason for change. For individuals, that compelling reason is, more often than not, enlightened self interest. For organizations, diversity generates competitive advantage.

How do we develop our leaders to take advantage of the opportunities presented by a diverse culture?

Re-Thinking Training Strategy

Many well-constructed leadership programmes tend to focus on the theoretical and academic thinking of past scholars. Organizational development concepts like Maslow’s Hierarchy of Needs and McGregor’s Theory X vs. Theory Y are useful background tools, but do not lead to tangible competitive advantage. Our current world is vastly different from the world in which Maslow and McGregor based their research.

In today’s knowledge economy, for example, hierarchical structures have been replaced by networks at Google. Bureaucratic systems at General Electric have been transformed into flexible processes, and control-based authority has evolved into relationships that focus on empowerment, coaching and the delivery of results that enhance the mission of the company.

It is also evident that the accumulated wisdom and knowledge of senior management cannot be effectively distributed to selected individuals and departments down the line to generate temporary advantages or to solve short term problems. Wisdom and knowledge has always existed in the heads of all individuals where value added concepts and practices are nurtured.

The Meaning of Diversity

It can be argued that diversity in the U.S. traces its philosophical roots to racial, ethnic, and gender characterizations, of which much has been written. However, in today’s digitally inter-connected and global marketplace, these characterizations are rapidly being augmented by additional forces that are just as compelling. Diversity in race, ethnicity, and gender are just three elements that are being re-thought in order to answer a primary question: “Will my company’s approach to diversity add to, or subtract from, our ability to achieve our business plan?”

These additional concepts of diversity include, but are not limited to, generational differences, religious and political differences; demographic shifts to other regions of the country, and socio-cultural issues represented by lifestyles, values and belief systems. Thus, diversity is an accumulation of related concepts that must be integrated into the basic cultural DNA of the company.

The Focus in on Human Capital

Human beings, not machines or processes, create competitive advantage. Each employee comes to the company with a fundamental set of knowledge, skills and abilities (KSAs). They also come with a unique set of experiences, biases, and expectations. Leadership’s job is to capitalize on these unique KSAs and build upon their strengths.

How Does One Do This?

With tight budgets, managers will spend money on subjects that will justify a return on their investment. Thus, the development training focus is no longer based upon theoretical history. It is based upon subjects that centre on desired outcomes as viewed by the employee, the customer, and the owners – outcomes that cause customers to continue buying our products or services at a premium price. More explicitly, it is based upon the execution of the business plan, not just on philosophical desires.

The training mindset is not specifically directed at diversity as a desirable philosophical state of existence. That’s a given. Rather, it is directed at generating value from the complexities of business and tapping into the distinct KSAs of the people who work with you.

Consider these examples:

Diversity and the Search for Talent

Many businesses long ago realized that their ability to tap into the skills and insights of their employees such as language and cross-cultural skills provided them with an advantage over other organizations. A city like New York has a huge immigrant population, many of whom do not speak English. Organizations that employ multi-lingual people who speak English and Portuguese, Russian, Spanish, or Arabic are able to work effectively and productively with those communities.

Today’s so-called Generation Y (those born between 1985–2000) have a much different views of work and play than their parents or grand-parents. Practically from the day they were born, they have been wired into the 24/7 mindset which runs counter to the 8am – 5pm, 40-hour working week mindset of current employment practices and the law. They insist on a work-life balance, since their loyalty to their employer is not reciprocated. They want to work for a socially progressive company that advances corporate social responsibilities in the communities in which they do business. And, they are nomadic – willing to go to where they are appreciated and valued.

Understanding generational issues is a key ingredient in attracting and retaining high caliber employees and also managing current employees. Leaders need to understand and act on the issues affecting the four generations of human capital: age discrimination, pensions and health care, shifting demographics, child and elder care, digitization of work, outsourcing to secure lower costs, professional and social network development, and movement of industrial sectors to geographies that provide cheaper labour, lower energy cost, and a political climate that is pro-business.

Diversity as a Key Element of Business Strategy

Progressive-thinking organizations recognize diversity has a direct impact on whether the company survives and prospers or goes out of business. Since wisdom and knowledge cannot be effectively delegated in today’s fast moving economy, execution of the business plan depends upon the skills, ideas, experiences and talent of local employees. These are the people who produce and deliver their products and services to customers. They are the ones who identify internal and external opportunities that generate new business prospects and solutions that benefit the customers, the stakeholder and the employees.

For example, Madame C.J. Walker (1867 – 1919) was an African-American laundress who identified a need for beauty and hair care products for black women. She identified a large market need and helped satisfy that need with her products. Walker's beauty products complemented her belief that one of the ways black women could gain access to business careers and financial power was by looking more acceptable to members of the dominant mainstream white society. She became the first American female to become a millionaire on her own achievements – and an active proponent of women’s rights and racial integration.

During World War Two, U.S. Marines in the Pacific used Native American Navaho speakers ('Windtalkers') to send and receive classified messages to the battlefield commanders. The complexities of the Navaho language, and the absolute lack of any Japanese Navaho speakers, became a significant factor in the Marines’ ultimate success on Iwo Jima, Guadalcanal & Tarawa.

Diversity and Core Competence

An organization’s core competence – that which it does better than anyone else does and is valued by the customer – is in a state of constant change. Each company identifies its core competency: Nordstrom’s focus is on exemplary customer service, Black and Decker’s expertise is on electric motors, and Sony’s is on its miniaturization skills and its commercial applications. A company’s core competency provides a direct benefit to its customers, is not easily replicated by competitors, and can be leveraged into multiple units of an organization.

Today, core competencies can be found within the employees themselves. The ability to capitalize on the creativity of its employees is a key ingredient to sustainability in the fast changing world. There is a trust and respect that the organization has for its employees. It demonstrates this trust and respect by directing problem solving and opportunity development downward to those people who actually build and deliver the product or service and interact with the customer.

Consider the ubiquitous Egg McMuffin. It was not invented by McDonalds’ corporate research and development team. Instead, it was created by a single franchise owner in California who experimented with various breakfast items. At that time (1972), McDonalds was only serving lunch and dinner. From that creative spirit of one individual, McDonalds was able to take this unique idea and parlay it into an entire breakfast menu – and business segment - focused around the Egg McMuffin.

Diversity and National Cultures

Each nation generates its own culture based upon its history and experiences. While difficult to describe, they exist and are powerful forces that must be understood. Concepts such as equal opportunity for all regardless of race, creed, gender and ethnicity are ingrained into the American psyche. However, these concepts are non-starters in other countries that are governed by strict authority or theology. Life, liberty and the pursuit of happiness are constitutional guarantees in the U.S. However, they are not found anywhere in Iran, Sudan, or Cuba.

Furthermore, the U.S. is generally considered an individual-oriented society where the individual is celebrated and praised. However, where individual praise for a job well done in the United States would be seen as a positive motivator or reward, individual celebration and praise in China causes discomfort with most managers and employees because their society embraces collectivism or teamwork.

Concurrently, the U.S. generally adheres to a short-term orientation where results that are not generated immediately are viewed as less valuable than results that are achieved immediately, or within the next fiscal quarter. It is neither right nor wrong – it is just normal. As such, sharp executives accept a nation’s time line horizon for what it is and modify their operations accordingly.

The basis for our competitive advantage

Concepts of diversity, as seen through the lens of the American experiences, embrace pluralism. Pluralism, for example, allows for all religions to co-exist together. It allows leaders to tap into the wisdom, experience and strengths of a community’s environment and culture and extract from it substances that benefits everyone. Unfortunately, from the American perspective, this is not a global or universal concept.

In the United States, we are blessed to have developed our awareness and appreciation of the strengths that ethnic, racial, gender, generational, and other communities bring to the social and professional fabric of our society. Resolving business and social issues is dependent upon an open and constructive sharing of diverse points of view. Yet as we become more enmeshed in the global community, we must also be aware that other nations might not see the issues from the same perspective as us. While the American Baby-Boomers were experiencing Woodstock, Vietnam, and the Civil and Women’s Rights movements during the 1960’s, our counterparts in China were experiencing Mao’s Cultural Revolution and Brezhnev’s style of Communism in the former Soviet Union. Our perspectives are vastly different. We must continue to develop our awareness and appreciation for the diversity contained in our world, embrace the positive aspects of such diversity, and establish a common ground upon which safe, stable and prosperous societies can co-exist. This is the basis for our competitive advantage.

December 2010