Multiculturalism in itself is not a resource

Understanding the mechanisms of value creation from an ever-increasing number of multicultural employees in the global workforce is crucial to most of the businesses we work with. Yet competitive advantages cannot be derived from simply employing multicultural personnel argues a new study.

The research finds that what matters most for a multinational’s competitive advantage is not the employment of multicultural personnel per se but rather the company’s ability to transform this employee’s unique capacities into strategic human capital resources. Comparative advantage requires deliberate actions to create alignment between the employees’ diverse individual and cultural backgrounds and organizational actions.

What the researchers say: “The aim of this research is to equip companies with specific tools for how to create value from their multicultural human capital,” said the study’s lead author. The research is published in the Journal of International Business Studies.

The researchers suggest that despite the growing number of multicultural employees in the global workforce, existing literature has not yet examined the circumstances under which their knowledge, skills and abilities can contribute to better performance or even become a source of competitive advantage.

“Despite the increasing numbers, leaders within these companies know little about how to manage them more effectively,” the researchers said.

The study highlights how multinationals can spend a lot of resources hiring multicultural employees in a competitive global labor market, but this investment will not pay off without changes in specific management practices.

The researchers conducted an in-depth ethnographic study with interviews over the span of two years in two multinationals—a leading fast-moving consumer goods company and a multinational auditing and business-consulting company.

“In addition to numerous research implications, we have identified those actions and unpacked the mechanisms needed to increase the value,” the authors said.

The researchers specify that some factors such as multicultural team leadership, team diversity and common language policy would be relevant for short term performance advantage, but to make this advantage sustainable, these will need to be coupled with differentiated HR architecture, a global mindset, and multilingual language practices.

They stress the importance of establishing a differentiated Human Resources (HR) architecture for multicultural personnel. For many companies, this might require new ways of thinking about employee management, as most HR practices are designed to treat everyone equally.

“We argue that in order to ensure that multicultural employee’s qualities, knowledge and skills are amplified and lead to competitive advantages, these companies should establish explicit HR practices for them that differ from their core HR architecture,” said the lead author.

The study argues that language policies may initially appear to be relatively straightforward but that many multinationals find themselves at a disadvantage in this regard.

“These companies need to make their language policies flexible and responsive to the needs of the global market. Our respondents did not express a preference for English as such. Instead, they stressed the importance of explicitly supporting multilingualism as a fundamental part of daily operations,” the researchers conclude.

So, what? That changes have to be made to support a multinational and multicultural workforce is obvious. However, that too has its dangers. A business is both a tribe and a collection of tribes, depending on its size. Those tribes are held together by commonality, by a common culture. Language is part of that, but so are assumptions, norms of behavior and sometimes unstated but powerful rituals.

Diversity and the undoubted corporate advantage that brings has to be allowed for within the context of commonality. It must be possible for people to fit in, and they must be prepared to do so. Management must, with the employees, create a culture to which everyone in the organization adheres. This is true no matter how many jurisdictions the business operates in.

For more on multiculturalism click here. For more on culture click here.