AIMA-Bosch Limited 34th NATIONAL COMPETITION FOR YOUNG MANAGERS

THEME : “Managing Diversity – Challenges for India Inc”

Team : 1) PRAVIN KUMAR

2) TARUN RAWAT

3) AVNPK CHAITANYA

Organization: INDEPENDENT TEAM

Address: FLAT 371, BLOCK 37, BPCL COLONY, AZIZ BAUG, MAHUL ROAD, CHEMBUR

EAST, NEAR ASHISH THEATRE, MUMBAI, PIN 400074

Tel No : 09324329851

Fax No: (022) 25540486

E-mail : kumarpravin@gmail.com

Number of words: 2790

Date of Submission: 05/07/08

Signature of the Team Member:

MANAGING DIVERSITY – CHALLENGES FOR INDIA INC.
 CONTENTS

1. Diversity – What does it really mean and how important is it?

2. Building Diversity – How do you do this?

3. Managing Diversity – The Pros and the flip side

4. Challenges for the India Inc – What do you do with the Diversified Workforce?

5. Measuring Diversity – The Practical side to the theory; DROI (Diversity Return On

Investment)
MANAGING DIVERSITY – CHALLENGES FOR INDIA INC.

AN ABSTRACT

Diversity – a reality that we cannot refuse to acknowledge in this world that is getting

smaller by the day. We will, as we go on, realize that Diversity is an advantage for

organizations than a problem as perceived by many. Successful corporations learn to

manage this to their full advantage. By adopting new structure and work practices that

are radically different from those traditional minded management, these organizations

managed to acquire a competitive advantage in the global market place. The whole

purpose of managing diversity is to bring out the best of employees talent, abilities,

skills and knowledge for the benefits of individual employees as well as the well-being of

the corporations. When workforce diversity is well managed, no employee in the

organization feels disadvantaged.

At the first level, the organization has to value and utilize individual and inter-group

differences within its workforce. In order to accommodate these differences, the

organization needs to conduct assessment, training, and interventions that will change

the organizational culture.

With the advent of the New Indian Multinationals, organizations are beginning to have a

very diverse workforce. Changing demographics of the Indian work place indicates that

managing diversity is far from being a passing fad-but is rather a business issue affecting

the bottom line. In an organization, diversity can be defined as the presence of

employees who differ from each other in terms of age, gender, ethnicity, region,

religion, skill level, race etc. There are various approaches for managing diversity. These

approaches can be applied at the individual level or at the organizational level. The

'individual' approaches to managing diversity include 'learning' and 'empathy.' The

organizational approaches include testing, training, mentoring and the use of alternative

work schedules as some initiatives.

An organization progresses through various stages before it develops into a

multicultural organization. These include the exclusionary organization, the club

organization, the compliance organization, the affirmative action organization, and the

redefining organization. Since most organizations have to employ a diverse workforce,

they must strive to develop into multicultural organizations. A multicultural organization

is one which is determined to eliminate all forms of social oppression within it and

includes members of various cultural and social groups in the decision-making process.

Given this scenario it is quite a challenge for the evolving India Inc to manage diversity,

not only in the global context but in the national context which is like dealing with

different countries within a country, knowing the regional variation.

Managing Diversity, though not new to Indians who are themselves very exposed to

dealing with many cultures within the country, the term itself has attained new

connotation with the Indian Multinationals crossing the vistas. It is in this context that

we need to clearly outline how the India Inc will need to harness the power of diversity

for an advantage of its own and its hugely talented workforce.

DIVERSITY – WHAT DOES IT REALLY MEAN AND HOW IMPORTANT IS IT?

Diversity, at the outset might seem to be very simple. If it does, then we are actually

looking at its one dimension. There are different levels, or layers of diversity that we will

take a look in this section.

FOUR LAYERS OF DIVERSITY

There is more to diversity than gender and race differences. There are four major

dimensions of diversity: internal, external, organizational and the individual’s

personality itself. Each dimension has characteristics that help one identify with

individuals in different ways. The characteristics that make up each dimension are as

follows:

Internal dimensions— These characteristics are genetically acquired.

External dimensions— These characteristics influence our lives and our value systems,

and contribute to the development of our personalities.

Organizational dimensions— These characteristics affect our experiences and work

status, and create inferior and superior cultures and attitudes.

Diversity is not limited to the obvious characteristics of gender and race. Many different

traits characterize an individual. The diversity wheel shown below represents those

traits in terms of four layers of diversity. Each layer identifies a different dimension that

defines who we are. No single element carries more weight than another. The

combination of these elements gives each person a unique personality.

The combination of personality and internal, external and organizational dimensions

makes people distinctive from each other. As employees get to know others within an

organization, they notice what makes each person unique.

IMPORTANCE OF DIVERSITY

INFORMATIONAL DIVERSITY A POWERFUL TOOL

The researchers found that informational diversity stirred constructive conflict, or

debate, around the task at hand. That is, people deliberate about the best course of

action. This is the type of conflict that absolutely should be engendered in organizations.
On the other hand, demographic diversity can sometimes whip up interpersonal

conflict. This is the kind of conflict people should fear. "People think, 'I have a different

opinion than you. I don't like what you do or how you do it. I don't like you’. This is what

basically can destroy a group.

The third type of diversity is based on goals and values, and it actually generates both

types of conflict. This is the most potentially damaging of all the diversities. Without

value-goal homogeneity, a team can accomplish little. But once a team recognizes and

accepts a goal, it makes problems easier to deal with because each person knows the

intentions of the others are the same.

The importance of diversity has clearly come out in an experiment conducted to

understand the effects of diversity on the throughput. The experiment is shown below.

THE MURDER MYSTERY

In a related lab study in Kellogg’s Institute, behavioural scientists looked at the effect

social and informational ties had on how groups shared information. They set up groups

of three people who were told to solve a murder mystery.

In each group two members were social friends. The third member was a stranger. In

half the groups, the friends had a common piece of information and the stranger was

given a piece of unique information essential to solving the problem. In the other

groups, one friend and one stranger had common information, while the other friend
had the unique information. Which group was more likely to share information more

effectively?

The groups with two friends having common information and the stranger with unique

information did the most productive information sharing. The reason could be that the

two friends know each other and expect that they have similar information because of

their mutual experience. A stranger knows he or she is different and is more likely to

share unique information.

In groups where one of the friends had the special information, the friend suppressed

the informational difference in order to keep social ties intact, researchers speculate.

There are a number of reasons why diversity is fast gaining importance in the current

scenario.

1. Changing Customer Base: For companies to remain competitive in the global

economy, the composition of their workforce must reflect their changing

customer and market populations. Companies with a diverse workforce are

better able to market their products and services to an increasingly diverse

market population.

2. Enhanced Financial Performance: Several studies have demonstrated that

effective diversity programs are linked to the company's financial performance:

 A 1997 study by the University of Houston found that companies with diversity

programs performed better than those without such programs.

3. Improved Productivity: Anecdotal information from several companies -

including Intel, DuPont, General Motors, Inland Steel and Pitney Bowes - shows

that a more diverse and team-based workforce helps generate new ideas and

increase revenues.

4. Increased Job Satisfaction and Employee Morale: The Families & Work

Institute's "1997 National Study of the Changing Workforce" reports that, when

looking at a range of issues including equal opportunities for advancement, lack

of discrimination, and respect, "employees in supportive workplace

environments are the most satisfied with their jobs," and "employees whose

workplaces are supportive and responsive to their individual needs are the most

loyal."

5. Decreased Vulnerability to Legal Challenges: Companies that have established

diversity programs and management systems to address and resolve potential

discrimination and harassment issues are less vulnerable to lawsuits and

penalties.

6. Enhanced Reputation: A company's ability to be known as a great place to work

with an open and inclusive environment can enhance its reputation in the

marketplace. This inturn leads to increased belief in company culture which

increases its share value.

BUILDING DIVERSITY

NEW INDIAN MULTINATIONALS

"Infosys to Hire 300 US Grads"

"Infosys to hire from European Universities"

"Infosys Technologies said on Friday that it was recruiting 30 interns from 17 European

technology and business schools as part of its Global Internship Programme — InStep.

"We firmly believe that the future success of Infosys lies in its ability to create an

environment that is open to people from different nationalities and ethnicities," --

Infosys Chairman Narayana Murthy

"Talent is imperative in today's economy and the increase in globalisation means the

competition for global talent is rife. At Infosys, we recognise the importance to invest in

skills globally and provide opportunity for future business leaders to understand the

changing dynamics of a flat world." -- Mr Nandan M. Nilekani, CEO, Infosys

Technologies.

Taking this topic to the global playground, above statements are the leading indicators

that companies have a need to build a globally diverse work force. As companies expand

abroad, they will need people with diverse skill sets and with deep knowledge of doing

business in those countries. Employees from home country - say India for example will
never be able to match the deep knowledge on Brazilian business by a Brazilian. This

makes it essential for companies to hire talent from other countries.

Global IT giants such as IBM and Accenture have already built a multiethnic,

multinational, multicultural work force. Indian IT companies are now starting to do the

same.

India itself has a diverse group of people: Different Religions, Languages, Ethnicity and

lifestyles. India is home to 50+ languages and 200+ dialects. India probably has all the

world’s religions represented and also has people from almost all ethnicity (African,

Caucasian, Aryan, Dravidian, Chinese, Polynesian). Yet a workforce of Indians alone is

not enough. Firms will need people from other nationalities too.

A good thing about India though is that the country and its culture has been diversity

friendly. This creates a suitable base for Indian firms to create a globally diverse

workforce. A diverse work force can create diverse ideas which are superior and that

can provide competitive advantages.

MANAGING DIVERSITY

Managing Diversity involves those activities that integrate nontraditional employees

into the work force and using their diversity to the firm’s competitive advantage.

EMPLOYEE DIVERSITY TRAINING

Leaders are beginning to understand that diversity training within their organizations is

a key component to supporting diversity initiatives. Through diversity training, a

company can create a common frame of reference and establish a solid foundation

upon which employees can understand each other and eliminate biases and barriers

that often impede on the companies’ overall ability to effectively promote a culture of

inclusion.

Companies can offer a variety of flexible training programs to meet the needs of all

employees. However, it is best to avoid one-shot training efforts that stir up emotions

without channeling them in productive directions. Preferably, ongoing training must be

employed that encompasses diversity as only one facet of needed change in the

corporate culture.

MANAGEMENT TRAINING

Training program to focus on diversity training geared specifically for managers,

education in leadership skills and development of personal potential, to transform the

challenge of diversity into an opportunity for inclusion in the business.

It is not the differences among people, but the emotional reactions to the differences

that can distract employees and reduce utilization. In addition, every executive’s and

manager’s performance review to be linked to his/her role in supporting the company’s

diversity policies and goals.

EMPLOYEE PERFORMANCE EVALUATIONS

Maintaining a nondiscriminatory, objective performance evaluation system is an

important element of diversity, establishing impartial performance criteria and not

getting tainted by the evaluator’s personal prejudices promotes a work environment

that values every employee, regardless of his/her age, gender, racial or ethnic

background.

The performance evaluation system should center on five core competencies:

teamwork, leadership/vision, judgment, creativity/innovation and accountability. Rather

than experience or skill set measures to help the business and better support an

objective assessment of performance. Managers, in particular, should be trained how

to offer constructive criticism and feedback.

The following grid will help us identify the TOWS – Threats, Opportunities, Weaknesses,

and Strengths of Managing Diversity as an issue.

WEAKNESSES
STRENGTHS
• May lead to sacrificing
• Greater Creativity the individual for group
• Better Problem fairness
Solving • Might be misunderstood
• Greater for “reservations” and
understanding and “equal opportunities”
flexibility

OPPORTUNITIES
THREATS
• Malleability of Indian
• Resistance to Change workforce
• Interpersonal Conflict • Exposure to working
• Resentment with varied cultures
• Backlash within the country
• Attrition
CHALLENGES FOR THE INDIA INC – WHAT DO YOU DO WITH THE DIVERSIFIED

WORKFORCE?

The challenge for the companies is to manage this diversity. The company will now have

to create an environment that is based on appreciation and respect to different ideas,

different points of view, and different opinions - and at the same time minimize friction

within the organization. Once a reputation of being "diversity friendly" organization is

created, it becomes easier to attract talent from other nations and thus create a

perpetually diverse organization. Thus a well managed diverse work force can create

new growth opportunities and innovation that the organization had never imagined

before.

CHALLENGES

The benefits of diversity are not instantaneous. Diversity creates differences and this

often means conflicts. In MNCs, people from different countries tend to form their own

groups and these groups cannot get along easily with each other. The same is applicable

to the work force within a company.

Differences in communication styles, work attitudes, or behavior can create friction

within teams - and when these differences are not controlled, it can cripple a team.

Research has found that a diverse team often goes through an extended period of time

in the storming phase. It becomes important and essential for the management and

team leaders to take concentrated efforts to integrate the team.

These global mangers are very difficult to find - let alone hire.

To make diversity succeed, a strong and committed leadership is needed. These leaders

who are from top management must understand the benefits of diversity. They must be

committed to create a diverse workforce - by creating suitable staffing strategy and

cultural integration plans.

Leaders must be able to standup to these beliefs and demonstrate their appreciation to

different ideas. A weak leadership or if leaders show any signs of favoritism, inter-group

fights will reign which results in low morale and high employee turnover. And over a

period of time if the problem is not corrected, the company loses its image and that can

turn away customers and potential good employees.

INTEGRATING A DIVERSE WORK FORCE

Integrating a diverse work force is not easy neither it is instantaneous. Intel, Microsoft,

IBM, Accenture etc., have created a high performing global work force by taking a series

of steps over an extended period of time. The same will hold true for Indian firms.

The first and the most essential step in managing diversity is to have commitment from

the top leadership. Leaders of the company should wholeheartedly endorse diversity

and should also create diversity in the leadership cadre.

Second step is to replicate this diversity in all levels of the organization starting from the

top. This implies that the company will now need a global staffing strategy. Few firms
have gone to the extent of having a policy that mandates it to have at least one woman,

one racial minority employee in each level of the organization.

The third step is to set target for the entire organization. Targets for every

group/division within the company in terms of workforce diversity have to be set. This

will mobilize the middle management to take proactive steps to create a diverse work

force. This should be followed by having a suitable employee rotation program -

wherein employees are encouraged to work in different locations and with different

sets of teams (these teams are diverse teams). A well crafted work rotation program can

create a truly integrated diverse work force.

STEPS IN INTEGRATING A DIVERSE TEAM

CREATE A DIVERSE LEADERSHIP

CADRE

REPLICATE THIS DIVERSITY ACROSS

THE HIERARCHY

SET DIVERSITY IMPLEMENTATION

TARGETS
MEASURING DIVERSITY – THE PRACTICAL SIDE TO THE THEORY; DROI (DIVERSITY

RETURN ON INVESTMENT)

Diversity, as elucidated in the previous sections, needs an investment. To build the

processes, to groom the workforce, to train them – each of these steps would require

an investment. For a business, if there is an investment, there has to be return on it. And

Diversity Pays! Executives and other organizational personnel are beginning to recognize

the benefits of calculating the impact of seemingly intangible process like managing

diversity on something as tangible as the bottom-line. Conventional systems

encouraged limited, short-term thinking with respect to managing intangibles. Why do

they do this? Because, expenditures in these areas are treated as expenses than as

investment in assets. In direct contrast to this, investment in buildings and machinery is

capitalized and depreciated over their ‘useful’ lives.

Consider for instance the following dilemma faced by executives and managers:

Decide whether to invest in 10 crores in hard assets or 10 crores in people. In practical

terms, when an organization invests 10 crores in a building or a physical asset, this

investment is depreciated and earnings are reduced gradually over a 20- 30 year period.

In contrast, a 10 crore investment in people is expensed in entirety (and therefore

earnings reduced by the same) during the current year. For executives and managers

whose pay is tied to this year’s earnings, the choice of which investment is pretty clear

by now.
As a result, organizations under financial pressure, tend to invest in physical capital at

the expense of human capital – even though the latter may very well generate more

value. This kind of pressure may result in poor decision making behaviour, such as

personnel layoffs, downsizing to generate short-term cost savings. Organizations will

sooner or later realize that people are a crucial source of competitive advantage rather

than an expensive luxury that is to be minimized.

The clear bottom line is this – If current accounting methods cannot give diversity

professionals the measurement tools they need, then it is imperative that new tools are

developed to demonstrate diversity’s contribution to the organization’s performance.

Like any other discipline, diversity must be composed of both solid theory and applied

sciences to gain credibility as a key contributor to organizational performance.

Calculating Diversity Return on Investment:

There are seven steps to calculate Diversity Return-on-Investment:

1. Know what you want to know

• Identify a Business Problem Related to the Organization’s Strategy

• Formulate Research Questions
• Begin with the End in Mind -- Your Report
• Create the Diversity Measurement Study Objectives

2. Prepare and Collect data

• Identify Data Collection Measurement Areas to Check

• Review Historical Data
• Conduct Interviews
• Conduct Focus Groups
• Analyze data using the Hubbard Diversity 9-S Framework *(See Annexure I)
• Create or Purchase Evaluation Instruments
• Survey the Organization
3. Isolate diversity’s contribution

• Select a Method to Isolate Diversity's Contribution

4. Convert the contribution to money

• Identify the Hard and Soft Data Contained in the Diversity Contribution
• Select a Method to Convert the Hard Data Contribution to Dollars

5. Calculate the costs, benefits and DROI This step will help you:

• Identify the Major Cost Categories

• Identify the Major Benefits
• Calculate the Benefit-to-Cost Ratio
• Calculate the Diversity Return-on-Investment (DROI %)
• Identify the Intangible Benefits

6. Report it to others

• Identify the Report Timing / Other Needs

• Identify Reporting Vehicle(s)
• Create Report
• Deliver Report
• Evaluate Feedback

7. Track and periodically assess progress

• Provide follow-up data for analysis and benchmarking purposes

• Introduce new automated Diversity Measurement Software Systems for
monitoring, tracking, and reporting results
• Introduce a companion survey development software tool and its statistical
analysis capabilities.
 ANNEXURE I

THE 9 – S FRAMEWORK

The 9-S framework is adapted from the McKinsey’s famous 7-S model to understand

organizational variables that build corporate capability and pinpoint the causes of

Organizational Malaise.

The McKinsey model references seven variables that can be leveraged to make

organizational change easier: Strategies, Structures, Systems, Style, Skills, Staffing and

Shared values. Add to these, the two more variables that play an important role –

Shared Vision and Standards. To effectively manage diversity, all of the variables within

the model must be examined to ensure their complete alignment with the

organization's diversity goals and to understand the options for increasing each

variable's effectiveness.