Diversity Multiculturalism

1. Diversity & Multiculturalism Strategies for Changing Workplace & Pluralism Lecture 5

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6. “The question is this: Is there a black, a Hispanic, or a woman in your company who, if all things are equal, can expect to become chairman within the next ten years?”Reverend Jesse Jackson Sr., Fortune Magazine

7. Key Issues Regarding Multiculturalism… How do changing work patterns and worker mobility drive strategic renewal? Which differentiating and sustained competitive advantages are created by multicultural workforces and organizations? What new and different management challenges are presented by multiculturalism? What are the new and/or emerging work patterns and individual choices that are driving change and strategic renewal? How do changing work patterns and demographics neutralize the traditional sources of competitive advantage and strategy formulation?

8. Changes in the Workplace…

9. Understanding Multiculturalism & Diversity… There some major challenges to understanding these concepts: Distinction between diversity and multiculturalism Leading multiculturalism for competitive advantage Factors driving and changing work lives, styles, employment patterns Strategic impact of multicultural workforces and related issues/aspects

10. Defining Multiculturalism and Diversity… There are definitional and operational differences between diversity and multiculturalism:

11. Comparing Diversity and Multiculturalism…

12. Strategic Implications of Multiculturalism… Multiculturalism creates segments and micro-markets, which represent sources of talent. Companies must constantly search these segments for talent. Multiculturalism leads to more creative and innovative breakthroughs. Multiculturalism enhances critical thinking.

13. Multiculturalism at Work… The Diversity Elite (50 companies) outperformed the S&P 500 on a continuous basis (as of 1997). They averaged returns of 125.4 percent versus 112.2 percent, and 200.8 percent versus 174.2 percent for the three and five year periods, respectively, as compared to the S&P 500 (in 1997). In a 1992-1994 survey of over 3,200 companies found that affirmative action programs had little or no negative impact on productivity. The “best practice” company has the following profile: Minority individuals represent 11.7 percent of their boards of directors. Minorities comprise 24.9 percent of its total workforce. 23.8 percent of new hires are minorities. 7.2 percent of minorities are among the highest paid employees.

14. Executives’ Focus on Diversity… 75% of Fortune 500 have formal diversity programs; however, only 54 percent measure the results of their programs. Over 80% consider diversity important. Program focus: 93% are focusing their development efforts on African Americans 92% are concentrating on women 85% target Latino/Hispanic Americans Diversity programs included: Diversity training Employee affinity groups Mentoring Career development

15. The Common Misconception… Many organizations are lured into a false sense of multiculturalism based on statistical representation and a statutorily prescribed definition of diversity. This perception: Excludes critical factors such as: Cultural background Life experiences Professional and geographical diversification Educational background, etc. Emphasizes “statutory” diversification Ignores pluralism

16. Multiculturalism as a Source of Competitive Advantage… The most critical aspect of multiculturalism regarding competitive advantage is the collective wisdom. Companies must ensure diversity of cultures, life experience and backgrounds.

17. Changing Workforce & Strategic Renewal The Imperative Is Clear: Depending on the given market, high performers incorporate in their cultures an appreciation and awareness of local: Societal values Social behaviors Political situation Religious convictions and customs Cognitive and communication practices

18. Three Major Forces Drive Workforce Shifts…

19. Each Force Involves a Set of Factors… Working Arrangements: Free Agency Women Leaders Position Tenure Technology Individual Expectations: Lifestyle and Living Longevity Education, Earnings, and Income: Education and Earnings Income and Earning Power Executive Compensation, Organizational Performance and Income Equity

20. Working Arrangements… Free Agency Migration of workers from rural to industrial areas due to industrialization Structural shift and a change in the workforce and the working habits Increased mobility of labor force Growth of employment in smaller businesses… entrepreneurship

21. Working Arrangement… Increasing Flexibility and Fluidity Currently, 6-7% of US workforce are independent contractors In 1997, around 29% of workers stayed on the same job for a year or longer as contract workers Total wages and salaries for independent workers exceeded $30 billion in 1996… a 360% increase over a 10-year period The professional segment of independent workers is growing, mainly in: High-tech areas Professional/management services

22. Entrepreneurship… A New Wave of Employment Between 1989 and 1995, 2.9 million new companies were created and 2.6 million died; a positive net change of 300,000 new businesses. Companies with fewer than 500 employees generated 76.5% of all new jobs added to the private sector between 1990 and 1995. In 1995, workers employed by companies with less than 500 people represented 52.5% of the entire private sector workforce. The number of independent contractors is growing; in 1995 this category represented: 31% of professional women 25% of professional men

23. Women in Workforce… A Gradual Progression In 1997: 65% women were working compared to 35% in 1966. Women accounted for 46% of the total labor force. 70% of women between 15 and 64 are working. Yet… women’s earnings lag behinds men’s: Overall, women earn 74% of men earnings. At top executive levels, women earn only 68% of men’s salaries. The “Glass Ceiling” still exists: Only 2.5% of top executive positions are occupied by women. Only 5.3% positions leading to the CEO are held by women. Women constitute only 10.6% of all corporate officers in Fortune 500. Nevertheless… the US is leading the rest of the world with respect to these statistics. Only 5% board members in UK are women, comp. to 11.2% in US Women represent only 30-40% of managerial positions in Europe, compared to 40% in the US

24. Women Leaders… Some Unique Qualities Women managers and leaders are: More participative More relational Better listeners Clearer and honest speakers Better negotiators Creating more positive influence in the workplace More comfortable with ambiguity and change More flexible Better at sharing power and information Better at collaboration

25. Issues and Challenges in Women Leadership Glass Ceiling persists: Preconception, stereotyping and exclusion from influential networks, especially in case of minority women Corporate rigidity Lack of sincere opportunities Cultural issues and barriers in certain cultures and societies Predefined roles and customs; societal, cultural, religious, etc. e.g. Arabic cultures, some Asian societies

26. Cultural Dexterity… Key to Successful Global Workforce To become successful as a global competitor and leader: Know the cultural rules and norms of each local market Appreciate and respect the nuances of local cultures Rely on signals, cues, and networks to establish informal and formal relationships Increase efforts and work harder, as driven by the local customs and demands Be patient while establishing presence in a new markets, especially if considerably different from the home environment Although valid for all, these imperatives are especially critical for women and minority individuals

27. Position Tenure… “Transitory tenure” has become an employment standard Several factors drive job changes: Corporate downsizing Outsourcing trends Globalization and geographical shifts New processes and technologies Changing lifestyles and individual perspectives and needs

28. Position Tenure… A Downward Trend Between 1983 and 1996 the average tenure for a male worker over the age of 55 declined by 6 years from almost 18 years to 12 years or by 29% For males between the ages of 25 and 64, the average tenure fell by 19%from 1991 to 1996. Today, a 35-year-old male has an average job tenure expectancy of around six years Since 1983, nearly every age group of men experienced a decline in median tenure, with particularly sharp drops occurring among men ages 45 to 54 and 55 to 64 Since 1983, nearly every age group of men experienced a decline in median tenure, with particularly sharp drops occurring among men ages 45 to 54 and 55 to 64 Tenure for women from 1983 to 1991 changed little, but was up slightly in 1996 to 3.5 years The overall median tenure for women rose between 1983 and 1996, with nearly all of these gains taking place from 1991 to 1996.

29. Position Tenure… A Downward Trend For overall population, the average tenure is estimated at 4 years A 35-year old man has an average job tenure expectancy of 6 years 63% MBAs intend to stay with their first employer for less than 4 years The average tenure of a terminated manager was approximately 10.0 years as of March 31, 1998, with severance packages ranging between 13 to 25 weeks For managers between 35 and 45, it takes about 9 months = 36 weeks to find better or equivalent position 77% respondents (Exec-U-Net survey) experienced age discrimination with regard to tenure

30. Strategic Challenges of Declining Tenure… The decrease in tenure present two major issues: Limited tenure translates into lower benefit relative to cost, especially for less experienced personnel. The most valuable tacit knowledge possessed by experienced personnel is lost once they leave the organization.

31. Technology and Workforce Impacts… IT has a significant impact on workforce and working processes: Enables worker and location interconnectivity 4.5% of US workers telecommuted in 1998… will be 8% in 2001 Creates personal, intra-corporate as well as inter-corporate networks Provides for instantaneous communication and information transfer Obsoletes traditional ways and methods of management and leadership

32. Expectations Driven by Lifestyles and Longevity… LIFESTYLES More disposable income (dual income) Greater costs Increased mobility Less free time Less family time Careers are becoming a priority

33. Lifestyle & Living… Some Interesting Facts Households with dual income have doubled since 1950, from 20% to 40% in 1996 7% of US households earned over $100,000 in 1995… a 109% increase over a 19-year period US workplaces with “flextime” represented 61% in 1998, up from 40% in 1996 Overall, US companies lag behind European organizations in ancillary benefits e.g., Norway provides paid child leave at 80% of the salary Germany provides free day care for 3-6-year olds Workforce values are changing… an MBA survey: 71% considered family important 4% placed their careers ahead of families 78% wanted good reference from employers for future jobs 62% wanted to work for exciting companies Compensation alone does not create employee satisfaction… especially in the light of CEO earnings

34. Longevity… Average life expectancy in the US is around 76 years 75 million baby boomers in the US workforce… about 37% of the workforce In 2000, 27% of the US workers will be 55 or older… this will be about 37% by 2020 Financial security leads to longer “work lives” Social Security concerns Medicare concerns Organizational payrolls, health benefits and social administration costs will escalate More creative management and job enrichment programs will be required

35. Purchasing Power… The US income and wealth gap is widening In 1995, the disparity between median and rich income was 15x The income for top 10% of US workers has grown by 0.6% annually from 1965 to 1995 It has increased by 8% for the bottom 10% US per capita income is 31% higher than for other industrial nations In 1999, the US average per capita income ranged between $34,000 and $43,000 Average US income was: $40,000 for Caucasians $27,000 for African-Americans $28,000 for Latino/Hispanic Americans

36. Executive Compensation… In 1997, CEO pay was 326 times higher than the average salary for US workers Typical annual compensation for a Fortune 500 CEO is $7.8 million, including stock options, bonuses, incentives, etc. In 1996, executive base salaries increased by 39%, and by 54% including stock options, benefits, etc. 11 percent of America’s largest companies would move from a profit to loss position, and 13 percent would have sustained a 50 percent reduction in profit, if the financial performance of these companies were restated for the cost of CEO stock options When the former US company Chrysler Corporation was acquired by Germany’s Daimler Benz, Robert Eaton, CEO of Chrysler, earned eight times more than Juergen Schrempp, the CEO of the acquiring and dominant company

37. Education and Earning Power… In 1980, a person with a degree could expect to earn about 45% more over their lifetime than a person who did not have a degree. By 1996, the differential had grown to 85% The number of people with four years of college education as a percentage of its total population over 25 years of age in 1995 was 23 percent as compared to only 14 percent in 1976 From 1965 to 1995, the average number of years of education increased from 11.8 to 12.7 years The number of people between the ages of 25 and 29 who have college degrees increased from 23.2 percent to 27.3 percent Among 25 to 64 year olds the relative earnings of a college graduate are, on average, about 60 percent higher than for those who do not have a college degree While the mean unemployment rate was 4 percent for college graduates, it was 7 percent for non-college graduates graduates from the top twenty-five business schools command starting salaries averaging $20,000 per year higher than those who graduate from “second-tier schools” and generally earn more throughout their lifetimes

38. Strategic Importance and Implications… Increasing income in all societal groups translates into expanded and more sophisticated markets. Creates new sources of revenue and growth. Directly drives and impacts organizational renewal. Increasing at a rate higher than for the general population… growing gap between top executive pay and worker salaries. Frequent misalignment with organizational performance. Strong correlation between education and earning potential and market power. The percentage of population with college and advanced degrees is increasing.