Organizational Behavior Course Notes – Managing Cultural Diversity


Class notes from my core MBA Organizational Behavior (OB) course. These focus on managing cultural diversity.

The term diversity refers to a variety of management issues and activities related to hiring and effective utilization of personnel from different cultural backgrounds.

Diversity as a Competitive Advantage

Six areas where sound management can create a competitive advantage
Inevitability-of-diversity issues (the need to hire more women, minorities and foreign nationals because of national and cross-national workforce)

  1. Cost
  2. Resource acquisition

Value-in-diversity hypothesis (diversity brings net-added value to organization processes)

  1. Marketing
  2. Creativity
  3. Problem-solving
  4. Organizational flexibility


  • Data shows that turnover and absenteeism are higher among women and racioethnic minorities than for white males.
  • Job satisfaction levels are often lower for minorities.
  • Frustration over career growth and cultural conflict with the dominant, white-male culture may be the major factor behind the different satisfaction levels.
  • Organizations that fail to use and retain employees from different backgrounds can expect to suffer significant competitive disadvantages compared to those firms that do.

Resource Acquisition

  • Attracting and retaining excellent employees from different demographic groups.
  • As women and racioethnic minorities increase in the workforce, organization must compete to hire and retain these people


  • Markets are becoming as diverse as the workforce.
  • Selling goods and services is facilitated by a representational workforce in several ways
    • Companies with good reputations have favorable public relations. People may prefer to buy from companies with good reputations.
    • Culture has a significant effect on consumer behavior. In some cases, people from a minority culture are more likely to give patronage to a representative of their own group.


  • Work team heterogeneity promotes creativity and innovation.
  • Minority views can stimulate consideration of non-obvious alternatives in task groups.
  • As long as team members have similar abilities, the heterogeneous teams were more creative than the homogenous teams.
  • In order to reap these benefits, research shows that heterogeneous team members have to be aware of the attitudinal differences of other members. Therefore, cultural awareness training must occur in corporations.

Problem Solving

  • Diverse groups have a broader and richer base of experience form which to approach a problem. Thus, it can also improve problem solving and decision making.
  • Decision quality if best when neither excessive diversity nor excessive homogeneity are present. “Variety is the spice of life.”
  • A core of similarity among group members is desirable.
  • Better decisions due to:
    • A variety of perspectives brought to the issue.
    • Higher levels of critical analysis of alternatives through minority-influence effects
    • Lower probability of groupthink (the absence of critical thinking is caused by the preoccupation of maintaining cohesiveness).

System Flexibility

  • Managing diversity enhances organizational flexibility.
    • Some evidence that women and racioethnic minorities tend to have especially flexible cognitive structures.
    • As policies and procedures are broadened and operating methods become less standardized, the organization becomes more fluid and adaptable.

Suggestions for Organization Change

Specific features of multicultural organizations

  • Pluralism: all groups respect, value and learn from one another.
  • Cultural groups are well represented in all levels of the organization.
  • Minority groups are members in the informal networks of the organization.
  • Absence of prejudice and discrimination.
  • Equal identification of minority members with the goals of the organization.
  • Minimum inter-group conflict based on race, gender, nationality, etc.

Five key components needed to transform traditional orgs to multicultural ones

  1. Leadership
    • Top management’s support and genuine commitment is crucial.
    • Champions are needed at lower levels, especially in key line managers.
  2. Training
    • Awareness training – creating an understanding of the importance
    • Skill-building training – educate on specific cultural differences and how to respond to differences in the workplace.
    • Treat training as an on-going education process rather than one-shot seminar.
  3. Research
    • Helpful in identifying issues to be addressed in the education process.
    • Identify areas where changes are needed and provides clues about how to make them.
    • Necessary to evaluate the change effort.
  4. Analysis and change of culture and human resource management systems
    • Uncover sources of potential bias unfavorable to members of certain cultural groups
    • Identify ways that corporate culture may inadvertently put some members at a disadvantage.
  5. Follow up
    • Monitoring change
    • Evaluating results
    • Institutionalizing the changes as part of the organization’s regular on-going processes
    • Should include:
      • Additional training
      • Repetition of the systems audit
      • Use focus groups for on-going discussions about diversity issues.

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