Monday, May 01, 2006

Leadership & Diversity

Today in the era of globalization, corporate top management in most companies is characterized by a diverse muti-ethnic, multicultural teams. This heterogeneous team of individuals represents the changing facet of modern leadership. Even in my current firm, the top management team consists of people from USA, India, Pakistan, France, & Egypt: A heterogeneous team of individuals from a wider variety of backgrounds and perspectives.

Why a Heterogeneous Team?

While studying at University for my MBA, I had done a study on benefits of ethnic diversity - it was a team study done by a team of diverse individuals from India, Thailand, USA and Hong Kong. In this article, I am writing about the summary of benefits of multiethnic leadership and means to create a successful and diverse management team. This writing is largely based on my previous study and some of my observations.

Benefits of Diversity

It has been found that diversely educated and experienced top management teams give firms an edge, enhancing their ability to manage globalization and strengthening their financial performance. Heterogeneity in the leadership team: breadth of functional expertise, educational background, international experience, and industry experience helps rapidly changing industries, such as semiconductors, IT, Bio-technology, Oil & natural gas, and medical technology etc. Diversity in management team gives the firm a distinct competitive advantage.

On the negative side, it has been found that without the right mix of incentives and an appropriate leadership style, diversity can hinder, not help, performance. The problem is that heterogeneous teams are harder to motivate and manage. Heterogeneity decreases loyalty and increases the probability of conflict.

Given the high stakes of global competition, many firms are actively encouraging diversity among the work force and also at the top level management teams. A close knit like minded homogenous management teams are being replaced by a more heterogeneous group of diverse leaders. This type of transition is increasingly common in today’s globalizing world.

Steps to promote diversity

Most people think that it is easy to create a diverse heterogeneous management team - Just hire people from different countries/backgrounds. The reality is that creating a diverse team is hardly that simple. Yes, one can create a diverse, multiethnic team. But it may not perform. To improve performance and motivate such a team, we found that the following steps were necessary:

  • Promote an open culture: Bringing a diverse team together also brings a sense of insecurity among managers. It is quite natural for people not to trust others who do not share their beliefs/practices. This is a great obstacle for success. The only way to overcome this is to create an open culture. Create an environment where information should flow freely within the organization. Encourage an internal debate among the mangers - let this debate be a healthy one - where all opinions are welcome without criticizing the person.

  • Training is Important: Teamwork at the top level is extremely important. Individuals who make up the team may not be aware of the cultural nuances of other members in the team. It is therefore very important to provide training to the members to help them understand the cultural differences. Training can be in several forms: personal coaching by CEO, or formal training on cross-cultural work environment, or various team building activities.

  • Focus on goals. The diverse multiethnic team should concentrate on the goals. All the debates, arguments must be directed towards defining the goals for the organization prioritizing them. To achieve this, CEO should refrain from controlling the discussion, instead he/she should provide direction or guidance. This will keep the collective attention of the team focused on the topics of shared interest.

  • Get the pay equation right: In heterogeneous teams, cohesion — already in short supply — will be further threatened by significant differences in pay among members (including the CEO). A fair compensation structure, which includes incentives based on objective performance benchmarks aligned with the organization’s core strategy, is essential to maintaining harmony in a management team.
Closing Thoughts


Having a diverse leadership cannot guarantee success, but it improves the odds. Firms that adopt a diverse leadership teams are less likely to fail in a rapidly changing business environment. Global firms need diversity as they need to operate and succeed in many countries.

2 comments:

Carolyne said...

Do you have references to support this statement. I am looking for just this information - It has been found that diversely educated and experienced top management teams give firms an edge, enhancing their ability to manage globalization and strengthening their financial performance. Heterogeneity in the leadership team: breadth of functional expertise, educational background, international experience, and industry experience helps rapidly changing industries, such as semiconductors, IT, Bio-technology, Oil & natural gas, and medical technology etc. Diversity in management team gives the firm a distinct competitive advantage.

Chaitanya said...

You have beutifuly put your thoughts on diversity. I am Chaitanya, a MBA student from Mumbai.
I am doing a project on diversity initiatives in Indian companies. I do agree with your thoughts & would like to put them in my research work. If you can suggest any areas which i should concentrate on in Divesity management for my project & any source of information, it will be grete help for me.