Authored by Simon Hollingworth
Liftstream’s previous article in this series, “Boardroom Diversity Means Better Business”, concluded that a diversity initiative is not something to undertake as a Public Relations exercise but because a diverse boardroom makes better business sense. Scott Page in his book, “The Difference”, backs this theory up. He used mathematical models to demonstrate that a diverse group of people will solve a complicated business problem far better and more efficiently than a homogeneous group.
Working on the assumption, therefore, that the smart businesses are those which actively seek to employ a more diverse workforce, this article focuses on exploring the specific challenges related to implementing a diversity programme in emerging markets. It is generally accepted that the majority of advanced diversity-led companies originate from Westernized countries in Europe and North America where the process of increasing diversity among the workforce is a deliberate and considered exercise. As these companies expand into the emerging countries of the developing world, where social structures and cultural influences are different, how do they migrate their business values to those markets? Or, are they forced to adopt local culture values that perhaps are less encouraging of the importance that minorities play in the corporate world.
Many of us have direct experience in this globalised economy of working for companies that originate from a country different to our own. This can be a rewarding experience but requires a high level of adaptability and tolerance for the different business practice. Liftstream’s founder, Karl Simpson explains:
“While I was working in Silicon Valley, I helped many European companies create leadership teams in the US, and today Liftstream helps US companies enter Europe. It is evident there are considerable challenges associated with getting leadership teams who truly appreciate the nuances of the local market they are entering.”
Perhaps supporting the view that culturally diverse management can help achieve a winning International strategy. Karl also says:
“I have seen many companies pay a heavy price for failing to understand cultural difference and the importance of aligning your business with the local market. There are few businesses where merely replicating your business elsewhere can achieve success, so it follows that your people and human resources strategy must be equally geared towards localised market success.”
Conversely, as successful companies in some emerging markets swallow up Western companies as they grow acquisitively into new markets, do those organisations find themselves under pressure to operate a diversity culture that does not exist in their own market but which might be highly integrated across the acquired company. This also raises the question as to whether a universal diversity policy is really truly achievable across multiple international markets.
It is worth noting before we in the West take too much of the moral high ground, that in her article “Glass Ceilings: Unconscious bias still holding women back”, Sarah Murray found that senior women seem to fare better in some emerging markets. Her evidence is further support by a recent report by Grant Thornton which found that in the BRIC markets, 26% of senior management roles are held by women, comparing with just 18% in the G7. South East Asia has the highest level of participation at 32%, with the EU on 24%, Latin America 22% and North America just 18%, as reported recently by Grant Thornton.
At a country level, Russia streaks ahead at 46% of senior management being women. In Australia and Thailand, 30% of Chief Executives are female while in mainland China the figure is 19%. Compare that to only 6% of CEO seats in the UK and US being occupied by women. Singapore-based Karen Fawcett, group head of transaction banking at Standard Chartered Bank, feels this may be due in part to there being larger numbers of family-run concerns in Asia where siblings and husband and wife teams often make up the board members. Let’s not assume, therefore, even though this situation may have arisen as a consequence of other social factors rather than a deliberate policy, that the West is making all the running in the pro-diversity stakes.
It is worth noting that since 2009 though, the emerging markets have seen a decline in the participation of women in management, which might indicate a change resulting from greater prosperity or some other factor.
Salman Bokhari, Managing Director, SIDRAPEX Pte Ltd. Singapore, and a former executive with pharmaceutical company Lundbeck, suggests that the issue of hiring a diverse workforce in emerging markets is not entirely one of cultural differences but equally making sure that the management process is handled in the correct manner.
“It is important that if a company decides on a so-called pro-diversity policy it is also prepared to take newcomers into its inner ‘trust circle’. That may also mean devolving decision-making power. Very often companies show diversity because it looks good on the annual report cover, and because it meets the needs of a Western home audience, but do not really transfer power to the periphery.”
While acknowledging the need for a diverse hiring policy, he also points out that, in some instances, there are factors that may take precedence over diversity when setting up a team in an emerging market where perhaps the positive effects of diversity may have to be forfeited in the name of initial downstream success:
“A diverse hiring policy per se is not a guarantee for growth [in an emerging market]. Relevant experience counts for more as well as the ability to manage uncertainty. This is particularly true in emerging markets where quantity substantially exceeds the quality of applicants, and where the future is consistently uncertain…
…Building and maintaining trust over time is the single most important consideration, next, of course, to hiring suitability. This may come about either as a result of diversity policy or specific hiring. In the Asian context it is important also to remember the influence of ‘face’ and ‘guanxi’. “
His references to ‘face’ and ‘guanxi’ in China also go to show that, wherever you do business, social status and image can play a significant role in the hiring process. In such instances, diversity may well be placed on the backburner in order to satisfy the shorter term needs of local conditions.
Cesar G Concepcion, Critical Care General Manager, China, Novartis Pharmaceuticals highlights the importance of striking the balance between diversity, company culture and local conditions:
“My major challenge is always finding the right combination of diverse individuals that makes a high performing team and selecting individuals that will fit “our” culture.
I’ve seen organizations fail when a “foreign” leader, with international experience, is placed in a position to manage a team but she/he does not have or understand the multi- cultural sensitivity needed to succeed in the “new” market. “
Experience suggests, therefore, that, even where a diverse workforce is the desired outcome, individual circumstances dictate that policies implemented successfully elsewhere may have to be overlooked in a different market and that each situation may require its own individual treatment. The issue is not necessarily the different cultural factors pushing back against diversity in principle but more the fact that there are factors that pull in other directions in the name of ‘getting the job done’. What seems clear is that a policy devised and implemented in the West is unlikely to be applicable across all markets – a theory that Bokhari himself backs up unequivocally:
“A ‘one-size-fit-all’ approach does not work, neither for Western nor for Eastern companies. Given the sheer diversity in the emerging markets this would be a flawed approach also as far as business policy is concerned.”
The emerging markets story, led by the BRIC countries, is still a relatively nascent economic story. The fact that their respective prosperity has coincided with a severe and rapid economic decline in Western economies and glacially slow recovery, has only served to heighten the attention given by corporate CEOs and business analysts as to the opportunities these markets present. There remain high business pressures to secure emerging market presence and companies are taking aggressive strategies to ensure they are not left out of this growth story. Only recently we have seen a $13.9bn acquisition by Takeda, the Japanese pharmaceutical manufacturer, of Nycomed, a European company, which was aimed at seeking a stronger footprint in the emerging markets. Yet to fully integrate these businesses, the evidence of how they harmonise their human resources strategies remains unanswered, but these are big-stake bets on greater market penetration and the human capital assets will feature strongly in delivering the value.
Ultimately few companies in the west, or elsewhere, would or have placed diversity ahead of the growth and prosperity of their company. Diversity remains a highly debated topic and there remain many people in leadership positions who simply require competently skilled professionals in the correct jobs driving their companies forward. What we are hopefully beginning to see is that more executives and company boards, feel that by encouraging diversity they are fuelling that aforementioned prosperity and it is indeed becoming a competitive advantage as they grow in both their historical markets and the new emerging economies which now strongly feature.
It seems that avidly pursuing any policy like employee diversity, and prescribing this to any local market to which you enter is simply unrealistic. However, as those local businesses take hold and begin to align themselves to the global values of the company, the opportunity to enrich the workforce diversity will grow in importance.