1.4. GLOBALIZATION AND DIVERSITY

While domestic concepts of diversity were vital tools for economic and social change in the United States, they fall short in a new, global environment. As we've seen, the values underlying U.S. domestic diversity initiatives do not translate wholesale to other cultures, nor do they adequately reflect the importance of culture itself. Yet, as Ellis Cose, author of The Rage of a Privileged Class, says, "It is going to be awfully hard to forge a globally competitive workforce if the races can't learn to work together." As Cose notes, managing diversity domestically is a prerequisite for succeeding globally. Conversely, because of the increasing internationalization in home markets, addressing global diversity issues is increasingly a prerequisite for succeeding domestically.

To understand the complexities of managing diversity in a global environment, we must first understand the phenomenon of globalization itself. To do that, we'll investigate the causes and forms of globalization, discuss the threat of cultural convergence and cultural imperialism that often accompany discussions of globalization, give sample corporate responses to globalization, and provide a Three Cultures Model that helps articulate the three key cultures whose interaction must be mediated in global corporations.

1.4.1. Hallmarks of Globablization

The cover of a recent Economist magazine is simple and clear: A picture of a hurricane from space is shown with three words in large print—"Storm over Globalization."

Referencing the recent flurry of activities over World Trade Organization (WTO) and International Monetary Fund (IMF) meetings around the globe, the Economist article was as much about fear of loss and the erection of cultural barriers as it was about globalization and economic policies. Yet the structural approaches to globalization taken by many corporations tend to neglect culture as a key variable or treat it superficially. International HR practitioners typically address global compensation, sourcing, relocation issues, and even cultural adaptation at its simplest—but often there is a gap between domestic diversity practitioners and those dealing with the complexities of the global business. In many organizations, global diversity and cultural differences are still seen as obstacles to be overcome rather than as tools to be leveraged for business success. In fact, domestic and global diversity is often still seen as an end in itself, rather than as a means to some other business end.

It is this attention to global competitiveness that marks the next phase of the evolution of the concept of diversity. Globalization has brought with it intense international competition, not just among the major corporations of the world, but in small businesses as well. A global war for talent, domestic and cross-border mergers and acquisitions, joint ventures and alliances, changing employee expectations and demands, and pressures for greater productivity are just some of the business drivers facing executives and business leaders worldwide. Michael Marquardt has said that four "Ts"—technology, travel, trade, and television—have brought us quickly to the global age.

Fortune 100 companies aren't the only ones going global. Even small and traditionally domestic businesses are crossing new borders in response to dramatic global shifts in demographics, markets, and products. In fact, one of the five major business reasons for focusing on diversity in the United States is globalism, as reported by the New York-based Conference Board, an organization focused on research about corporate issues. Individuals in nations around the world are recognizing—and capitalizing on—the power of globalization. For example, why else would Iranian and Chinese demonstrators carry their signs in English if not expressly for American TV audiences?

"Globalization," says New York Times reporter Thomas Friedman, "is the next great foreign policy debate." Friedman is the author of The Lexus and the Olive Tree, a 1999 bestseller that helped readers understand the implications of globalization by focusing attention on the delicate balance and tension between our simultaneous dedication to modernizing, streamlining, and yearning for advancement (symbolized by the Lexus) and our ongoing yearning for our cultural heritage and identity as we fight over who owns which olive tree.

The globalization "system," as Friedman calls it, "is not static, but a dynamic ongoing process: globalization involves the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before—in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before, and in a way that is also producing a powerful backlash from those brutalized or left behind by this new system."^[]

Cross-border mergers such as those between Citigroup (United States) and Nikko (Japan), BP (Britain) and Amoco (United States), and Daimler (Germany) and Chrysler (United States) have become more common and also drive the need for managers to confront diversity head-on and to develop a global mindset. Cultural clashes are typically the most difficult aspect of these partnerships. Also, billed as "mergers of equals," they often are not. "How do you pronounce the company's name?" goes one joke heard often after the BP/Amoco merger. The answer? "BP: the 'Amoco' is silent."

1.4.2. Globalization's Impact

While many view globalization as either good or bad, Friedman understands more clearly that the tension in globalization is holding "both-and" in our minds at the same time. Globalization is neither inherently good nor evil, but, like the demographic changes that have driven U.S. diversity work, simply a current and future reality. The sooner we stop debating its merits and focus on understanding its implications and the ways in which we can benefit from it without losing our own unique identities, the better. To take it a step further, one goal of global diversity work—and by extension, this book—is to help us not only understand global diversity and its impact on business, but to help us understand how to leverage those differences for human, business, and societal gain.

Let's look at the globalization process as it relates to diversity. Facilitated by the rapid development of new information and communication technologies and resulting in greater transparency and accountability, globalization represents a challenge for maintaining cultural diversity and also creates the conditions for renewed dialogue and learning among cultures and civilizations. It also creates the conditions for renewed hostilities and fear that with globalization comes a loss of cultural identity.

Companies are increasingly going global for several reasons—to serve new markets, to gain access to lower cost or higher quality, to build economies of scale, to diversify because of lagging domestic market share, or to preempt competitors. McDonald's, for example, faces a maturing fast-food market in the United States, but the portion of operating income from abroad is expected to grow 20 percent annually.^[] McDonald's executives prefer to call their company "multilocal," rather than multinational or transnational, building local supplier chains, using local talent, and exerting little management control from their Illinois headquarters.

The term "global corporations," says professor Ronald Bosrock, "generally describes where the company does business, but not how the company does business."^[] Bosrock offers the following shorthand for understanding the different stages of global perspective:

• Ethnocentric: Tending to regard one's own culture as superior; tending to be home-market oriented. All controls located at home office.

• Polycentric: Tending to regard each culture as a separate entity; tending to be oriented toward individual foreign markets. Allowing foreign entity control for one market.

• Regiocentric: Tending to be oriented toward large regional markets, with regional headquarters that have separate strategic plans and separate support staff.

• Geocentric: Tending to view the world as one market; tending to set worldwide strategy. Interdependent markets with no regional headquarters and no regional supporting staff. Management coming from whatever country produces the best talent. Ideas accepted from whatever location produces the best results.

In Chapter 2, you will find more detailed information on corporate stages of globalization as well as the ways in which the stage of globalization of an organization can influence global diversity needs and strategy.

Regional responses to globalization often reflect the skill of various countries to manage international and global diversity. European companies have a tendency to put nationals at the head of foreign subsidiaries and a small number of nonlocals, while the Japanese like to reproduce Japanese management and their corporate culture. In general, U.S. companies have historically tried to reproduce their corporate culture by authority of the top management and through the imposition of headquarters' procedures.^[]

"Building a value system that emphasizes seeing and thinking globally is the bottom-line price of admission to today's borderless economy," writes Kenichi Ohmae in The Borderless World. But the world isn't borderless, as his book title suggests—instead, it is only money that transcends borders. The world remains full of borders—racial, national, linguistic, economic, organizational, functional, market, and many others. Human resources and diversity professionals must be realistic and respectful about these borders and cultures and must learn to effectively mediate among competing interests, demands, and cultures both within—and without—their organizations. Above all, we must sublimate the American urge to eliminate or blur rather than learn from those borders and cultures. "Globalism," says diversity consultant R. Roosevelt Thomas, Jr., "is unadulterated complexity." In answer to that complexity, Adler warns in International Dimensions of Organizational Behavior,"Today we no longer have the luxury of reducing international complexity to the simplicity of assumed universality."

Krispy Kreme, a North Carolina-based company, has only scratched the surface of the U.S. market, with a mere 226 stores nationwide, compared to competitor Dunkin' Donuts' 3,500. But that's not stopping them from going global to capture a greater market share: The first European Krispy Kremes should open in Britain and Spain in early 2003. As reported in Time magazine (August 12, 2002), Krispy Kreme first opened a store in Toronto, followed by the announcements of franchise agreements for thirty stores in Australia and New Zealand. They are expanding internationally because they believe there is a market for their very American deep-fried, sugary products. It is a strategy that has worked for other food and beverage product companies such as McDonald's, PepsiCo, and Starbucks. Still, Krispy Kreme must avoid the mentality of "We like it in America, so you ought to like it too," warned John Stanton, a food-industry expert at St. Joseph's University in Philadelphia.

1.4.3. Cultural Bereavement

Understanding this delicate balance between exporting Americana and being respectful to the local culture is a key challenge facing those U.S. companies going global. Because of the immense size of the internal market of the United States, it is not a lesson that many American businesses have taken to heart until very recently.

When Pizza Hut entered Yemen, it created integrated dining rooms in a traditional Moslem society where meals rarely take place outside the home and, when they do, separate rooms or curtained-off areas are provided for men and women. "The forces of internationalization and traditional culture clashed: Women could no longer be separated from men unrelated to them while they ate, or eat in public without removing their veils."^[] Of concern in this and other similar examples is globalization's tendency to demolish local norms that traditional societies use to provide a common identity and purpose to individuals.

In some cases, the subjugation of local culture is not the intent. For example, for some people Microsoft's dominance in operating systems for computers is an indication that they are pursuing cultural dominance as well. When Microsoft recently decided not to support the Icelandic language in its Windows 98 product, it created an uproar in Iceland. The Icelandic Language Institute saw Microsoft's intent as destroying their cultural heritage; however, Microsoft's motive wasn't cultural, but commercial. The market for an Icelandic Windows 98 just wasn't big enough. But as Claude Smadja, managing director of the World Economic Forum, has said, "Corporations will have to find ways to reconcile their search for maximum return to shareholders with their inescapable social responsibility to the people and environments in which they operate."^[]

Corporations will increasingly be faced with a demand for their products and a concomitant cultural bereavement as consumers fight to maintain their own sense of identity. While economist Robert Reich wrote in his 1991 book, The Work of Nations, that "There will be no national products or technologies, no national corporations, no national industries," others believe that view is far too simplistic.

Francis Fukuyama believes that homogenization and an affirmation of distinctive cultural identities will occur simultaneously. On a macro level of large economic institutions and political institutions, Fukuyama believes, there is a greater homogenization of institutions and ideologies. On a cultural level, though, he believes it is not clear that homogenization is proceeding nearly as rapidly. Fukuyama believes that our attention to global consumer culture is superficial. "A culture," he says, "really consists of deeper moral norms that affect how people link together."^[]

Benjamin Barber's influential book, Jihad vs. McWorld, reminded us that, if we looked only at the business section of the newspaper, we would be convinced that the world was increasingly united, that borders were increasingly porous, and that mergers were creating a single, global market. But if we looked only at the front page of the paper, we would be convinced of just the opposite—that the world was increasingly involved in civil war and the breakup of nations. Jihad, Barber says, pursues a bloody politics of identity, while McWorld seeks a bloodless economics of profit. The tension between these two world views is a hallmark of globalization.

It's a confusing debate for many: Is globalization the source of economic growth and prosperity or is it a threat to social stability? By many measures, the world economy was more integrated at the height of the gold standard in the late nineteenth century than it is now.^[] The pros and cons of globalization have centered around issues such as competition for markets, workers' rights, loss of workers' jobs, human migration, environmental concerns, and the growing sense that the process has not yet delivered on the promise of improving the lot of a very large part of the world.^[] Some believe that the rapid pace of globalization has outstripped the ability of the corporation to evolve and adapt.

According to the World Dictionary of Multinational Enterprises, the economic power commanded by the world's five hundred largest corporations accounts for 80 percent of the world's direct investment and ownership. The top twenty-five global employers have a combined payroll exceeding ten million workers. Corporate headquarters for the five hundred largest industrial firms are located in thirty-two different nations.^[] With that power comes great responsibility.

One of the most controversial aspects of globalization is the worldwide spread and dominance of American culture through the dramatic growth of mass communications such as music, television, films, and the Internet, as well as through the penetration of American corporations overseas. When EuroDisney opened in 1992, Michael Eisner, CEO of the Walt Disney Company, declared it "the most wonderful project we have ever done." Jean Cau, a French critic, had another viewpoint: "A horror made of cardboard, plastic, and appalling colors; a construction of hardened chewing gum and idiotic folklore taken straight out of comic books written for obese Americans."

The biggest tourist attraction in Romania today is not one of its own national treasures. Instead, it is Southfork Ranch, a million-dollar replica of the home made famous by TV's nighttime drama, "Dallas," in the 1970s. In 2000, Jose Bove was led away in handcuffs after the French farmer was sentenced to three months in jail for assault on a McDonald's being built in his hometown in the middle of France. Bove was a national hero.

Yet this pervasive and negative image of Americans on a mission to spread their culture through globalization is not borne out in a recent survey of Europeans. In a November 2000 United States Information Agency (USIA) poll, only minorities in Italy (19 percent), Great Britain (23 percent), and Germany (31 percent) perceived U.S. popular culture as a serious or very serious threat. The French were more critical, with 38 percent agreeing that American culture poses a serious or very serious threat.^[]

When Americans themselves were asked how they felt about McDonald's opening up in cities around the world or the popularity of U.S. TV shows in other countries, only 43 percent said they had positive feelings. It appears that Americans are cognizant of the dangers of wholesale "export" of American culture abroad. And there is also awareness of the need for us to become more culturally competent as a nation. In a recent poll, a near-unanimous majority (91 percent) of U.S. citizens agreed, "The global economy makes it more important than ever for all of us to understand people who are different than ourselves."^[]

Companies are beginning to realize the truth in that statement. When Swedish furniture retailer Ikea entered the U.S. market, it replicated its Swedish concepts, such as no home delivery and beds that required sheets conforming to the Swedish rather than U.S. standard. Swedish nationals constituted virtually the entire management team of the company and fluency in Swedish was considered essential at the senior levels.^[] The company learned from its mistakes. While its model was to build a huge building with a thousand parking spaces around it, when they entered Hong Kong, they put a small IKEA in the middle of Causeway Bay with no parking spaces. That store is now second in the world for sales per square foot.

McDonald's "multilocal" approach realizes that some elements—such as lining up and self-seating—have been readily accepted by consumers for whom those practices are out of the cultural norm. But other aspects of their U.S. model have been rejected, especially those relating to time and space. In Hong Kong, Taipei, and Beijing, for example, consumers have turned their neighborhood restaurants into leisure centers and after-school clubs for students. "Fast" in that case refers to the delivery of food, not its consumption.^[] The Pillsbury Company realized, after airing its "Doughboy" ads in the U.K., that British women did not like the idea of taking cooking advice from a young boy, so their ads were changed to use a man's voice with a British accent. The reasons for all these adaptations? Cultural difference—those "all-important respects" that Takeo Fujisawa referenced in his discussion of Japanese and American management.

Kenichi Ohmae, in The End of the Nation State (1995), denounces the view that globalization will result in the deculturation of the world. Instead, he says, there will be partial convergence of tastes and preferences. Global brands, writes Ohmae, "overlay new tastes on an established, but largely unaffected, base of social norms and values." Where some warn of the creation of a "McWorld," Ohmae envisions strong cultural identities that enjoy what the world marketplace has to offer—on their own terms. "The contents of kitchens and closets may change," he writes, "but the core mechanisms by which cultures maintain their identity and socialize their young remain untouched." Indeed, there is convergence in economic systems around the world, not in value systems.

Strong national, regional, and civilizational cultures continue to challenge us in doing business globally. But to fully understand and address those challenges, we must first understand the issues of culture and cultural identity themselves. What is culture? What is its impact on business practice? How can we begin to see culture less as an obstacle to be overcome and more as a business advantage to be leveraged?

1.4.4. Global Diversity Strategies

In addressing the needs of globalization and in building global corporate diversity strategies, research by The Conference Board has shown that the following practices are necessary to achieve success:^[]

• Establish common values and purpose across cultures;

• Provide support and resources at international sites;

• Share best practices;

• Establish a multicultural, multinational team to develop and oversee initiatives;

• Create both centralized and decentralized structures;

• Develop global diversity councils;

• Initiate worldwide diversity conferences;

• Organize region- or country-specific task forces; and

• Design and implement global diversity education and training.

In addition, we would add the following:

• Learn from other cultures, not just about them. You can use the "Global Diversity Strategy Audit" for your company.

1.4.5. Suggestions for Using the "Global Diversity Strategy Audit"

Objectives

• Assess level of an organization's stage of development in dealing with global diversity

• Increase awareness and knowledge about aspects of a global diversity strategy

• Target areas of needed development

• Provide data for strategizing regarding organization development

• Identify individuals who need to be involved in the global diversity strategy of the organization

Intended Audience

• Members or managers of diversity task forces or planning teams

• Executive staff involved in strategic planning or diversity development strategies

• Executive staff charged with organizational strategy regarding diversity

Time

• 45 to 60 minutes

Materials

• Copies of the "Global Diversity Strategy Audit"

Directions

• Discuss and define the steps of global diversity strategy outlined on the audit.

• Ask team members to individually respond to the questionnaire, following directions.

• Ask small groups of three to five to discuss their responses and be prepared to report back to the large group their suggestions for what needs to be done, based on their assessment of where the organization is on each strategic element.

Questions for Discussion/Consideration

• What are our organization's strengths and weaknesses?

• How similar or disparate are perceptions of different individuals in your group? What does this say about the communication of global diversity strategies in the organization?

• Who needs to be involved in dealing with the issues surfaced?

• What does this tell us about our organization?

• What do we need to do to improve our effectiveness?

Cultural Considerations

• Talking about organizational performance may be uncomfortable for some team members. In such cases, have participants focus on Column 2 (What Is Being Done) in order to first allow for celebration of those global diversity strategies before focusing on any problem areas.

Caveats, Considerations, and Variations

• Participants may not have enough information to answer each item. If not, ask them to focus their attention on those areas in which they do have experience.

• This can be used as a planning tool for diversity councils or teams responsible for global diversity in the organization.

• It can be reassessed quarterly to track progress.

Underlying these strategies are the need for cultural competence, the ability to understand cultural difference, and the ability to leverage it for business gain—and at a deeper level than simply global branding and global consumer preference. Globalization has forced corporations to move from their focus on domestic diversity to a broader focus in which understanding the impact of national and civilizational culture is a core competency. To fully understand the impact of this and learn to manage it, we must first understand more clearly what is meant by culture itself.

In his 1999 book, Globalization and Culture, John Tomlinson suggests that globalization cannot be understood simply in terms of increased mobility around the world or through the development of electronic networks, but must be set in relation to a host of cultural practices that are embedded within the "mundane" experience of everyday life. At the center of his thesis is how "the impact of globalization is felt not in travel but in staying at home."

Success in the next twenty years, for many companies, will stem from successful—and innovative—joint ventures and alliances, many of them across cultures as well as across product and service lines. But the conditions for success of such global collaborative ventures has changed. No longer simply product-driven, the survival of new global enterprises will depend as much on flexibility in managing cultural diversity as on sophistication in marketing techniques. This entails not only the successful management of a multicultural workforce in a global context, but also the ability to vary services across cultures—not simply by using marketing ploys imposed from the outside, but by an understanding of how culture drives differences from within. It's essential to grasp the deep structures—religious, social, ethnic, and ethical—which influence the way the others reason, what they expect, and how they listen. This requires a level of genuine understanding that goes beyond rapidly acquired skills or cultural "dos and taboos."

For while business is global, management remains culture-bound. Being culturally competent, notes Henry Lane in International Management Behavior, entails "a willingness to acknowledge cultural differences and to take steps to make them discussible and, thus, usable." Increasingly, the question we must ask ourselves when working across cultures—whether in our own country or across borders—is "Do we understand how they are thinking about the world?"^[] To do that, we must understand both our own culture and that of others.