International Organizational Behavior 2e Chapter 6 Page 1
CHAPTER 6
MANAGING DIVERSITY IN MULTICULTURAL
TEAMS AND INTERNATIONAL PARTNERSHIPS
CHAPTER INTRODUCTION
I hope that someday it will be more colorful and prettier, too.
—Deutsche Bank Chief Executive Josef Ackermann’s joking
remark in discussing the bank’s desire to add women to its all-male
executive committee
Issues related to diversity are viewed differently across countries. Diversity issues are sensitive
and complex. Managing diversity in a cross-cultural context includes (among others) assessing
the impact of heterogeneity in national, cultural, and ethnic backgrounds on employee morale,
cohesiveness, and communication. It also includes determining how to best promote women and
their careers in the workforce and establishing bias-free human resource (HR) management
International Organizational Behavior 2e Chapter 6 Page 2
CHAPTER REVIEW OUTLINE
MANAGING DIVERSITY: SENSITIVE AND DIFFICULT CHALLENGES
When companies cross borders, they may run afoul of cultural norms related to diversity, but
they may sometimes be able to hire better local employees because of local sensibilities about
diversity. Consider gender issues related to diversity in Japan compared to Europe and the U.S.
Gender discrimination has been illegal in Japan for more than two decades but laws are not
I. Diversity Challenges Facing Expatriates
American firms face diversity challenges in doing business abroad. Laws that make it illegal
for U.S. companies to discriminate against Americans on the basis of sex, race, ethnicity,
complicate American firms’ efforts to offer equal opportunities to potential expatriates.
Some American and European managers believe that they should not send females to certain
foreign locations (e.g., Saudi Arabia) because of a perception that the cultural environment in
some nations makes it difficult for them to be effective in expatriate roles. There are many
The reluctance of some U.S. firms to send women or minorities into “harm’s way” as
expatriates carries legal risk given American law, particularly if the stated reason is simply to
avoid clashes with local sensibilities. Females are a growing part of the expatriate population
International Organizational Behavior 2e Chapter 6 Page 3
The role of senior management is critical when it comes to helping females succeed abroad
in expatriate roles. Here are four sets of suggestions for managers to consider for women and
any potential expatriates who might encounter diversity-related issues abroad due to race,
ethnic background, or religion.
• Provide appropriate training. Management should provide training that educates
individuals about local attitudes and how to respond to them. For females, training
should focus on gender issues and how they can leverage their unique position to
improve their effectiveness. Accompanying spouses or family members should
participate in this training, as they may face similar challenges or can serve as a
support system for the expatriate. Firms are well served to include local employees in
training about diversity issues and perspectives.
• Leverage expatriates as role models. Once they return, expatriates are valuable assets
as role models for others. Former (or current) female expatriates should be
encouraged to share their experiences with other women being considered for foreign
assignments. This will provide positive evidence that women can, and do, succeed in
expatriate roles, particularly in challenging foreign posts.
International Organizational Behavior 2e Chapter 6 Page 4
Many multinational companies operate in countries that have male-dominated attitudes
and where finding talented employees is challenging. In such places, finding and
II. Corporate-Level Approaches to Managing Diversity
How do firms cope with various diversity issues across literally dozens of nations?
Multinational firms face the challenge of managing cross-national diversity (employees from
potential benefits and costs are summarized in Table 6.2.
Recent evidence suggests that few senior executives are proactive when it comes to
managing diversity issues. A study of over 4,000 executives in nearly 150 multinationals
found that roughly 90% fell short of being proactive on diversity in their firms. They
III. Cultural Diversity in Teams: Challenges and Solutions
Some of the thorniest diversity challenges that international managers face involve teams of
employees from a variety of cultures and countries. One of the biggest mistakes that
into one. It may be more appropriate to assume that teams are characterized by cultural and
other forms of diversity, at least at the start.
A. In the trenches with multicultural teams
Teams are the fundamental building blocks of organizations. There are work teams,
cross-functional teams, and management teams, virtual teams that use their pooled
B. Culture-driven differences in team behavior
uncertainty, and how much context matters in their communications. In other words,
cultural differences of individualistic and collectivist societies in their approach to work
can complicate, if not compromise, the effectiveness of multicultural teams in achieving
goals. The following are four specific areas in which culturally driven barriers can hinder
multicultural teams:
1. Decision-making norms that diverge or conflict. Multicultural team members
have different views about how much analysis (quick or extensive) needs to be
done before decisions are made.
International Organizational Behavior 2e Chapter 6 Page 6
trouble getting their points and knowledge across. This can create feelings of
incompetence and frustration as well as preclude the team from tapping valuable
expertise from all its members.
• Adaptation involves modifying the attitudes, processes, and practices found in the
team without disturbing the makeup of the members or altering the assignment being
tackled. A major advantage of adaptation is that the team can do it on its own in many
cases—sometimes without any management involvement. Adaptation takes
considerable time and energy, which may be in short supply, and tends to work best
with savvy team members who are able to recognize and acknowledge cultural
differences while being motivated to bridge them.
• Structural intervention is when management introduces changes that modify the
team’s structure or its work methods. The goal is to eliminate sources of conflict or
reduce tension between team members. Intervention makes sense when: 1) tension
already exists; 2) there are logical ways to subdivide the team’s work; and 3) cliques
on the team have negative influence that could be weakened by mixing up members.
Subgroups can create problems later if isolated members harden their attitudes,
causing flare-ups when the larger team eventually reconvenes to finish its work.
International Organizational Behavior 2e Chapter 6 Page 7
B. Cultural differences in social loafing
Another culturally driven phenomenon that occurs in groups and defies easy categorization is
“social loafing.” Studies conducted within the U.S. have repeatedly shown that people are
Studies show that, unlike Americans, Japanese perform better in groups than on their own.
Other studies have found that social loafing happens among Americans (individualists) but
not among Chinese (collectivists). Group effects do not always reveal an advantage for
Social loafing research suggests that managers must be careful when introducing group-
based incentives with teams in collective cultures. Since the type of group in which
collectivists work impacts performance, it is best to form teams around natural collections of
employees (i.e., existing in-groups) to maximize the effects of group incentives in collective
environments.
C. Using cultural diversity to your advantage
The composition of a diverse team tends to impact its initial performance—the greater the
diversity (based on characteristics such as gender, age, and/or culture, etc.), the more
difficulty the team will have. More diverse teams have bigger headaches while
International Organizational Behavior 2e Chapter 6 Page 8
communicating, more difficulty building unit cohesion, and more trouble setting up an
effective structure than less diverse or homogenous teams. Over the long run diverse teams
often perform best, particularly with novel problems—they bring many perspectives to bear,
Studies have found that homogeneous teams initially outperformed more diverse teams, but
were surpassed later. Part of the challenge with diverse teams is that people from different
cultural backgrounds have divergent views on what it means to work in a group or team. The
following are some guidelines for managing diverse multicultural teams.
• Create a clear vision and mission. Since team members come from diverse
backgrounds, they may disagree about how to focus their efforts. Time spent to “flesh
out” the team’s vision and mission in advance will help bridge individual differences
and increase the odds of success.
• Recognize that reactions to training may differ around the world. While providing
diversity training can help multicultural teams succeed, firms should understand that
team members may respond differently to training because of their cultural values.
International Organizational Behavior 2e Chapter 6 Page 9
D. Summary of diversity in teams
The benefits of team diversity take a long time to manifest, partially because diversity
increases the time that teams need to function effectively and make decisions. In the long
INTERNATIONAL PARTNERSHIPS:
MANAGING DIVERSITY, COMPLEXITY, AND COORDINATION
This section of the chapter addresses complexities and cultural challenges associated with
international partnerships between firms, management decision-making processes that lead to the
formation of new partnerships and alliances, and the developmental stages that international
firms often go through along the way.
I. Bridging Barriers in International Decision-Making
Management processes that facilitate strategic decision-making are critical if international
firms are to respond quickly to the competitive environments they face. A key competitive
A. Formal and informal mechanisms
Formal mechanisms, such as strategic planning teams, are specifically created by the firm
International Organizational Behavior 2e Chapter 6 Page 10
Informal mechanisms are also powerful and can be tapped to coordinate firms’
activities—common examples include the networks of relationships that exist among
B. Creating buy-in with the strategy development process
development tends to exacerbate. This can be avoided if firms use processes perceived to
be “fair” when creating international strategy. A fair process ensures more cooperation
from local subsidiary employees and helps strengthen relationships over time, especially
when a new strategy involves change. To have a fair process, executives from
headquarters must:
1. make significant efforts to familiarize themselves with foreign operations;
2. ensure two-way communication while strategy is being developed;
Figure 6.1 captures this process in detail. By engaging local employees, fully explaining
decisions, and clarifying expectations, executives can improve local employee trust in
headquarters management.
II. Toward Partnerships and Alliances: Stages in International Development
Many important decisions companies make involve how to grow their international
operations. Consequently, it is useful to understand how firms develop internationally over
International Organizational Behavior 2e Chapter 6 Page 11
A. Developmental stages
o Stage 1: Exporting. Many domestic firms begin “internationalizing” by exporting.
They may rely on an export manager or use consultants to provide the expertise
o Stage 2: Sales subsidiaries. As foreign sales grow, firms may start using distributors
or representatives abroad to promote products and provide service. For instance, L.L.
o Stage 3: International division. Today, Harley-Davidson is arguably in Stage 3, which
involves assembly or manufacture of products overseas. Harley-Davidson’s first
o Stage 4: Multinational. The final three stages involve complex multinational
operations that may develop over time. Stage 4 firms understand that while
headquarters must shape strategic direction, foreign outposts often do best when run
by employees who grasp the local environment.
o Stage 6: Alliances, partners, and consortia. Increasingly, firms are forming
relationships with each other to leverage their respective strengths or combine
resources. Firms with established partnerships such as joint ventures are often in
Stage 6. For example, automobile corporations Daimler, Mitsubishi, and Hyundai set
International Organizational Behavior 2e Chapter 6 Page 12
B. Multinationals from developing countries: an alternative road
These international development stages will not apply to every firm. Many multinationals
from developing countries have traveled a different evolutionary road. They
III. International Partnerships: Making Choices and Managing Challenges
How do companies decide which foreign firms will make the best partners in the first place?
Should that partnership be in the form of an acquisition, a joint venture, or some other type of
A. Choosing (carefully) international partners
A key reason international partnerships have a fairly low survival rate is that many
partnering firms fail to monitor their relationship closely. While it is understandable for
firms to focus on the business end of things, not addressing cultural differences and any
International Organizational Behavior 2e Chapter 6 Page 13
B. Ending partnerships
Eventually, most partnerships end. Consequently, before multinationals jump into
partnerships, they should think through how to get out of them. Partnerships can end for
many reasons: partnering firms run into financial trouble; firms find better partners that
will bring in more business and greater revenue; or management decides to pursue new
C. Acquisition challenges
Acquisition is a common way multinationals partner with foreign companies while
maintaining control at the same time. This is a complicated process, particularly when the
Acquiring a foreign firm means acquiring all its problems too, such as inferior products
and tense labor–management relations. Cultural and stylistic gaps often separate the
buyer and the foreign firm that it acquired. Recent research shows that, over the long
term, it is actually better for firm performance when there is a large cultural distance
International Organizational Behavior 2e Chapter 6 Page 14
D. Joint venture challenges
Multinationals with cutting-edge technology often want a controlling stake in joint
ventures to protect their intellectual property. This is increasingly the case with Western
multinationals seeking Chinese partners. Today, multinationals with technology to
protect in places like China want their own managers to run joint venture operations or at
least control the intellectual property, especially if a majority stake is not possible.
A common purpose behind many international joint ventures is to produce and distribute
a product in a particular country or region. In many cases, the partners include a
Cultural and managerial conflicts can hinder joint ventures. Different cultural values and
business practices may cause partners to clash when it comes to making decisions about
goals to set, how to run the joint venture, and how to evaluate performance. Recent
research suggests that ten or more decision factors shape joint venture performance—
many of which are complex, impacted by cultural differences, and center on how the
partners interact with each other in managing their relationship.
E. Other types of alliances