2.3.1 Competitive Advantage As Influenced By Human Capital
An organization’s competitive advantage can be influenced by factors such as personnel resources. Various surveys carried out indicates that many business executives of an organization value talent development as it is the basis of a company’s improved performance and realization of profits. The resource they value in an organization is human capital. Regarding strategic management, there are some changes. For instance, the new theoretical viewpoint is given by Grant (2001), the resource-based analysis (RBV). What differentiates this viewpoint from other strategic management environments is the emphasis it provides about the company’s internal working cycle, the methods employed, and the results obtained. While other models concentrate on the environment, RBV focuses more on business.
According to Johnson (2009), the three organization resources include human assets, physical assets, and organizational asset resources (35). The examples of Human assets are the judgment of workers and intellectual experience. Physical assets include the geographical location of the organization, machines, and the technologies used. On the other hand, the organization’s assets comprise the company structure, synchronization of systems, and the company’s relationship with the environment and the organization’s workers.
According to Patrick and Abigail (2003), SCA’s source can be from human resources since they cannot be substituted and, at the same time, add value to the firm. Therefore, it is essential to include human resources when coming up with strategies concerning the firm. Grant (2001) argues that even if these strategies are not applied universally, their basis requires human resources for full implementation.
2.3.2 Employee Diversity
Nile and Dyer (2004, 1166), defines diversity as the difference that exists within a group. For Instance, it illustrates that a group is made up of one or more features of those that compose the group. Additionally, the variety includes characteristics like ethnicity, age, disability status, gender, location, and religion. Therefore, diversity comprises various categories of people (Herring, 209). In the workplace, diversity includes culture, one’s level of education, employee status, religion, age, family status, and physical appearance.
2.2.3 The Development of Personnel Diversity.
The popularity of the idea of diversity started in the 1990s as a management method. Then from that period, it received more fame because of the primary socio-economic environment it impacts on an organization. Social changes have amplified not only cross-cultural relations but also employee diversity (Cook & Glass, 2009; Seyman, 2006). For example, it has amplified it to a point where employee diversity is seen as a requirement for the success of an employee strategy rather than an option. It is due to the strain of competition faced by organizations in economically supporting and enhancing the companies’ efficiency despite society’s changing prospects and priorities. The difficulties mentioned above explicitly focuses on why social conditions should be addressed in an organization. For instance, the primary reason is to ensure that the organization achieves its objectives. Twenty-first – century jobs are, according to labor market estimates, culturally, ethnically, and politically diverse. Therefore, diversity in an organization is necessary as it improves its efficiency despite challenges that may exist within the organization’s operating environment.
According to Benschop (2001), there is a need to include a diversity of staff in the debate on Strategic Human Resource Management (SHRM) since most of the workers have cultural variations that are sometimes overlooked (401). Therefore, the incorporation of the discussion would be a significant obstacle to be tackled by future field researchers (Curtis & Dreachslin, 2008; Shen, 2009). To them, the business climate currently has three vital qualities catalyzing the achievement of diversity in the workforce. The essential attributes comprise business globalization, shifting of labor patterns concerning demographics, fluctuation of competition, work composition, and creation. From the study, the changes in legislation and law are the most important drivers of diversity. For Instance, in the context of the Kenyan context, these legislations play a crucial role in the execution of these diversity programs. Thus there is need of an organization’s workers to be included in SHRM since they have different cultural requirements that are sometimes overlooked.
Those groups which have experienced an increase in employment include ethnic minorities and women. The changes in terms of demographic trends are complex and essential since they do not stand alone. Such developments are related to factors such as accelerated economic growth, increasing mortality and healthy living, ability shortage, and reduced economic activity for the elderly. Due to the decline of similarities in worker’s pool, organizations must create management policies concerning diversity that offer equal opportunities for employees from various backgrounds and talented workers. When an organization consider this aspect, it will be in a position to accommodate employee diversity. According to Gilbert and Ivancevich (2000), this will ensure the protection of their competitiveness in the market. Therefore, an organization will have an advantage over others in selecting skilled personnel.
Those businesses with a global footprint face international challenges when addressing complex difficulties related to culture (Allard, 2002). Therefore, diversity is perceived as a package instead of an opinion. Hence, it has encouraged the creation of a proper management approach. According to Marble (2000), there is a need for multicultural and multinational business capital management in the globalized world. For example, for these multinational companies to achieve their customer’s needs, they need to make informed decisions on mergers, solve the challenges arising by either quickly responding to these challenges or adjusting the cultural frameworks they have used. A proper management approach enables a company to quickly solve issue that may arise in its daily operations.
On the other hand, different policies related to management exceeds issues concerning communication and help to curb disagreements among the organization’s employees. Moreover, its inclusiveness and trust-based organizational culture are crucial. The culture generated thus offers a sense of belonging amongst an organization’s employees. It also increases business efficiency, inspiration, and commitment of an individual employee. Therefore, proper management policies reduces disagreements among employees and creates a culture where employees have a sense of belonging.
With the competitiveness of the 21st-century global market, these organizations need to apply Marble (2000) principles popularly referred to as “flexible specialization.” According to the principle, innovation and divergence are crucial for an organization. Competition is increasingly focused on broadening a consumer’s demands. Work teams, therefore, should come from various backgrounds and also be innovative in their undertakings. Their innovativeness will enable the company to achieve its objectives.
2.2.4 The Evaluation of the Impact of Diversity on Business Performance.
The determination of an organization’s performance and diversity makes it significant for one to identify how the two terms can be well-defined and quantified. Diversity of an organization, based on traditional categories, may emanate from distribution, for Instance, sex, nationality, and race. The diversity of employees has been divided into the following three categories to collect differences in an individual’s employment status, level of a person’s education, gender, and disability. First, is known as social category diversity, which emphasizes demographic variance such as age, ethnicity, and gender. Secondly, informative diversity emphasizing an individual’s educational background, experience, tenure, and skills. And the third category is value diversity, which describes the differences in personality and attitudes (Anderson and Metcalf, 2003, 350). Hence the three categories of diversities are necessary for the success of an organization.
Additionally, diversity not only enhances an increase in market share but also improves customer relations because it strengthens employee-to-employee relationships, labor costs would also decrease. Besides, it improves production efficiency and quality with the ability to solve challenges, being innovative, varied skills, and employee versatility. According to Cox and Blake’s (2001) research, when there are diverse employees, an organization, the market share of the organization, and sales increase, especially to the minority groups. Moreover, customer choice is also realized, where they would like to buy items from those who are like them and those firms promoting diversity. The primary reason why organizations realize increased market share is that they practice diversity. According to Bhadury (2000), customer satisfaction increases when the organization deals with foreign and domestic customers. Therefore, they not only maintain but also increase their market share.
Various studies carried out indicate that those managers who have successfully managed diversity in their organizations are good in talent and skills retention. According to Woods and Sciarini (2005), many employees may be from different organizations that value diversity. In such a situation, the employer may save even more through a cost-effective process of hiring. Therefore, they hire the most outstanding individuals for the job. According to McEnrue’s (2003) observation, those organizations that exercise diversity are 40 % lower than those organizations that do not want to; therefore, they are not affected by absenteeism and discrimination lawsuits
(Cox, 2001). For those employers supporting diversity management, and inclusive work environment enhances employee productivity and performance, creating a sense of job satisfaction. Moreover, diversity provides a competitive edge due to environmental flexibility (Cox & Blake, 2001). From their study, they have implemented the following measures; the cost of labor, performance, and quality of an employee, and market share. Organization’s that practice diversity will therefore, save more on hiring and training process.
Employee diversification can be achieved through various competencies and knowledge. Various employee skills, for example, improving productivity, leads to better productivity of the entire organization. Different skills also lead to innovation and better quality products and services in the organization. Moreover, it promotes the development of skills that necessitates the development of new diversification (Cox, 2001). To achieve this, the company can then create a conducive environment synonymous with high productivity levels, leading to the recruitment of both skilled and talented workers in the organization. And because of the employees’ egalitarian disposition, they will keep their workers. This is important for the firm since it will save both the training cost and hiring cost. Moreover, upholding the information and skills of the firm (DiTomaso, 2007). Therefore, one can quickly identify how diversity can affect employee skills and the overall organization’s performance.
In a company, there may be workers having diverse characters. A character is a distinctive characteristic of an individual. For Instance, emotions, attitudes, competencies, and values a person’s personality. These unique features of a particular employee may affect them in different ways. For Instance, having different attitudes towards working as a team, training, and organizational changes are important factors of employees in decision making. Attitude is how a person responds to certain activities. These feelings towards other people which arise from culture affect the attitude of a person. Therefore, the employees’ values determine their level of participation in the organization and the value they can add to the organization. The acquisition cost is the source of an organization’s efficiency, innovation, and creativity. This explains the growth of the organization’s revenue and market share growth (Bacharach, 2005). Therefore, it can be concluded that the diversity of employee values affects the performance of the organization.
According to Anderson and Metcalf (2003, 350), social difference includes diverse demographic characteristics of workers and their cultures. The social diversity category is associated with different cultures, such as the demographic attributes of an employee—for example, place of origin, ethnicity, gender, and age. At the workplace, particular different perspectives experienced comes as a result of diversity. For example, gender is seen as one of the factors that enhance business performance. Increased employee satisfaction and productivity leads to reduced labor cost in the organization.
Employees who are productive in the organization can be measured through an increase in sales and improved work efficiency. This goes with the organization’s aims, which are increasing profits and market share. An employee’s age is an essential component that can be used for learning in an organization because it enhances creativity, hence leading to the production of better products and services to the competitive market. Moreover, the business bottom line will be realized through effective business processes. Professional praise is given to those companies which practice gender diversity. They are, therefore, experiencing an increase in staff numbers and customer loyalty. Besides, they will receive more applications when they have job opportunities; hence they will have a chance of selecting the best candidate for the job. With the best employees, the organization benefits as they provide them with a means of competitive advantage. The organization will attract a lot of job applicants too. Therefore, the company will have an alternative to hiring talented and qualified individuals. When there is increased customer satisfaction, the organization realizes its bottom line ( Kochan, 2003). The primary reason for this is that the customers reward them through engaging in business with them; therefore, the revenue will continue to grow. Therefore, high level of productivity among the employees in an organization ensure that the company increases its market share.
Companies operating in trade-related industries such as multinationals have a more significant advantage because, with ethnic differences, the company can get skilled individuals in the labor market. It thus enables companies to communicate with their customers in the market place effectively. A positive image of the organization from the environment in which the organization carries out its activities contributes to sustained sales and profitability. Therefore, organizations can avoid misunderstanding by respecting the differences that exist. When an organization focuses on this, it will expand its market, market share growth, and customer loyalty (Gilbert & Ivancevich, 2000). Therefore, the study shows that social differences among the organization’s employees impact its performance.