THE EFFECT OF WORKFORCE DIVERSIFICATION ON ORGANIZATIONAL PERFORMANCE IN THE BANKING INDUSTRY IN KENYA
MUDI PATRICIA NATASHA
A Research report submitted to Strathmore School of management and Commerce in partial fulfillment of the Requirement for the Degree of Bachelor of Commerce (Human Resource Management)
This project is my original work and has not been presented for a degree in any other University.
SIGNED …………………………… DATE ………………………………
Mudi Patricia Natasha
This management project has been submitted for examination with my approval as the University Supervisor.
SIGNED ………………………… DATE ………………………………..
I would like to acknowledge my project supervisor, Madam Roseline Lubullelah, for her intellectual support on my project which enabled me to successfully complete my project. I would also like to acknowledge my parents Mr. and Mrs. Mudi for their constant encouragement and moral support throughout my studies. To my relatives and friends for their encouragement as I juggled my studies and my project.
To God for the far He has brought me and His constant grace and favor in my studies and my life in general. Receive all the Glory and Honor.
It is with great humility and happiness that I dedicate this work to my father, Mr. Anthony Mudi and my mother Mrs. Elizabeth Mudi. Making you proud is my motivation in life. You have invested in me financially, morally and spiritually. Thank you!
I also dedicate this project to my dear grandmother who was not able to see me reach this far, Rest in Peace.
Table of Contents
TOC z o "1-3" u hAKNOWLEDGEMENTSPAGEREF _Toc521145821 hiiiDEDICATIONPAGEREF _Toc521145822 hivLIST OF TABLESPAGEREF _Toc521145823 hviiiCHAPTER ONEPAGEREF _Toc521145824 h1INTRODUCTIONPAGEREF _Toc521145825 h11.1 Background of the studyPAGEREF _Toc521145826 h11.1.1. The Banking Industry in KenyaPAGEREF _Toc521145827 h11.2 Problem StatementPAGEREF _Toc521145828 h31.3. General ObjectivePAGEREF _Toc521145829 h41.3.1. Specific ObjectivesPAGEREF _Toc521145830 h41.4 Research QuestionsPAGEREF _Toc521145831 h41.5 Significance of the studyPAGEREF _Toc521145832 h51.6 Scope of studyPAGEREF _Toc521145833 h5CHAPTER TWOPAGEREF _Toc521145834 h6LITERATURE REVIEW:PAGEREF _Toc521145835 h62.1 IntroductionPAGEREF _Toc521145836 h62.7 Theoretical ReviewPAGEREF _Toc521145837 h72.7.1 Symbolic Interactionist TheoryPAGEREF _Toc521145838 h72.7.2 Multi-dimensional Approach to DiversityPAGEREF _Toc521145839 h72.7.3 Social Identity and Social Categorisation TheoriesPAGEREF _Toc521145840 h82.7.4 Resource Based Theory of DiversityPAGEREF _Toc521145841 h92.2 Empirical ReviewPAGEREF _Toc521145842 h102.2.1 Classification of diversityPAGEREF _Toc521145843 h102.2.2 Gender diversityPAGEREF _Toc521145844 h102.2.3 Age diversityPAGEREF _Toc521145845 h112.2.4 Education diversityPAGEREF _Toc521145846 h132.2.5 Cultural diversityPAGEREF _Toc521145847 h132.3 Link between age and education diversity on a firm’s performancePAGEREF _Toc521145848 h142.4 Positive and negative aspects of cultural diversityPAGEREF _Toc521145849 h152.4.1 Positive aspects of cultural diversityPAGEREF _Toc521145850 h152.4.2 Negative aspects of cultural diversityPAGEREF _Toc521145851 h162.5 Workforce diversity yielding positive resultsPAGEREF _Toc521145852 h172.6 Workplace diversity not yielding as much positive resultsPAGEREF _Toc521145853 h182.8 Conceptual FrameworkPAGEREF _Toc521145854 h202.9 Research gap………………………………………………………….…..21
CHAPTER THREEPAGEREF _Toc521145855 h22RESEARCH METHODOLOGYPAGEREF _Toc521145856 h223.1 IntroductionPAGEREF _Toc521145857 h223.2 Research DesignPAGEREF _Toc521145858 h223.3 Population DesignPAGEREF _Toc521145859 h223.4 SamplePAGEREF _Toc521145860 h233.4.1 Sampling DesignPAGEREF _Toc521145861 h233.4.2 Sampling FramePAGEREF _Toc521145862 h233.4.3 Sampling TechniquePAGEREF _Toc521145863 h233.4.4 Sample SizePAGEREF _Toc521145864 h243.5 Data CollectionPAGEREF _Toc521145865 h243.7 Data Analysis and PresentationPAGEREF _Toc521145866 h24QuestionnairePAGEREF _Toc521145875 h29
LIST OF TABLES
Table 2.8: Conceptual Framework…………………………………………… 20
1.1 Background of the study
Thanks to technological revolutions of the contemporary world, globalization and international immigration, the modern workforce is now more varied or diverse in terms of composition (Christian, Porter ; Moffit, 2006). Workplace or organizational diversity has thus become a buzzword for modern corporations and a topic of high importance for organizations, analysis and scholars. It is more so important for firms that are endeavoring to position themselves aggressively for growth and to attain a competitive advantage (Deloitte, 2014).
With the recent developments in technology and the constant migration of people from and to different countries, organizations are experiencing a shift in their workforce as diversity in terms of the people asset is becoming more and more visible. Organizations are tasked with a myriad of human resource management challenges that stem from workforce diversity. Diversity can be defined as acknowledging, understanding, accepting, and valuing differences among people with respect to age, class, race, ethnicity, gender, disabilities, etc. (Esty et al. 1995). Diversity issues are now considered important and are projected to become even more important in the future due to increasing differences in the population of many countries. Companies need to focus on diversity and look for ways to become totally inclusive organizations. A diverse workforce is a reflection of a changing world and marketplace. Diverse work teams bring high value to organizations.
1.1.1. The Banking Industry in Kenya
The Banking industry in Kenya is governed by the companies’ act, the Banking act, the Central Bank of Kenya act and the various guidelines issued by the central bank of Kenya (CBK, 2010).Over the last decade, Kenyan Banks have realized tremendous grow in the last five years and have expanded to the East African region. The growth has been mainly underpinned by, the industry’s wide branch network expansion strategy both in Kenya and in the East African community region, and automation of a large number of services and a move towards emphasis on the complex customer needs rather than traditional ‘off the-shelf’ banking products. Players in this sector have experienced increased competition over the last decade years resulting from increasedinnovations among the players and new entrants into the market (CBK, 2013). Due to the hiring of international experts the banking sectors is faced with workforce diversity and measures have to be put in place to properly manage this. Due to the rapid expansion of the bank nationally and even internationally (to Uganda and Sudan), there has been an increase in the diversity of the employees and managers within the bank. These employees and managers have varied worldviews, perceptions, culture and these can only be successfully tapped to the advantage of the bank, if there is an effective workforce diversity management strategy in place. Although the bank has done extremely well in attending to diversity in the way they handle their customers, it is not clear whether this approach to diversity has been embraced internally. The bank seems to lack diversity among its core values of Professionalism, Integrity, Creativity and innovation, Teamwork, Unity of purpose, Respect and dedication to customer care, and effective corporate governance, which could be an indicator that the concept of work force diversity is foreign. According to Williams ; O’Reilly 1998 diversity, if unattended is likely to have an adverse effect on group processes such as communication, conflict and cohesion.
According to European Journal of Business and Management; KCB Bank Kenya Limited with its wide branch network operating across different countries in the East African region has a heterogeneous workforce comprising of different races, tribes, culture, religious beliefs, gender mix, age and different conceptions. The management of the KCB has the daunting task of insulating the bank from unmanaged workforce diversity which could actually do the opposite of what it promises, creating internal conflict and reducing organizational performance and effectiveness. It is therefore important to put in place effective measures to properly deal with workplace diversification in order to stir it to the purposed direction of the organization.
Barclays Bank has embraced the diversity and inclusion agenda globally; Barclays continuously harness their differences ranging from age, disability, education, ethnicity, gender, religion and beliefs, social background to create an environment where everyone can contribute to the best of their ability so as to not only maintain their lead position in the banking industry but also to contribute to the country's economic growth.
At Standard Chartered Bank, by becoming a responsible company; they view diversity and inclusion (D&I) as a critical lever for business success in the long term. They are committed to creating an inclusive environment that is free from bias and where everyone can realize their full potential, and in so doing, make a positive contribution to the organization. Comprising 130 different nationalities, Standard Charterer’s global workforce and footprint extends across almost 70 markets, primarily in Asia, Africa and the Middle East.
The CBK annual supervision report emphasizes that the financial institutions will need to cope continuously with changing business environment and a continuous flood of new requirements via robust ICT platform, while staying sufficiently agile. Consumers will continue to demand individualized services, and to demand them faster than ever before (CBK, 2014).
One of the most challenging issue facing organizations (Banks) in Kenya is managing the diverse workforce .In summary the literature underpins the different writings written with regard to how workplace diversity affects the performance of banks in Kenya, while some studies are in support of workforce diversity and its positive results , others are not of the idea and the authors feel like its more of an issue to deal with rather than a factor that leads to the growth of an organization.The literature review therefore tries to find out where the positive impacts of workforce divesification really stops and where the negative effecrs come in.
1.2 Problem Statement
A great deal of research has focused on workforce diversity. Deloitte (2014) observes that workforce diversity has become a topic of great importance in organizations and scholars concentrated on examining its impacts on organizational performance. Agolla (2007) concurs arguing that the workforce diversity management is an indispensable tool in attaining efficiency in firms.Moore (2011), partner and head of London-based Crowe Clar Whitehall contends that diversity is an indispensable tool in the attainment of competitive advantage and optimum organizational performance.According to Reskin (2003),however,the repercussion for not managing diversity, impacts negatively on employees’ performance in terms of work efficiency, translates to retrogressive organization’s productivity.With an extremely heterogeneous workforce in terms of race, ethnicity, culture, language, sexual orientation, religion, conceptions, business organizations face a very complex task to safeguard society or business organizations from potentially destructive conflicts that arise easily in a radically pluralistic or diverse organization (Dass and Parker, 1996).Despite an increasing number of studies, few consistent conclusions have yet to be reached about the antecedents and outcomes of diversity. Likewise, research on different dimensions of diversity (e.g., age, race, gender, sexual orientation, disability, and culture) has mostly evolved independently. Researchers have over the time conducted research relating to the effect of diversity on employees’ performance, yet very few have focused on the impact of workforce diversity on organizational performance. This research is provoked by the gap left vacant through an extensive number of study works that has been done on staff diversity and its impact on employees’ performance. This study therefore seeks to study the effect of workforce diversification on the organizational performance of the banking industry in Kenya.
1.3. General Objective
The general objective of this study is to establish the effect of workforce diversification on the organizational performance of the banking industry in Kenya.
1.3.1. Specific Objectives
1. To determine the effect of gender diversity on the organizational performance of the banking industry in Kenya
2. To explore the effect of age diversity on the organizational performance of the banking industry in Kenya
3. To ascertain the effect of education diversity on the organizational performance of the banking industry in Kenya
4. To establish the effect of cultural diversity on the organizational performance of the banking industry in Kenya
1.4 Research Questions
This study is guided by the following research questions formulated to aid in gathering the information regarding the research topic.
The research questions are:
1. What is the effect of gender diversity on the organizational performance of the banking industry in Kenya?
2. What is the effect of age diversity on the organizational performance of the banking industry in Kenya?
3. What is the effect of education diversity on the organizational performance of the banking industry in Kenya?
4. What is the effect of cultural diversity on the organizational performance of the banking industry in Kenya?
1.5 Significance of the study
The findings of this study may be important to any interested organization that seeks to understand the effect that age, gender, education and cultural diversity has on their overall performance.
The study is significant as it informs on the effect of workforce diversification on the organizational performance of the banking industry in Kenya. Through this study banks in Kenya should embrace the presence of a diverse workforce and align the emergence of a diverse workforce with the organizational performance of the organization; the study tries to answer the question; what effect does workforce diversification have on a Kenyan bank’s organizational performance?
This information enables the banks in Kenya to weigh the cost and benefits associated with having a diverse workforce. The findings and recommendations can be used by the banks in Kenya to align their human capital in order to have a competitive edge and to gain the most from their workforce. The study is additionally an empirical source for future research.
1.6 Scope of study
The scope of study lies in determining the effect of workforce diversification on the organizational performance of the banking industry in Kenya. The study seeks to achieve this by looking at factors that contribute to diversity and how they contribute to a bank’s organizational performance in Kenya. The study seeks to provide direction to the research by narrowing its scope to banks’ organizational performance in Kenya in relation to workforce diversification.
This chapter presents the literature review of the study, it presents the most recent theoretical and empirical literature relating to the study: The effect of workforce diversification on performance in the Banking industry in Kenya. The chapter precisely reviews the theoretical underpinnings surrounding the performance of financial institutions specifically the banks in Kenya with regards to diversity and how the two aspects intertwine. Carrell (2006) defines workplace diversity as the ways that people differ which can affect a task or relationship within an organization such as gender, race, education, religion, and culture.
As globalization is becoming a welcomed idea in the world, more and more people live and work in different cities if not countries and therefore continually come into contact with each other in the workplace. According to Lauring and Selmer (2010) the improvement and management of the people on a global scale inevitably requires dealing with cultural diversity and adopting diversity management strategies in their organizations. According to Mwikali and Kyalo (2015), Nigeria has realized a precedent change in the heterogeneity of organizations’ workforce. They note that Nigeria organizations not only boast of diversity in terms of age and gender but more importantly in the ethnicity and nationality of the workforce. Kochan, et al., (2003) observes the same in Egypt noting that the workforce in the country is diverse in terms nationality and that many can speak Arabic in addition to foreign languages including French, English and German.
2.7 Theoretical Review
2.7.1 Symbolic Interactionist Theory
Symbolic interactionism is an individual centred orientation that focuses on individuals in interaction and within a group, and on the composition and development of the self and personality. Its theory is employed in this study because of the focus on the employee experience of diversity resulting from interactions in the workplace. This perspective has its roots in the pragmatist philosophies of Mead, Dewey, Thomas and Park of the so-called Chicago School (Farganis 2008). The method advocated by symbolic interactionism is to look at the process through which individuals define the world from the inside and at the same time identify their world of objects.
2.7.2 Multi-dimensional Approach to Diversity
Aligned with the previous discussions of diversity as a broad concept, Maier (2002) discovered diversity dimensions. This multi dimensionality,which he termed a “kaleidoscope”,argued that diversity as a concept has many dimensions – similarities as well as differences.According to Maier, the individual ceases to be a member of a certain nation, ethnicity,race or gender group and becomes a multidimensional unique kaleidoscope. The framework Maier (2002) posed focuses on personal behaviour and the interactions of work group members.Multiple dimensions, claimed Carmichael (2005), interact with and influence one another and emerge, or are displayed differently in different contexts,environments and circumstances, making analysis and(diversity) management complex. This illustrates the multi-dimensionality of diversity in reference to the individual as a “kaleidoscope”.The kaleidoscope approach to diversity management is thus fundamentally imbedded in the theory of symbolic interaction. It suggests that the way in which we perceive others, and how we interpret their behaviour, determines how we will pattern our behaviour towards them.In other words, what we think we see in others in others will determine how we treat them and respond to them. The appropriateness of our behaviour will depend on the accuracy of what we think we see in others (Human 1996). The kaleidoscope analogy is used, whereby an individual is viewed as a multi-dimensional “kaleidoscope of patterns and sub-patterns”. Each segment represents different aspects of the individual’s identity and as the kaleidoscope is turned, different presentations are formed. Human (2005) employed this term to explain how social identities change within themselves,impact on each other within specific contexts, and how individuals with a variety of social identities interact with each other. The strength of particular identities varies from person to person.
2.7.3 Social Identity and Social Categorisation Theories
Social Identity Theory, developed by Tajfel and Turner in 1979, is a theory that is predicts intergroup behavior based on the perceived differences between groups. Self-Categorization describes the conditions under which individuals will perceive themselves or others as belong to a group. Diversity programs understand the importance of these theories and attempt to use these two ideas to their advantage. For example organizations may attempt to create the perception that the entire organization is a group that is different compared to other organizations. This makes those within the organization the “in-group” and all others part of the “out-group”. This would create a feeling of togetherness between employees within the organization and make employees feel like they belong.Social categorisation theory states that people tend to classify themselves and others into various social categories based on observable differences.
The similarity attraction paradigm describes humans to be attracted to those who hold similar attitudes and opinions and are therefore in the same social category. Härtel(2004) referred to the in-group, out-group distinction which reasoned that negative stereotypes and prejudices cause members to make biased attributions about other members.Non-prejudiced people will consciously over ride their negative stereotypes.This theory can be interpreted from Mead’s description of “concrete social classes” and”abstract social classes”, where individuals directly relate to one another. In essence, social behaviourisms result from the interaction of the individuals in a social matrix.In their review of diversity in organisations,Williams and O’Reilly (1998) found that researchers usually approach the study of diversity from either the “social identity” or”social categorisation” process, that is, the “similarity attraction”paradigm; “informational and decision-making” theories; and the degree of “distinctiveness”.As such, the similarity attraction and distinctiveness paradigm could be directly related to Mead’s description of the concrete social class or subgroups, whereby members are directly related to one another, versus the abstract social class or subgroup,whereby individuals related only more or less indirectly in a social unit.
Gudykunst (1988) held that the stronger the social identity of the individual,the more important group membership becomes to how the individual defines the self.Symbolic interaction theory suggests that individuals are capable of membership of multiple groups simultaneously and serially.Individuals may relate to different generalised others at different times, as meaning is attached to interaction. Social identity and social categorisation refer to the process whereby people derive at least part of their identity
from the social categories to which they belong, using those categories to categorise others as similar or different from themselves (Brewer 1995). He furthermore suggested that categorising people based on perceived differences could lead to conflict between in-group and out-group members.Tsui et al. (1995) suggested that similarity in demographics leads to an inference or assumption about similarity in values, beliefs and attitudes; a presumed knowledge of the other individual’s values, beliefs and attitudes lead to a sense of predictability, comfort and confidenceregarding the other individual’s likely behaviour in the future.From a symbolic interactive perspective
Hogg and Terry (2000) believed that people act according to their salient identities and favour a context, which strengthens group identities .
2.7.4 Resource Based Theory of Diversity
The main focus of Resource Based Theory of Diversity Management is how the implementation of diversity will affect organizational resources. There are four categories of resources that organizations possess: physical capital, financial capital, human capital, and corporate capital resources. These resources can either assist or inhibit the operations of the organization. Organizations attempt to use these resources in ways that will of course assist and improve business. From a business perspective organizations that are more diverse gain an advantage compared to organizations that are homogenous. Racial diversity within organizations increases financial performance when a growth or innovation strategy is used (Richard, 2000; Richard, Barnett, Dwyer, ; Chadwick, 2004; Richard et al., 2003 as cited in Yang ; Konrad, 2011). Richard and Johnson;s 1999 study (as cited in Yang ; Konrad, 2011) found that firms with more diversity management practices in place experienced lower levels of turnover and that diversity management practices interacted positively with an innovation strategy, resulting in higher productivity and better market performance. Organizations that are diverse gain several advantages over organizations who fail to implement diversity policies.
2.2 Empirical Review
2.2.1 Classification of diversity
There have been a number of types of diversity classification proposed in the literature, not all of which are defined consistently. A majority of these diversity characteristic classifications are based on perception and are dichotomous in nature. Some of the classifications that can be identified in the literature include readily detectable/less observable,surface-level/deep-level,highlyjob-related/lessjobrelated,relations oriented, and role-related/inherent dimensions (Christian, Porter ; Moffitt, 2006). However, the majority of these classifications can be broken down into two perspectives, the information and decision making perspective and the social organization perspective (Christian, Porter ; Moffitt, 2006).
2.2.2 Gender diversity
Debates are rife on the impact of gender diversity in the top-level management and organizational leadership on the general performance of the organization. Chin (2013) reports that a study found that firms that had high gender diversity in their top-leadership reported significant abnormal returns. Van Knippenberg, De Dreu and Homan (2014) found that while most top leadership and management in most firms are dominated by men, an inclusion of women in such teams make them not only become diverse but also improves the quality of the leadership and top-level management.
Given the current literature suggesting that diversity tends to generate higher creativity,innovation and quality decision-making at individual and group levels, this study posits that similar findings may be found at the executive board of director level, where these characteristics are most critical. As board functioning is highly related to organisational performance (Zahra and Pearce, 1989), the question becomes whether increased demographic diversity on boards affects overall company performance. In this vein,Finkelstein and Hambrick (1996) outlined two key functions for boards that are highly related to the performance of the organisation.First, boards are commonly the most influential factors determining strategy direction and decision-making inherent in their structural position. Second, boards fulfil a monitoring role that may include: representing shareholders,monitoring proper use of organisat9ions’ wealth, response to takeover threats and hiring, compensating and monitoring top management work.In light of Finkelstein and Hambrick’s work, Fondas (2000) argues that the presence of women directors helps a board execute its strategic function because their experience is often closely aligned with company needs. For example, she notes that women may have a slight edge over men in terms of impacting strategic planning Consequently, women can potentially help the board fulfil its strategic role.
Daily et al. (1999) conclude, for a study of Fortune 500 firms,that women have made significant progress in terms of assuming seats on boards of directors, but have not in terms of taking CEO positions. Bilimoria (2000) reports that even though the number of female board members is increasing slightly, few companies actively recruit females and there is still sex bias, stereotyping and tokenism on boards where women serve. Mattis (2000) concludes that women board members are increasing in numbers but the changes are small and incremental. Selby (2000) interviewed women board members from top US firms and observed that by including gender diversity on their boards firms concomitantly included diversity in other experiences and values. She notes that the “questioning culture” of a board can be influenced, in a positive respect, by having women board members. Bilimoria and Wheeler (2000) and Mattis (2000) are supportive of the above, stating that women directors help foster competitive advantage by dealing effectively with diversity in labour and product markets. Bilimoria and Wheeler see women directors as champions for change because they tend to be younger than their male counterparts and are open to relatively newer ideas and approaches to doing business. Dezo and Ross (2012) contend that heterogeneous groups (in terms of gender) provide different perspectives and bring different views and experiences that inform leadership and managerial roles and lead to high quality decisions at this level. The authors go further to postulate that a mere presence of a woman, having congruent information on the issue at hand may stimulate a broader and a deeper deliberation of alternative in the top management team (TMT).
2.2.3 Age diversity
Age diversity has been found to be a vital and strategic capability that adds (if not creates) value to the firm especially in the face of competition (Darwin, 2014).One way in which age diversity brings value to the firm and increases a firm’s overall performance is by facilitating creativity and innovativeness. Creativity refers to the generation of novel ideas which are both useful and appropriate while innovation is the intentional introduction, within a work team of novel ideas, procedures and processes that are new (Rietzchel & Zacher, 2015).
The culture and characteristics of workplace are shaped by those responsible for decision-making (Naff& Kellough,2003).The perceived decline in work ethicis perhaps one of the major contributors of generational conflicts in theworkplace. GenerationX for instance,has been labeled the slacker generation (Jenkins,2007),and employers complain that younger workers are uncommitted to their jobs and work only the required time and a little more.Another point of contention among generations regards loyalty towards employers.While traditional and boomers have been characterized as being extremely loyal towards their employers, the lack of loyalty of younger workers has been noted (Bannon,2001).While younger workers complain ,that this lack of respect towards them in theworkplace,olderworkers share similar complaints especially regarding the attitudes of younger and newer employees towards management (Deal, 2007) .However, Rietzchel and Zacher (2015) contend that despite an increase in empirical studies on ages and work, studies focusing on the link between age and creativity or innovation have not been limited.
Nonetheless, some of the studies that have been conducted on the issue have found a positive relationship between age diversity and creativity and innovativeness in ideas, procedures and processes in the organization (Rietzchel & Zacher, 2015; Darwin & Palanisamy, 2015). Other studies have associated age diversity with more performance in creative tasks. Simons and Rowland (2011) found that diversity produces different perspectives, knowledge and skills that enhance creativity and innovativeness and less conformity with past and existing norms Gupta (2013) asserts that values that people of different age group possess do complement each other and that this increases the innovativeness and creativity of age-heterogeneous workforces as compared to a more homogeneous one.
However, age diversity does not always generate positive results on organizational performance due to common stereotypes that surround the issue of age. Some of the stereotypes are that old workers are prone to more health problems, are unable to adopt to the current technological demands and organizational changes and generally offer poor returns on investment (Tolbize, 2008).
2.2.4 Education diversity
Education diversity could be explained as different set of task relevant skills,knowledge and abilities possessed by team members as a function of their educational background (Dahlin et al. 2005). According to upper echelon theory(Hambrick andMason 1984), to make a crucial decision for the firm such as decision in strategic measure, the demographic characteristics such as age, tenure and other characteristics are probably the important factors that will influence the decision making (Zee and Swagerman 2009). In line with that, Carsen et al. (2004) suggest that upper echelon theory supports that the demographic characteristics of top managers or BODs and the organizational decision-makers have substantial effects on firm’s performance. It should be noted that education background is one of demographic characteristics of the board (Jung and Ejermo 2014).Post et al. (2011) study on 41 samples of U.S. based electronic manufacturing firms in the 2006 list of Fortune 1000 companies find that both board diversification and the higher educational requirements of directors may improve a firm’s environmental corporate social responsibility (ECSR). They suggest that a board
that consists of higher educated people show more concern about the environment than
those with less education. In addition, Dahlin et al.’s (2005) focus on diversity in MBA
team members’ dominant educational background find that by having a team with educational diversity, it has positive effects on range and depth of information use.
2.2.5 Cultural diversity
Cultural diversity can be seen as a characteristic of a group with two or more people. It normally refers to demographic differences which distinguish one from another within the group (McGrath, Berdahl & Arrow, 1995). These differences include biological characteristics such as genitalia, physical differences including skin colour, or stylistic differences, for instance dress codes (Cox, 2001; Green, López, Wysocki & Kepner, 2002). This is in agreement with Parvis (2003), Grin (2004), Köppel (2008) and Amadeo (2013), who state that cultural diversity includes factors such as skin color, gender, language, nationality, religion, culture, sexual orientation and ethnicity. One of the key factors in managing organizational behaviour entails the understanding of the culture to which one belongs. The importance of globalization is increasingly leading to an international mobilization of human resources as well as cross-border exchanges causing a worldwide immigration flow (Craig & Douglas, 2006). This shifting scale of citizenship leads to discussions of cosmopolitanism, global citizenship and cultural diversity (Dower, 2000; Carter, 2004). As a result, it is essential that managers pay attention to the management of cultural differences such as language, culture, age, gender, religion or ethnicity (Grin, 2004; Köppel, 2008; Amadeo, 2013). This includes the process of integration as well as the management of teamwork among the employees. According to Wlodarczyk (2011), the motivation of employees is one of the most important factors to enable good teamwork.
2.3 Link between age and education diversity on a firm’s performance
Nonetheless, as Darwin and Palanisamy (2015) note, some studies have also found no important link between age diversity and a firms’ performance. A similar finding was found by Felman (2013) when conducting a bivariate analysis on the relationship between the two: age and innovation (creativity), focusing on creativity (idea generation), ‘selling’ of ideas to customers (idea dissemination) and implementation of the idea and found neither linear nor non-linear association.At the same time, Darwin (2014) found a negative association between employee performance and age diversity. Glass (2007) observes that current top leadership and managers of firms tap into the power of age diversity within the firm. In so doing, they are capable of making varied and potentially effective decision having considered the perspectives provided by such a heterogeneous workforce. Further, Zaidi, et al, (2010) contends that age heterogeneity in a workforce enhances the level of creativity in the ideas from which the firm’s top management is capable of defining and implementing novel solutions in anticipation of or in response to problems. It also follows that quality decisions can therefore be achieved through teamwork of age-heterogeneous groups.Dezo and Ross (2013) note that age diversity may not always lead to informed decision-making or ease problem solving. They point to the potential of such disparities and the stereotypes that underscore them as a real source of conflict if not effectively managed. Simons and Rowland (2011) concur pointing to the social attraction paradigm that perceives a more homogenous group as capable of problem solving and making decisions more effectively. It follows also that the potential of communication problems within a group that is more diverse in age is very real, as the values, perspectives, experiences and possibly skills become the flashpoint for intergroup communication (Darwin, 2014; Tolbize, 2008). Zaidi, et al, (2010, p.5) have boldly stated “Quality problem solving is the result of heterogeneous environment within organizations.”
However, Pohjanen et al. (2010) who use a sample of 56 firms on Stockholm Stock Exchange (Sweden) large cap find that more education diversity would be negative for firm’s performance. Furthermore, Bhagat et al. (2010) find weak relationship between educational diversity and firm performance. They analyzed data on the education of 1800 individuals who served as CEOs of Standard and Poor’s Composite 1500 companies to determine the impact of education on CEO turnover and firm performance.They find that there is no strong evidence of a linkage between directors CEO) education and firm performance. In addition, even when they find the evidence that the leadership of a CEO having a MBA degree from a top 20 business school enables better operating performance, the result is weak and probably, statistically insignificant.educational backgrounds will result in lower corporate performance. One of the issues that has become the interest of researchers pertaining to the board of directors is the impact of BOD’s education on the firms. A number of studies have been conducted worldwide in this area. Some researchers tried to explore the impact of BOD’s education with the company performance such as Bathula (2008) who found that education diversity in the form of PhD and non-PhDholders affects company performance. A study in an emerging economy (Mauritius)by Mahadeo et al. (2012)on the other hand showed negative relationship between the education diversity and the performance of companies listed on Mauritius Stock Exchange.
2.4 Positive and negative aspects of cultural diversity
Culture being a wide topic and it having many varying aspects, the literature will look at both the negative and positive aspects in relation to a firm’s general performance.
2.4.1 Positive aspects of cultural diversity
According to Köppel, Yan and Lüdicke (2007), a culturally diverse workforce increases the profit of an organization, the customer satisfaction as well as the image of the company. On one hand, it decreases the number of conflicts and the rate of turnover, and on the other hand, it increases the satisfaction and effectiveness of employees as well as customers (Cox & Blake, 1991; Larkey, 1996). Creativity and innovation are strengthened, and diversity helps to create new ideas (Adler, 2002; Köppel, 2008). This fact is also underlined by an older study conducted by Cox, Lobel and McLeod (1991) and Esty, Griffin and Schorr-Hirsh (1995), who declared that cultural differences improve creative problem solving. However, these beneficial outcomes are mainly gained when group members share similar preferences in an organizational culture such as values and goals (Chatman, Polzer, Barsade, & Neale, 1998; Jehn, Northcraft & Neale, 1999). Appointing staff based on their cultural backgrounds can win new markets, and products targeting certain markets can be developed (Esty, Griffin & Schorr-Hirsh, 1995; Adler, 2002; Köppel, 2008). Martin (2014) states that building in-house Research in Hospitality Management 2017, 7(2): 105–113 107 cultural talents enables companies to integrate smoother into foreign cultures, and workplace diversity enhances the chance of staff to overcome culture shock. Employees from a different cultural background often speak several languages, have cultural competencies and are highly motivated (Franken & Kowalski, 2006). Another advantage of a culturally diverse work force is that workers with different cultural backgrounds often have different ways of thinking. This leads to the fact that they analyze and solve situations and problems from a variety of perspectives as they often bring distinctive experiences, providing the organization with a beneficially vast and sound base of knowledge and information (Esty, Griffin & Schorr-Hirsh, 1995; Martin, 2014). This is also underlined by a study conducted by Al-Jenaibi (2011), who researched the scope and meaning of cultural diversity in organizations in the United Arab Emirates. Based on that study, group work with culturally diverse people helps “to overcome cultural differences through shared experiences” (Al-Jenaibi, 2011, p. 71).
2.4.2 Negative aspects of cultural diversity
Even though recent literature remarks on the advantages of cultural diversity in the workplace, including a higher level of creativity and increased competencies, it can be stated that these benefits do not reflect as effective in actual practice as it does in theory (Al-Jenaibi, 2011). When cultural diversity is not handled properly it can also lead to disadvantages. One of the main drawbacks is miscommunication, which often arises through language barriers and a different perception of non-verbal language. Employees with different backgrounds encode and decode messages in different ways leading to a higher possibility of misunderstanding, collision and tension (Kim, 2001; Wang & Mattila, 2010; Martin, 2014). In addition, barriers and difficulties in general can be created due to, for instance, religious differences and dysfunctional adaption behavior (Martin, 2014). Working in a culturally diverse field, the tendency of employees to get entangled in interpersonal conflicts is intensified. This is due to dissimilar beliefs, thoughts, opinions, traditions, norms, trends, values and customs (Bia?ostocka, 2010). The challenge with regard to this is that not all dimensions of cultural diversity such as age, gender and skin color are visible. For instance religion, politics and culture are less visible, leading to the fact that it takes some time to understand another’s culture. Pelled (1996) elaborates that diversity incites intergroup bias which can lead to negative outcomes in group work. In addition, the primary dimensions of diversity, which are highly visible, can lead to discrimination, stereotyping and prejudices if there is little to no experience in working as a group (Fiske, 1998; Hunter, 2009). These prejudices and discrimination can lead to losses in work and personnel productivity (Devoe, 1999). On the other hand, it can be seen that deep-level similarities such as equal values and thought patterns lead to a positive group cohesion. On the contrary, deep-level dissimilarity is negative for group cohesion (Harrison, Price ; Bell, 1998). This again can create conflicts between employees that can, but do not necessarily have to be based on work issues. A conflict could also have historical or regional causes, leading to negative emotions among workers and lost productivity (Martin, 2014).
2.5 Workforce diversity yielding positive results
Diversity according to Schneider (2001) is about creating a workforce culture that seeks, respects, values and harnesses difference. Singh (2002) highlights a business case for diversity claiming that inclusion and development of people to the best of their abilities will result in commitment, creativity and competitive advantage for the organization. For example, Barclays Bank declares the following as part of their strategy: A beacon of enlightened equality and diversity policies and practices world-wide and that it will integrate equality and diversity rationale into business, employment, supplier and community practices worldwide. Barbosa (2007) says that while contemplating people as the most important asset in every organization, it is equally important for HR strategies to recognize human inequalities otherwise known as workforce diversification and manage them effectively. Human resource management contributes to the value creation by increasing intellectual capital within the firm(Ulrich,2012)intellectual capacity is therefore created by embracing diversity in the workplace , allowing people from different cultural dimensions to work together therefore exchanging ideas leading to the growth of the organization.
According to Ozbilgin and Tatli (2008) successful organizations can benefit from workforce diversity by creating an organized environment which attracts people from diverse labor markets. Managing diversity promotes competitive edge by recruiting the best people from the job, regardless of age, gender, ethnicity or other individual characteristics. Empirical evidence suggests that many employees and managers regard diversity management as being equal to having an equal opportunity for any person to enter the organization.
Recruiting a diverse workforce is not just socially responsible: it is a necessity, given the rapid increase in minority, older worker, and women candidates and the 70% jobless rate among the disabled people. Doing so means taking special steps to recruit these people from these categories. Many employers such as Eastman Kodak Co., include disability under their diversity initiative umbrellas, this reflects their recognition that disabled people represent a large, untapped pool of potential employees. (Dessler, 2005).According to Cox (1994), organizations that promote and achieve a diverse workplace will attract and retain quality employees and increase customer loyalty. Organizations are increasingly adopting the diverse workforce criteria as a competitive advantage in the market. Greenberg (2004) notes that organizations with diverse workforce enjoys a greater variety of solutions to problems, diverse collection of skills and experiences, larger pool of ideas and experiences and high employee motivation that also translate to higher productivity, profitability, and return on capital employed. Management of diversity is, however, not without challenges (Devoe, 1999).
2.6 Workplace diversity not yielding as much positive results
Although research on representation and affirmative action/Equal Employment Opportunity (EEO) has continued, some scholars have shifted their focus to the impact of employee diversity on work- related outcomes. Theory suggests that employee diversity benefits organizations by increasing the number of perspectives and solutions to problems, but that it can also make organizations more likely to experience employee conflict, miscommunication and mistrust (Adler, 2003; William ; O’Reilly, 1998).Limited empirical research has examined the extent to which these process-oriented problems outweigh the benefits accrued from greater diversity in employee perspectives , with mixed results(William & O’Reilly,1998).
Research suggests that the relationship between the presence of diversity and organizational performance may not necessarily be a direct positive or negative relationship, the relationship instead depends on the strategy adopted by the organization. Richard’s (2000) survey of over 500 banks found out that those with more diversity in terms of the race and who had a growth strategy in place experienced a higher return on equity and net income per employee as opposed to those with no growth strategy in place but with a diversity in place for the workforce. More specifically, diversity in a work group can produce lower cohesion and miscommunication among group members, which can lead to group conflict (Jehn, 1995).Carrell (2006) comments in Labor Law Journal that although workforce diversity has become a reality in organizations today as predicted by Workforce 2000 in a 1987 report by the Hudson Institute, the ways that organizations define and manage workforce diversity are still evolving. Despite organizations investing millions in workforce diversity to boost employee morale and improve performance, they rarely achieve their expected benefits. With an extremely heterogeneous workforce in terms of race, ethnicity, culture, language, sexual orientation, religion, conceptions, business organizations face a very complex task to safeguard society or business organizations from potentially destructive conflicts that arise easily in a radically pluralistic or diverse organization (Dass and Parker, 1996).
In Kenya, Gacheri (2012) established that workforce diversity was found to affect employee performance at varying degrees considering both managers and non-managerial employees of the Equity Bank. The lack of written workforce diversity policy programs in most Kenyan organizations, especially in the banking industry questions the competence and sensitivity of the Human Resource Managers and organizations to the contemporary changing trends in Human resource Management. It is also surprising that the few organizations having written workforce
diversity management policies in place display a clear disparity between the written policies and actual practice. This leads to continued realization of more negative effects of workforce diversity than positive effects. Kochan et al., (2003) argues that diversity within the work place can evoke an array of emotions as some view diversity as something to be dealt rather than a tool to be used to improve the organization.
2.8 Conceptual Framework
Figure 2.1 below shows the conceptual framework of this study which shows the relationship between dependent and independent variables, the independent variables include; gender diversity, age diversity, education diversity, and cultural diversity. The dependent variable is workforce diversity on the general performance in the banking industry in Kenya.
Figure 2.1: Conceptual Framework
Independent variablesDependent variable
Link between age diversity and firm’s performance
Link between age diversity and firm’s performance
2877185779780Workforce diversification effect on general performance in the banking industry in Kenya
Workforce diversification effect on general performance in the banking industry in Kenya
Impact of education diversity on firm’s performance
Impact of education diversity on firm’s performance
Positive aspects of cultural diversity
Negative aspects of cultural diversity
Positive aspects of cultural diversity
Negative aspects of cultural diversity
2.9 Research gap
After the conceptual framework ,I have been able to note how different variables such as age ,gender ,education and culture have an impact on the performance of banks in Kenya ,in as much as diversity helps an organization have a competitive edge and it helps the banks have an innovative impact , know how to deal with their various customers who are diverse as well, the banks should also be able and willing to invest in diversity because if not properly handled diversity could cause chaos and conflict in the firm. The research concentrates on the impact of workplace diversity on the performance of banking industry in Kenya, it answers the question how does age diversity, education diversity, cultural diversity and gender diversity affect how banks in Kenya perform?
Chapter three provides the research methodology for the study .The chapter highlights the research design that was used in the study, identifies, and describes the population of the study. The chapter defines and explain the sampling design for the study and determines the sample size of the study. Chapter Three further explains the data collection instrument for the study, research procedure and the data analysis methods that were used.
3.2 Research Design
This study will use a descriptive research design. Blance, et al., (2006) have explained that a descriptive design is essential in studies that seek to find out ‘how’events or phenomena are related. Bless, Higson-Smith and Kagee (2006, p.48) permits the research to investigate and describe the relationship between variables while further allowing the researcher to test “factual hypothesis.” Therefore, a descriptive research design will permit the researcher to collect information regarding how age diversity, gender diversity, education diversity, and cultural diversity are related to an organizational performance. A descriptive research design will also describe the relationship between organizational performance and age diversity, gender diversity, education diversity, and cultural diversity which are the main focus of the study.
3.3 Population Design
The larger pool of people, events and items from which the researcher draws the elements, individuals and cases for sampling is the population (Blanche, et al., 2006 & Bless, et al., 2006). It is also upon the population that the research extrapolates the results of the research. However, Bartlett, Kotrilk and Higgins (2001) advices that such a population should be homogeneous in that it must possess and exhibit the information of interests to the researcher. The research is valid if the findings generates close links to the opinions, features and characteristic of the population (Bartlett, et al., 2001). The population of this study involves the financial institutions in Kenya and specifically the local banks in Nairobi.
A sample is a finite part of a statistical population whose properties are studied to gain information about the whole(Webster, 1985).In relation to the study, a survey will be conducted to that effect which will ensure that 31 locally owned banks will be studied..
3.4.1 Sampling Design
To obtain germane sample for consideration and inclusion in the research, a significant number of individuals from various banks based in Nairobi were selected from the population. Thornhill and Saunders (2000) explain that it is normally from this population that a researcher collects and infers information. It follows therefore that the validity of the study result is contingent on the suitability of the sampling design (Blanche, et al, 2006). The sampling design comprised of the sampling frame, the sampling technique and the sample size.
3.4.2 Sampling Frame
A register or a list of individuals, cases and events from which the researcher obtains the sample is the sampling frame (Blanche, et al, 2006). Robson (2002) clarifies more that the sampling frame denotes to the source of the appropriate or correct population from which the survey sample is drawn. The study will focus more on the top management ladder including and not limited to; Human resource directors at the sampled banks, the CEO, the company secretary, Head of corporate and regulatory affairs, Foundation director, Chief Operations officerand any other top management personnel who would have adequate information about diversification and organizational performance, considering that different banks will have different titles for the managers responsible for diversity at their various firms.
3.4.3 Sampling Technique
Robinson (2002) explains that the study objectives determine the methodology for deriving sample for inclusion in the study. Blanche, et al., (2006) adds further that the sampling process is not abstract but is guided by the scope and parameters of the study as well as the population and the objectives of the study. The study used the stratified random sampling technique, which involves the division of a population into smaller groups (strata) the strata are formed based on members’ shared attributes.
3.4.4 Sample Size
The sample size refers to the proportion of individuals that are actually chosen to participate in the study (Thornhill ; Saunders, 2000). They comprise of the people that bare close characteristics with the population but which the researcher can access within the time and resource constraints. The sample size of the study will inculde five top management personnel in every bank making the sample to consist of 100 respondents in total.
3.5 Data Collection
Blanche, et al., (2006) and Bless, et al., (2006) explain that data collection is the technique or strategy for obtaining or aggregating the information from the respondents. For this study a self- administered questionnaire will be used to that effect.
3.7 Data Analysis and Presentation
This study will use quantitative method of data analysis. To ensure easy analysis, the questionnaires will be coded in four sections in relation to the variables, each section will have four questions that cover the particular variable leading to the desired response. The first section will comprise of the background information to obtain the general information of the respondent, a total of five questions .The second section will cover the aspects of the four variables (age, gender, culture and education).The questions will be presented in tabular form to keep the questions precise and short to prevent the fatigue and boredom of the respondent. The questionnaire will have a total of 21 questions.
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This questionnaire will gather data on workforce diversity in Kenyan banks, it will gather data on how various variables affect the performance of banks in Kenya. The data will be used to tighten the loopholes and improve performance of Banks in Kenya and enable conducive environment for diversity to be embraced and prosper.
Be realistic and objective in assessing your organization. Please provide answers on all questions even though you feel that they repeat themselves occasionally. This is the only way to assure statistical validity of the questionnaire.
Please tick one choice for each of the following statements.
(1 = strongly disagree, 2 = disagree, 3 = nor disagree nor agree, 4 =agree, 5 = strongly agree; )
What is your gender:
What is your age:
31877032385 55 and above
3187704445 I prefer not to say
How long have you worked in this Bank?
31750017145 Less than 5
47117017145Human Resource Director
Head of Corporate and Regulatory Affairs4775208890
47498022860Chief Operations Officer
47434510795 Company Secretary
SECTION A: Gender
strongly disagree disagree nor disagree nor agree agree strongly agree;
1. Employees are paid/rewarded in an equal manner regardless of gender.
2.Enough is being done to make a positive impact on gender equality at our organization.
3.Opportunities are being withheld from women because of assumptions about gender roles in the organization.
4. We measure and track the effectiveness of our organizations gender diversity efforts.
SECTION B : Age
Strongly disagree disagree Nor disagree nor agree agree Strongly agree
1.The organizational focus is on generational differences and generational strengths
2.For aged staffs we consider their experience counts into the overall performance of the organization
3. Older people are less productive and just waiting to retire, they have higher absenteeism and accident rates
4.People quit learning when they get old, they are rigid and dogmatic.
SECTION C :Education
Strongly disagree disagree Nor disagree
nor agree agree Strongly agree
1. A boardthat consists of higher educated people show more concern about the environment thanthose with less education.
2. Having a team with educational diversity, has positive effects on range and depth ofinformation use and a result, high performance of the firm
3. There is no strong evidence of a linkage between directors (CEO) education and firm performance.
4. Education diversity in the form of PhD and non-PhDholders affects company performance in a positive way.
Strongly disagree disagree Nor disagree nor disagree agree Strongly agree
1.Cultural diversity nowadays is one of the most critical challenges faced by organizations.
2.Attributes,traits,characteristics,skills,experience and background are values at work.
3.Bringing people together from difficult background reinforces bad behaviour
4.Cultural differences influence the organizational performance positively
SECTION D :Culture
Any other comments:
Thank you for your participation in this study!
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