Diversity is not a fad. Firms are finding that globalization means dramatically more interaction with people of foreign cultures. Even at home, America’s shifting demographics are creating an increasingly diverse work force and customer base.
Corporate pro-diversity programs may have been born of good intentions (or good PR). But today, attention to diversity is becoming a central strategy to profit-seeking firms. At least it should be, according to new research by Xiao-Ping Chen of the University of Washington Foster School of Business and former doctoral students Dong Liu and Rebecca Portnoy.
The Foster study finds that firms and individuals who are motivated to learn about different cultures can improve the bottom line.
“Simply being willing to learn about other cultures makes a huge positive difference in one’s business interactions with people of different cultures,” says Chen, a professor of management and chair of the Department of Management and Organization at the UW Foster School of Business. “And this willingness is enhanced when an organization has a positive diversity environment.”
The real deal
To measure the economic effect of attitude toward diversity, Chen, Liu and Portnoy examined an industry in which the customer relationship is paramount and the stakes are both high and highly personal: real estate.
It’s also an industry that manifests the full diversification of the United States population. Today, nearly 35 percent of US residents are minorities and 12.5 percent are foreign born, according to the latest census figures. Both numbers are rapidly growing.
The cultural diversity of American house-hunters is presenting a new challenge for agents, and a revealing subject to study. Synthesizing sales data with individual and organizational attitudes on diversity at 26 real estate firms across the state of Washington, Chen and her colleagues found a clear empirical connection between diversity attitudes and cross-cultural sales.
At the heart of the study is “motivational cultural intelligence,” a key facet of a person’s overall cultural intelligence (CQ) that is marked by a willingness to learn about and adapt to cultures different from their own. Organizations can foster motivational CQ in their employees by regarding diversity as an asset and proactively leveraging its benefits.
Cultural intelligence can be developed
The study found that real estate agents who demonstrated motivational CQ were more successful in making cultural sales—that is, sales to clients of a different culture—than agents who lacked the same willingness. This positive effect was enhanced when a realtor’s agency offered a supportive environment for diversity.
“The more willing the agent, the more successful,” Chen says. “And the extent to which the organization encouraged its employees to accumulate knowledge about different cultures enhanced this success.”
Individuals are capable of developing motivational CQ, she adds. This makes it important for organizations to support the conditions that facilitate and accelerate the development of motivational CQ and a climate that favors diversity. Given that both employees and customers are becoming increasingly diverse, such behaviors increase a firm’s chance of success in intercultural business.
“There are more and more examples of global firms that are really culturally motivated: Procter & Gamble, GE, Starbucks, to name a few,” Chen says. “They are sensitive to local cultures and will adapt their way of doing business appropriately. And that’s why they have done so well locally and globally. Motivational CQ influences the bottom line.”
“A Multilevel Investigation of Motivational Cultural Intelligence, Organizational Diversity Climate, and Cultural Sales: Evidence from U.S. Real Estate Firms,” is the work of Xiao-Ping Chen of the University of Washington Foster School of Business, Dong Liu, an assistant professor at the Georgia Institute of Technology, and Rebecca Portnoy, an assistant professor at Washington State University at Vancouver. The paper was featured as a “Top Poster” at the 2009 Society for Industrial and Organizational Psychology annual conference and is forthcoming in the Journal of Applied Psychology.