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HRM practices to manage multicultural workforce: do the recommended best practices work for small business? A case study.
Business services (Management)
Human resource management (Analysis)
Workplace multiculturalism (Analysis)
Monga, Manjit
Pub Date:
Name: European Journal of Management Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business, international Copyright: COPYRIGHT 2008 International Academy of Business and Economics ISSN: 1555-4015
Date: Summer, 2008 Source Volume: 8 Source Issue: 2
Event Code: 200 Management dynamics Computer Subject: Company business management
Product Code: 7300000 Business Services; 9918000 Business Personnel Management NAICS Code: 541 Professional, Scientific, and Technical Services SIC Code: 7300 BUSINESS SERVICES
Geographic Scope: Australia Geographic Code: 8AUST Australia

Accession Number:
Full Text:

The changing workforce demographics have significantly increased the importance of managing diversity at Australian workplaces Effective diversity management is argued to be a potential source of competitive advantage. Diversity has several dimensions such as age, gender, marital status, religion, race, nationality, work styles, cultures, values and so on. This paper focuses on one particular aspect of diversity 'multi-culturalism'. This paper presents a case study of a privately owned small retail organisation in South Australia, popular amongst ethnic minorities as a migrant friendly employer. Practitioner and scholarly literature advocates certain best practices in the area of HRM for effective diversity management. The aim of the case study is to examine the extent to which the recommended 'best practice' work force diversity management practices were implemented in the HRM area that makes it successful. It was found that the diversity management practices in the HRM arena were informal and typically managed by the owner. The owner/manager is able to create a positive multicultural environment without systematic application of best practices prescribed by the experts. It would be reasonable to say that this small business has developed its own HR management practices suitable to its requirements and the constraints that small businesses generally face as compared to medium or large business.

Keywords: Workforce diversity, multicultural, human resource management, equal employment opportunity, affirmative action, case study.


Workforce diversity is recognition of the fact that people differ in many ways, visible or invisible, mainly age, gender, marital status, social status, disability, sexual orientation, religion, personality, ethnicity and culture (Kossek, Lobel & Brown 2005); different attitudes, needs, desires, values and work behaviours (Rosen and Lovelace 1991; Deluca and McDowell 1992; Morrison 1992). Demographic trends indicate that the composition of workforce in the western world is becoming increasingly diverse and consequently human resource managers face more and more issues in relation to workforce diversity in organisations today. Diversity has several dimensions such as age, gender, marital status, religion, race, nationality, work styles, cultures, values and so on. This paper focuses on the 'multicultural' aspect of diversity and its management in the human resource management functions. Multiculturalism is one of the most important dimensions of diversity, more so in Australia where people born overseas constitute 24% of the Australian population (ABS 2004).

There is a strong argument in literature that workplace diversity is a potential source of competitive advantage for business if managed effectively (Cassell 1996). There is evidence that a diverse workforce has better-quality solutions on brainstorming tasks, displays more cooperative behaviour, relative to homogenous groups, and can raise organizational efficiency, effectiveness and profitability (McLeod, Lobel and Cox, 1996; Wilson and Iles 1999). Full utilization of the skills and potential of all employees may enable access to a changing marketplace by mirroring increasing diverse markets (Cox & Blake 1991; Gardenswartz & Rowe 1998; Iles 1995) and improving corporate image (Kandola 1995).

Practitioner and scholarly literature advocates certain best practices in the HRM arena for effective diversity management. These practices are believed to enhance employee and organisational performance (Adler 1986; Deluca & McDowell 1992; Morrison 1992; Fernandez 1993; Hall and Parker 1993; Schreiber et al. 1993; Grace 1994). However, literature on HR diversity management largely ignores the needs and constraints of small businesses and pertains to the resource rich larger organisations. Small organisations normally find themselves unable to implement the best practice as they are more suitable to large organisations. For examples small businesses may not have extensive budgets for staff recruitment, to advertise and to hire HR consultants.

Small organisations are a vital contributor to the overall performance of the Australian economy (Wijewardena & Tibbits 1999). This paper presents the findings of a case study of a privately owned small retail organisation in South Australia. This particular organisation is popular amongst people from multicultural background as a migrant friendly organisation. The aim of the case study is to examine the extent to which diversity management practices were implemented in the HRM area that make it successful. The findings of the study could contribute towards development of best practices for small businesses to manage diversity effectively. The paper first provides a brief background to the development of diversity management, then discusses the best practices as found in HRM literature, and goes on to present the findings of the case study followed by discussion and conclusion.


Historically, diversity management has its roots in EEO and AA legislation and has been used to provide a legally defensible position against charges of discrimination. A firm with a diverse workforce could argue in legal proceedings that they were not guilty of discrimination since their workforce demographics represented the local community. Although diversity management underpins a commitment to EEO and AA, the actual scope of diversity management is a lot broader (Kossek et al. 2005). First, diversity management seeks to overcome labour market segregation through addressing inequalities based on individual differences, such as race, gender, class, etc. (Horwitz, Bowmaker-Falconer & Searll 1996). Second, diversity management extends beyond legal requirements and emphasizes on valuing and taking advantage of individual differences, mainly cultural pluralism, in order for all people to maximize their potential.

Other objectives include mainly creativity, flexibility, employee attraction, employee retention and better marketing capabilities. Through effective diversity management, diverse teams aim at achieving greater innovation and creativity, enabling them to outperform homogenous teams (Cox & Blake 1991; Richard 2000). Whilst there is evidence that short-term progress may be affected by conflict and communication problems, by bringing a wider range of perspectives to problem solving, diverse teams foster speed and innovation and produce substantially higher quality solutions over whole development cycles. Moreover, by bringing equality to employment relations, organisations tend to attract and retain an adequate and qualified workforce. Cox and Blake (1991) argue that the benefits of effective diversity management include reducing turnover, absenteeism and attracting the best candidates as the labour market shrinks. They argued that heterogeneous organisations that valued diversity would have higher quality group decision making, greater creativity and innovation, more organizational flexibility due to the possession of divergent thinking, greater ability to attract and retain best talent and greater marketing capability.

2.1 Diversity Management and HRM

HRM is a set of distinctive activities, functions and processes that are directed at attracting, directing and maintaining an organization's human resources (Lado & Wilson 1994). The HR function has grown substantially over the past few decades and now covers the whole array of people management processes. There are different views about the nature of HRM and there exists an enormous variety of HR practices adopted by various organisations (Boselie, Dietz & Boon 2005). Nevertheless, it is widely recognized that the key practices of HRM includes recruitment and selection, training and development, performance management and compensation (Shen & Edwards 2006).

2.1.1 Recruitment

Recruitment is defined as searching for, and obtaining, potential job candidates in sufficient numbers and quality for the organisation to select the most appropriate people to fill its jobs (Goss 1994). A number of 'best' practices have been recommended for management to use (Morrison 1992; Schreiber et al. 1993). These include a number of attributes that work to promote diversity when using traditional standards and procedures to recruit people. Diversity selection practices might involve developing a job description and selection process that reflect diversity needs criteria, specific to individual positions. Such criteria should cover duties, language fluency, qualifications and experience needed and should comply with antidiscrimination legislation. Other practices include attracting applicants by including advertisements in ethnic language press in addition to daily newspapers, presence of diverse managers on selection committees and implementing techniques that allow diverse people to answer questions to the best of their ability and potential. When interviewing, the focus should be on the skills required for the position and not on other factors such as country of origin, skin colour, and race (Morrison 1992; Schreiber et al. 1993).

A number of studies in Australia and overseas have indicated that steps and criteria followed by organisations to select and test applicants are inadequate or inappropriate for a number of applicants including minorities (Loveman & Gabarro 1991; Rosen and Lovelace 1991; Morrison 1992; Schreiber et al. 1993). For instance, blanket literacy and language testing in recruitment are increasingly used for language and literacy levels which bear no relationship to the specific job requirements. Interviews are also important factors in the selection process. However, researchers have found that interviewers have little or no understanding of techniques suitable for interviewing applicants from different ethnic backgrounds (Caudron 1990; Morrison 1992).

2.1.2 Training and Development

Training is a systematic acquisition and development of the knowledge, skills and attitudes required by employees to adequately perform a task or job or improve performance in eth job environment (Goldstien 1980; Latham 1988; Schuler 1992; Tharenou 2006). Effective management of diversity in the area of training and development warrants specific consideration to be given to identifying training needs within the framework of the organisation's goals and objectives. Roberson, Kulik and Pepper (2003) suggest that organisations should systematically conduct a training needs assessment and design programs in accordance. Education and training should be tailored to the specific needs of the organization, division, level, team or individuals and can be technical or non-technical.

Workplace diversity impacts organizational outcomes indirectly through effects that begin at individual level (Rynes & Rosen 1995; Kossek, Lobel & Brown 2005). Employers also face the challenge of integration of diverse workforce with the dominant workforce. Diversity awareness has been found to be an effective tool to foster effective diversity management (Society for Human Resource Management Diversity Surveys 1998, 2000, 2002). It is aimed at building a common understanding of the value of diversity, assisting in building social cohesion so that it improves individual and organizational outcomes. Rynes & Rosen (1995) found in their study that seventy five percent of trainees, who took diversity training, left the training with positive diversity attitudes, while only nine percent trainees actually entered with favourable attitudes. Ford & Fischer's (1996) review states that training programs aim to change employees' attitudes (affective and cognitive) and behaviours to 'value diversity' and reduce subtle forms of discrimination and exclusion that hinders effective working relationships.

Different strategies have been suggested by researchers at individual level. Mentoring is one strategy targeted at the individual level. It involves one successful senior staff mentor who is attached with a junior member of staff from minority group. The objective of individual mentoring is to enable underrepresented demographic groups to move through the glass ceiling- the traditional, invisible barriers to advancement say Ragins (2002) and Thomas & Gabarro (1999). Pettigrew (1998) suggest that developing 'affective ties' with out-group members which increases information and empathy regarding the out-group members and fosters social connections, reduces prejudice. Kossek, Lobel and Brown (2005) conclude from their literature review that HRM practices such as diversity training and mentoring have the potential to change attitude and career outcomes. Kossek et al. (2005) suggest that external facilitators involved in diversity training may help to achieve higher levels of productivity in a shorter time given work group diversity can lead to increased conflict among members in the short-term.

Professional development and career planning is another area that requires careful attention while designing diversity management policies. If the HR practices concerning career progression do not effectively reflect diversity issues, diverse employees would have negative perceptions of the whole process (Richard & Kirby 1999). Organizations should ensure providing equal opportunities for promotion and personal development to all employees. Diverse workers should be regularly included on panels that evaluate, select, and promote managers. The problem of assessing candidates for promotion who are 'different' can be reduced if some of the decision makers are non-traditional managers. Direct intervention by top-level executives in the promotion process is sometimes necessary to ensure that diversity goals are not overlooked. The main point is that candidates must not only be recruited, but they must be adequately prepared to take on demanding managerial assignments (Loden & Rosener 1991; Morrison 1992). Scholars have suggested that mentoring is another strategy for managing diversity. A successful senior mentor is matched with a more junior women or minority employees, with the objective of enabling under-represented demographic groups to move through the invisible barriers and advance in their careers (Ragins 2002).

2.1.3 Performance appraisal systems

Carroll and Schneier (1982) describe performance appraisal systems as identification of measurement factors or criteria against which to evaluate performance, measurement of performance against such criteria, review of performance levels attained by individuals, and development of subsequent performance. A performance appraisal system should be objective not subjective, relevant to the job and the company, and fair to all employees and offer no special treatment (Schuler et al. 1992). Effective performance appraisal practices in the area of diversity aim to build diversity in decision making bodies. For instance, minorities could be included on panels that evaluate, select and promote employees. The problem of assessing promotion involving candidates who are from non-dominant population can be reduced, if some of the decision makers are from ethnic backgrounds. It can also help to create objective criteria and fair performance appraisal practices. When conducting an appraisal, the language of appraisal should focus on the individual's performance not personality. If this general rule is violated, "multicultural" employees could be adversely affected. Fulkerson and Schuler (1992) argue that appraisal should be as culturally neutral as possible. Effectiveness of the practices can be ensured by relating performance appraisal efforts to compensation. For instance, when assessing each manager's performance, actions taken by the manager to hire and promote minorities and women can be used as performance criteria (Morrison 1992; Sessa 1992).

2.1.4 Remuneration

Remuneration is the activity by which organisations 'evaluate the contributions of employees in order to fairly distribute, direct and indirect monetary and non-monetary rewards' (Schuler et al. 1992). These rewards are base pay, performance related pay, cost of living adjustments, incentives, perquisites and other benefits. Remuneration serves to attract potential job applicants, retain and motivate good employees, administer pay within legal regulations, facilitate organisational strategic objectives, and reinforce and define structure (Armstrong & Murlis 1994).

Diversity management in remuneration requires complete application of the principle of equal pay and performance-based pay system. Moreover, the compensation structure, the wage determinants and the benefit schemes should be designed not only on common principles but also considering each individual in terms of their ability, knowledge and skill. An individual-driven remuneration system facilitates individual lifestyles and further promotes diversity.

Pay inequality is a main cause of job dissatisfaction and de-motivation and therefore a major HR diversity issue (McLoughlin & Carr, 1997; Van den Bos, Lind, Vermunt, & Wilke 1997). Kramar has been supported by Dagher et al (1998) who reported that diversity practices in remuneration are widely used by Australian organizations. Only a small percentage of companies tie manager's rewards or compensation to the achievement of diversity goals (Allen et al. 2004).

The main problems that affect culturally diverse employees are inequality of income and bonuses, job recognition, promotion and assignment of responsibilities (Jackson et al. 1992; Grace 1994). Researchers have indicated that a lack of, or differences in career planning, and organisational discrimination may be responsible for the loss of promotional opportunities that would better prepare nontraditional managers for senior-level positions (Loveman and Gabarro 1991; Schreiber et al. 1993; Kogod 1992).

Recognition is seen, however, as a necessary component in developing leaders for the future. Hence, it is important to recognise individual performance so more significant roles are given to minorities appropriately, and more challenging assignments are allocated in return for their improved performance (Rosen and Lovelace 1991; Schreiber et al. 1993). Morrison (1992) stated that the tendency in some organisations is to develop non-traditional managers until they are guaranteed success in a position. Traditional managers still prefer to give non-traditional employees responsibilities on a 'trial' period before they become permanent. This could certainly create mistrust, decrease morale, and demotivate the nontraditional workforce.

Cabezas and Kawaguchi (1988) have stated that an income gap exists between white managers and minority groups for the same amount of work and qualifications. This was found to be related to barriers, creating some discrepancies in recognition. Prejudice, for instance, may contribute to an unwillingness to pay higher salaries, grant benefits, or give minorities freedom to do their jobs without constant monitoring. Studies by Goldin (1990) and Gerhart and Rynes (1991) revealed that there is still reluctance to give nontraditional managers the same authority and rewards that go to their white male counterparts. Unequal pay, low salaries, fewer benefits, and slower promotions, for example, are documented in both staff and management jobs. While research conducted overseas indicates that there appears to be some amount of discrimination in the type of rewards multicultural employees receive, the position in Australia has not yet been established.


This is a qualitative and exploratory study of a small retail organisation located in South Australia which deals in household electrical appliances. The organisation made an interesting case for study because it is reputed for its culturally diverse workforce and is known as a 'migrant friendly' amongst multi-cultural communities. The objective was to examine which diversity management practices are implemented in the HRM area that effective.

Focus group discussion technique is an effective and efficient way to gather rich qualitative data in natural settings. All of the employees were invited to participate in separate focus group discussions--for employees from dominant culture and for employees from multi-cultural background. Multi-cultural employees defined as those employees whose country of origin is not Australia and who have different ethnic background. Ten multi-cultural and nine employees from the dominant culture volunteered to participate in focus group discussions. Separate focus groups were conducted for Australian and multi-cultural employees so that the participants of each of the groups felt comfortable to freely express their views. There were two focus groups of Australian employees (4 participants in each group) and two focus groups of the employees from multicultural background (4 participants in each group). Semi-structured interviews were also conducted separately with the two senior managers- the white goods manager and the brown goods manager, and with the CEO/owner of the firm.

3.1 The organisation

The case study organisation is a privately owned small retail organisation located in South Australia, and is a franchise of a national company dealing with household electrical appliances. It employs 30 employees on average depending upon the 'retail season'. At the time of this study over 50% of the staff was from a multi-cultural background from a number of nations such as Bosnia, Poland, Vietnam, El-Salvador, Thailand, India, Brazil, Nepal, Korea and Malaysia. The organisation has a turnover of 44% which is lower than the 70% benchmark set by the head office of the company.

The organisation has 3 levels of hierarchy. There is a CEO/owner, a sales manager, a warehouse manager and an administration manager. There are senior sales staff on the shop floor who report to the sales manager and supervise rest of the sales staff and cashiers. The administration manager and his administrator provide customer service as well as information on retail management systems to the rest of the employees. The HRM functions are managed by the owner/CEO himself.

The participants were between the age of 23 years and 46 years. The period of employment within the organisation varied between 3 months to 5 years.


4.1 Findings

4.1.1 Recruitment and selection

The organisation relies heavily on 'Word of Mouth' and community networks to attract potential applicants. The products and services are advertised within the community newspapers. It is felt that there is no need to formally advertise any positions as, "We don't advertise, and there is no special way, I think people are always looking for a job or a new job that minimises the need to advertise", said the CEO. The organisation accepts applications on ongoing basis and maintains a database of applicants. Job seekers complete a job application form available at the shop along with their current resumes. The form includes information about the type of job being applied, skills possessed and contact details. As and when a vacancy arises the applications are short-listed and the candidates who are successful in the first round are interviewed by the CEO. No formal job criteria is used but the CEO stated that some of the factors he takes into consideration are- prior retail experience; other work experience; how far the candidate lives from the shop; job history, how often jobs are changed; the attitude; communication skills and English language proficiency. "You look at what jumps out on the application, after 20 years of experience you have a gut feel and you go with it", said the CEO. "I do consult my managers before making an offer but in a more informal way than any formal panel". The sales managers substantiated what the CEO said. The focus group members of sales assistants believed that the selection process was fair and was based on skills, experience and language proficiency.

There is an informal need based adhoc approach towards the recruitment and selection process. "I don't think there is a master plan to recruit migrants, we just have a good number of multicultural employees" said the sales manager.

4.1.2 Training and Development

The organisation has an induction program for new employees. The induction is brief and assisted by the induction handbook. New employees are briefed about their role, duties and responsibilities. They are introduced to the staff and shown around the organisation. The induction handbook is elaborate and contains guidelines on customer service, information on organisation structure and hierarchy, merchandising, roles and tasks, personal development, the compulsory training on manual handling, occupational health and safety risks and safe work guidelines. The employee is expected to read and understand the information provided and sign a declaration that they have read and understand the information. Technical training called 'E-learning' is provided on the use of the information system software used by the organisation. All new employees are on a three month probation period after which their performance assessment would determine whether their services will be continued or terminated.

Although there is a strong contingent of culturally diverse employees, the organisation does not provide any cultural sensitivity or diversity training for employees from dominant culture and from multicultural background. "We are successful in providing a safe working environment where people from different backgrounds can work together and be happy." The nature of retail business in Australia is such that a high staff turnover is expected. The high employee turnover seems to be a deterrent to any further investment in training.

The career management plans are in place for the more senior employees who have worked in the organisation for longer period and intend to continue to work there, as it relates to the issue of high turnover. The organisation has recently introduced a buddy system for staff development where a more experienced and senior staff is attached to the junior staff who intend to pursue a career in retail.

4.1.3 Performance Appraisal

The performance appraisal is typically an informal process where the CEO provides individual counselling and receives and provides feedback to the employees. There is no formal performance review process. The process is the same for all employees. The appraisal includes the ability of employees to work in a multicultural work environment. The multi-cultural employees were not expected to perform at higher level then the Australian employees in order to secure their jobs.

4.1.4 Remuneration and Compensation

The organisation has a performance based pay system. Everyone is paid according to the award they fall under. The organisation has a policy of equal pay for equal work. "The surname does not matter here, it is around the same basis", said the CEO and the managers interviewed. It was supported by the employees that the remuneration is equitable and based on performance and is not influenced by any other factors. One best practice which is implemented in this organisation is that all staff are appraised on their diversity performance.

4.2 Discussion

It is clear from the data that the organisation under study manages diversity within the framework of EEO and AA. The management practices implemented in the organisation are driven mainly by three factors- the nature of retail business, the ethos and values of the CEO and owner of the business and the size of the organisation. The management seems to have accepted the attitude towards retail as career. "Retail is a bridge and it is unfortunate", in the opinion of the CEO, "Most people take up casual and part time jobs and remain casual to have flexibility, or until they find something better and they move on. We have many students completing their studies at the universities and they work part time to earn some money".

The owner has developed a strong belief in the value of diversity but concedes that this is not a thought out strategy from the start of the business. It has developed over a period of time. According to Australian Bureau of Statistics, 24.8% of the total Australian workforce is born overseas. "We are lucky to have such high coverage of cultural diversity. We also have a high turnover but this is the nature of retail business. A reality I have to face", said the CEO. Diverse workforce is seen as an advantage to the business because customers feel comfortable talking to people from similar backgrounds. "It also helps us (the business) understand the customers better and provide better services". I am proud to say that my store has the lowest turnover of 40% to 45% amongst all of the franchises.

The informal, ad-hoc and hands-on approach to manage diversity in HR functions is typical of the small organisations due to the constrains of their size and resources. Typically the HRM functions are controlled by the owner / CEO. The small business owner of a firm employing up to 50 employees handles all of the personnel duties himself (Little 1986). Employee referrals, walk-ins and community networks are used extensively as recruiting tools (Hornsby and Kuratko, 1990). Training and induction is quick aimed at speedy returns as the working span of the employee may be short and not worthwhile to spend resources on extensive training programs. Remuneration and compensation is consistent with EEO framework and the equal pay for equal work policy. One thing that is important and done differently in this organisation is embedding diversity performance in performance appraisal of all employees. The employees have a clear understanding of the ethos and values of the leader CEO/ manager.

The management has been successful in creating an environment where employees are comfortable working together with people from diverse backgrounds. The multicultural employees appreciate the opportunity to work and in return feel obliged to do their best. The value in diversity policy is applied as a top to bottom approach reinforced by the CEO on continual basis. "We have had occasional inter-group and interpersonal conflicts in the past but not often. I deal with issues as and when they happen and may need to make a decision and take action for the good of the greater", said the CEO. The employees found the CEO and the managers very fair and equitable in their dealings with staff. As said by Hambrick (2007) if we want to understand why organisations do the things they do, or why they perform the way they do, we must consider the biases and dispositions of their most powerful actors--their top executives and in the case of small business it will be the owner of the business.


Literature demonstrates a clear correlation between diversity management practices in HRM and improved employee /organisation outcomes such as low absenteeism, high morale. This case study suggests a relatively informal, ad hoc approach to the management of diverse employees. However, coupled with leadership shown by the CEO, diversity is accepted and is working very well in this organisation. The best practices as advocated in literature are relevant mainly to large organisations and smaller organisations may have to develop practices suitable to their requirements. This is because of the obvious constraints due to their limited size and resources. Use of community networks and word of mouth to attract and recruit staff may be an effective method of recruitment. It gives confidence to both the employee and employer, because there is a referee known to both parties. Embedding diversity performance in performance appraisal sets the scenario for employees that the organisation is serious about diversity management.

This study has several limitations. There is potential self selection bias as the participants in focus groups decided to participate in the study. More research is required in the area of HR diversity management in small businesses. Perhaps one of the reasons that businesses are reluctant to take a more systematic approach to diversity management is that the evidence of the impact of diversity on the bottom-line has not been systematically measured and documented for easy retrieval and use (Robinson and Dechant 1997).


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Dr. Manjit Monga received her Ph.D. from Panjab Univeristy, Chandigarh, India. Currently she is a lecturer at the School of Management, University of South Australia in Adelaide. Her research interests are in the area of human resource management and organisational behaviour, management and workplace ethics, organisational culture, diversity management.

Manjit Monga, University of South Australia, Adelaide, AUSTRALIA
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