Eden Charles highlights the need for senior management to wake up to the increasing role of diversity in order to survive in today's global market

The commercial case for a comprehensive diversity initiative is strong, and many businesses have already realised that a multicultural workforce is a huge asset. However, misconceptions, inappropriate practices, poor language skills and ignorance about other cultures continue to cause businesses to miss valuable opportunities at home and abroad. The risk of ignoring diversity in the global market cannot be underestimated, and the threat must be mitigated. If they are to compete effectively, Western European companies need to realise that they no longer have a choice - it has become essential to have knowledge of, and be able to communicate with, people of different nationalities, cultures and religions.

Emerging trends

In the global economy traditional barriers are disappearing, and cross border trade is now integral to many companies' growth and success. A decade ago, Japan, Europe and North America were responsible for over 80% of global commerce, but new markets have since opened up throughout the world and have brought both increased opportunity and competition.

Moreover, developments in technology have made new markets accessible to even the smallest of companies.

The growing markets of Latin America, Asia and Central and Eastern Europe are now playing an ever more important role in global buying, selling and manufacturing. For example, burgeoning free enterprise in China has not only drawn attention to its one billion consumers, but has also strengthened the country's economic status. Equally, India's continuing economic growth has caught the eye of long-term investors and created new opportunities for business.

In recent years there has been a backlash against large multinational corporations, which have in the past exploited poorer countries and failed to invest in local communities. An increase in smaller home-grown companies is forcing large western organisations to re-evaluate the way in which they do business. Local businesses have the advantage, as they possess a greater understanding of their customers' needs and are more in tune with changes to local markets. Furthermore, consumers prefer to deal with a workforce with which they can identify and that has a true commitment to their community.

To compete in these markets European companies must respond to their differing requirements, and this can be done only through a comprehensive diversity initiative. The failure of a business to acknowledge and respond to the role of diversity carries a number of risks that will hamper its growth and may eventually threaten its survival.

Diversity in practice

To succeed in today's diverse environment it is essential to have knowledge of, and be able to establish effective relationships with, people of different cultures and languages, and large western corporations must work to better match the populations that they are trying to reach. Businesses that employ people of different backgrounds can swell their knowledge and understanding of diverse consumer groups, enabling them to provide a more tailored and satisfactory service. By ensuring that their workforces reflect the ethnic make-up of the areas in which they do business, companies can better meet the needs of their customers as well as improve their representation and create vital ties with the community. Organisations that continue to ignore the requirements of these new markets will increasingly miss out on new opportunities and their growth will be stunted.

HSBC is one trans-national company that has responded positively to the challenges of the global market. The bank's current advertising campaign, highlighting how different cultures and nationalities respond to different messages and the benefits of this, has successfully raised the company's profile as a pro-diversity organisation. As 'the world's local bank', HSBC has become a leader in diversity, and recognises that by employing people of differing backgrounds it is gaining a competitive edge and is better able to adapt to new situations. For example, to win over the south Asian business community the company established a service that tailored to its needs by employing staff that understood the market and with which the region's consumers could identify. Almost 50% of employees in the 12 special teams devoted to winning over this sector are from south Asian backgrounds.

On a wider scale, failure to meet the needs of these increasingly powerful consumer groups could have serious implications for western economies, as home grown industries will squeeze out European and American companies.

For instance, Microsoft Windows software presently uses a simplified version of Chinese and Japanese characters, despite the fact that in 20 years time over half of the world's computer users will be from these countries.

As their own software industries grow, the prospect of these nations dropping Windows may become a serious threat to the American IT industry.

A diverse workforce wields immense power in the domestic market as well.

For example, 8% of the UK workforce is made up of ethnic minorities, and these groups have considerable purchasing power, with almost £15bn in after-tax income belonging to black and Asian consumers. In some urban areas the proportion of the 'buying' minority population rises to over 30%. Enlightened companies have already recognised the need to capitalise on these markets and the corresponding requirement for competencies that reflect ethnocultural diversity. Both Sainsbury's and Marks and Spencer have realised that they can attract new customers by implementing changes to their recruitment policies that will create a better match with their customer base. These companies are now working to ensure that the workforces in their shops reflect the ethnic make up of the areas in which they are based.

Diversity across an organisation

Ignoring diversity at board level also carries great risks, and these too must be managed. It is vital that those at the top of the organisation develop a better understanding of different cultural practices and languages if new partnerships are to be created and opportunities seized. For example, in Asia there is a far greater emphasis on the nature of a business relationship than in the UK, and in China an understanding of Guanxi (the business network that exists among various parties that support each other) is vital to achieve success. Companies that wish to do business in this country cannot simply fly in, do the deal and fly out again. Time and resources must be invested to establish a strong relationship, for the Chinese prefer to do business with people they know and trust. South and Central American organisations, such as those in Mexico, also look for personalismo in their business arrangements and will often expect repeated personal visits from senior management before a deal is struck.

A diverse workforce is not only necessary to break into new markets but also to attain a competitive edge. A diverse pool of talent, experience and perspective is inherently more creative and innovative than a homogeneous one and these characteristics are vital for success and growth. It is not enough, however, merely to employ people of different backgrounds; neither is it enough to ensure that these people are represented at the higher levels of the organisation.

There is little point in recruiting for diversity and then pushing people to conform to the stereotypical white male model of working. European companies cannot expect employees with vastly differing needs and potential to flourish in such an environment. If they are truly to gain from the knowledge and skills of a diverse work force, changes must be made to encourage a positive contribution from all groups within the organisation.

Beyond race and ethnicity

Diversity does not relate simply to race and ethnicity, and a comprehensive diversity initiative will recognise differences that are less salient than those of race, gender, disability or sexuality. Companies that fail to recognise diversity at every level risk alienating employees and creating an atmosphere of resentment. True diversity will enhance a company's competitive edge and innovative spirit. The need to implement an inclusive diversity initiative is amplified by developed countries' rapidly changing demographics.

There will be fewer people of working age in the future, making it imperative that optimum use is made of resources. Companies cannot afford to exclude or alienate different groups if they want to maintain a high calibre of employee.

To make diversity work, real and often difficult decisions must be made.

Successful programmes will result in fundamental changes to an organisation's culture and challenge traditional attitudes. Processes and behaviours will need to be modified and a more inclusive and flexible environment established.

Businesses should implement changes to their practices that make the most of their diverse workforce; working practices and attitudes need to be flexible enough to accommodate and complement every individual to ensure that they are able to give their best. For those companies that do recognise that one size no longer fits all and implement the changes required to make the most of the modern workforce, the benefits may be vast.

As companies go global so too must the practice of corporate social responsibility.

Businesses that succeed in breaking into new markets must be seen to invest in local communities and economies if effective relationships are to be maintained.

The last decade has witnessed a significant shift of focus, with business responsibility and ethics now playing a much greater role in consumer behaviour. Businesses that build a reputation for employing people of diverse backgrounds and working in a socially and environmentally sound way, will increase customer loyalty and boost sales. In an age where image is everything, an organisation that is seen to be actively embracing diversity and combating prejudice will most certainly be held in higher esteem than those that do not.

- Eden Charles, an organisational development consultant and specialist in diversity, is an account director at Berkshire Consultancy Limited, Tel: 0118 988 2992.