Diversity Management Practice: The Case of Commercial Banks in Ethiopia.

AuthorTadesse, Worku Mekonnen


Semela (2012) noted that Ethiopia is a country in which more than 80 ethno-cultural as well as linguistic groups live. These heterogeneous and diverse cultures have serious human resource management implications in terms of addressing conflicts that may arise due to competing interests of diverse work forces. In Ethiopia, for decades, diversity related issues such as the right and equality of ethnic and religious groups have been the historic and prevalent questions (Adamu, 2013). Issues related to workforce diversity are a concern for organizations that are becoming more heterogeneous with the mix of people in terms of gender, age, race, and education background (Robbins, 2009). As stated by Patrick and Kumar (2012), the concept of diversity can be along the dimensions of race, ethnicity, gender, sexual orientation, socioeconomic status, age, physical abilities, religious beliefs, political beliefs, or other ideologies. Diversity management as is implicated by Kandola and Fullerton (1994) deals with differences in organizational players and endeavors by the organization to tap the strengths in these differences to its advantage. According to Robbins (2009), workforce diversity has important implications toward management practices and policies. Experts have defined diversity broadly in order to recognize that all employees bring their differences including those of group-identity to the workplace.

Diversity management is a strategy to promote the perception, acknowledgement and implementation of diversity in organizations and institutions. Diversity management is based on the idea that diversity opens up alternative ways of perceiving, thinking and acting and thus enriches the life of the business community (Cox & Blake, 1991). Diversity potentially has positive effects on group creativity or team innovation, because different group members bring non-overlapping resources (knowledge, skills) to the group. Wentling (1997) observes that a broad definition moves diversity issues beyond an 'us versus them' struggle to a focus on using diversity to accomplish both individual and organizational goals. However, organizations which seek to correct a company bias against a particular group may define diversity more narrowly according to their specific needs.

In financial institution like commercial banks, there are increasing needs to develop businesses even beyond their national boundaries in order to solicit profits from global operation. Such practice obviously calls for a more dynamic diversity management model. The banking industry is accepting and valuing a multicultural workforce wherein their employees include members of a variety of ethnic, religious, and gender backgrounds. Therefore, attention needs to be given to the challenges and opportunities associated with the growing trend toward diverse workforces. This study examines the effect of managerial concerns on diversity that are related to age, gender, education and ethnicity on employees' perceived performance considering employees from commercial banks located in Ethiopia.

Problem Statement

Research on diversity concerns have looked at it from narrow as well as broader perspectives. Researchers who advocate narrow perspectives emphasize that diversity should be restricted to specific cultural categories. The broader perspective stated that diversity encompasses all the possible ways people can differ. There is empirical evidence that all dimensions of diversity can lead to positive as well as negative effects (Jackson et al, 2003). Diversity management practices are said to enhance productivity, effectiveness, and sustained competitiveness (Mercy & Rachael, 2013). Recognizing workforce diversity is important for maintenance of competitive edge. DiTomaso and others (2007) stated that "diversity matters because individuals give social significance to the categories or groups they associate with various people". Choi and Rainey (2010) have shown their concern by stating that "diversity in the workplace is a central issue for contemporary organizational management. Concomitantly, managing increased diversity deserves greater concern in public, private, and nonprofit organizations". Most of the research undertakings in diversity management are based on western cultures and few were considered in African organizations like Ethiopia though it is a country with diverse work groups. Apart from common diversity concerns like age, gender and educational backgrounds as revealed in many countries, Ethiopia is made up of more than 80 Ethnic groups. Therefore, this study targeted to fill the research gap on diversity management by testing the effect of organizational diversity concerns on the employees' performance in the Ethiopian banking industry

Research Questions

  1. What are the levels of organizational concerns for managing employee diversity issues?

  2. What is the perceived level of employee performance?

  3. To what extent managerial diversity concerns influence employee's perceived performance?

Research Hypotheses

H1 : Increased organizational concern for gender diversity related issues have significant relationship with employee perceived performance.

H2: Increased organizational concerns for diversity related issues based on age differences have significant relationship with employee perceived performance.

H3: Increased organizational concerns for diversity related issues based on ethnicity have significant relationship with employee perceived performance.

H4: Increased organizational concerns for diversity issues based on educational backgrounds have significant relationship with employee perceived performance.

H5: Increased organizational concerns for diversity management concerns have significant effect on employee perceived performance.

Workplace Diversity & Employee Performance

The world's increasing globalization requires more interaction among people from diverse backgrounds. Managing diversity is a significant organizational challenge. Diversity can be defined as acknowledging, understanding, accepting and looking for ways to become inclusive organization (Robbisnon, 2002). While diversity efforts have the potential to strengthen organizational effectiveness, experience has shown that realizing the full benefits of diversity is neither simple nor straight forward. For some organizations increasing diversity is viewed as an end in itself, a way to respond to the environmental drivers (Thomas, 1990). Effective diversity management practices can enhance the results of the collaboration. When ignored, the potential tensions and misunderstandings can seriously impair a group's effectiveness and individual satisfaction (Gormley & Spink, 2003).

A study conducted by Eddy and Burke (2005) reveals that the concept of diversity management is essential in decision-making. The findings uncovered that the assessments of features that make individuals different are useful in matching the workers with the type of jobs that suit them best. According to Roberson and Park (2006), there exists a positive link between diversity and organizational performance as indicated by increased company value, which results from diversity reputation in a company. The other indicator is the positive relationship between company revenues and the attitude of the leaders on diversity. According to Young and Nam (2013), the attributes of worker diversity influence the effectiveness of internal activities at the company level. The study revealed that diversity in education level, age and sex was adversely affected by the hierarchical positions held. Maicibi (2008) found that institutions should embrace workforce diversity as it had more benefits to the company. In Kenya, the study by Omolo, Oginda and Oso (2012) identified that diversity in recruitment has an effect in firm performance. The study conducted by Mbugua (2014) revealed that use of workforce diversity management strategies influenced achievement of high profits, return on assets and return on investment, increase company productivity, achieving competitive advantage and increase market share, improve quality of product and service delivery, offering of quality electronic products, increase company network, product market performance and increase sales volume. The study concluded that diversity efforts support and contributes to organizational growth strategy.

Gender Diversity & Employee Performance

According to Brown (2008) and Gilbert et al (2003), significant amount of workforce diversity remains ineffective if gender issues are not first recognized and managed. Ismail and Ibrahim (2008) conducted a...

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