CULTURAL DIVERSITY MANAGEMENT AND BANK PERFOMANCE:

A CASE STUDY OF BANK OF AFRICA AND

UNITED BANK FOR AFRICA IN KENYA

LISA MARIA MWANI

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF
BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS,
UNIVERSITY OF NAIROBI

NOVEMBER 2015
 DECLARATION

I declare that this research project is my original work and has not been presented for a
degree in any other institution.

Signature: ___________________________ Date: _________________________

LISA- MARIA MWANI

D61/62931/2010

This research project has been submitted for examination with my approval as the
university supervisor:

Signature: ___________________________ Date: _________________________

PROF. MARTIN OGUTU

Associate Professor

Department of Business Administration

School of Business

University of Nairobi

ii
 DEDICATION

I dedicate this research project to my soul mate, my love Shadrack and to our wonderful

children with whom I have walked this journey. To my loving parents, Odillia and the

late Moses Ashton Mwani.

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 ACKNOWLEDGEMENT

I am truly thankful to the Lord God almighty for giving me the grace and courage to

pursue this MBA program to the end. This has been a long and challenging journey

which has taught me the value of patience and resilience in every facet of my life.

Secondly, I thank my supervisor Professor Martin Ogutu for the wise counsel and

guidance he patiently provided as we moved along in the research project; for enabling

me to recognize and tap into the very crucial skills and knowledge that the MBA program

imparts. To my moderator, Dr. Yabs, the entire department of business administration

fraternity and various scholars in the University of Nairobi, who contributed in one way

or another to the realization of this research project, I am eternally grateful.

My appreciation to University of Nairobi- Kabete library staff, most especially Mr.

Kyalo, for the support and willingness to assist me in finding the material required for the

research project. I acknowledge the overwhelming support and assistance from my

friends and colleagues, particularly Dr. Ann Kariuki, Eunice Wanjiku, Valentine and

Alex who were at hand to help me look for material and my colleague Nduta, for

standing in for me at work while I completed the project.

Last but not least, I appreciate my loving mother Odillia, for her prayers and constant

encouragement throughout this journey. To my closest friend and companion, Shadrack,

for setting the pace and leading our children and I in the pursuit for knowledge; for

holding my hand walking with me as you also pursued your PhD. The love,

encouragement and support you gave to us all were priceless.

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 TABLE OF CONTENTS

DECLARATION............................................................................................................... ii

DEDICATION.................................................................................................................. iii

ACKNOWLEDGEMENT ............................................................................................... iv

ACRONYMS AND ABBREVIATION ........................................................................ viii

ABSTRACT ...................................................................................................................... ix

CHAPTER ONE: INTRODUCTION ............................................................................. 1

1.1 Background of the Study .............................................................................................. 1

1.1.1 Cultural Diversity................................................................................................. 3

1.1.2 Organizational Performance ................................................................................ 4

1.1.3 Commercial Banks in Kenya ............................................................................... 5

1.1.4 Bank of Africa and United Bank for Africa........................................................ 6

1.2 Research Problem ......................................................................................................... 7

1.3 Research Objectives ...................................................................................................... 9

1.4 Value of the Study ...................................................................................................... 10

CHAPTER TWO: LITERATURE REVIEW .............................................................. 11

2.1 Introduction ................................................................................................................. 11

2.2 Theoretical Foundation ............................................................................................... 11

2.3 Forms of Cultural Diversity ........................................................................................ 12

2.4 Management of Cultural Diversity ............................................................................. 14

2.5 Cultural Diversity Management and Organizational Performance ............................. 15

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CHAPTER THREE: RESEARCH METHODOLOGY ............................................. 18

3.1 Introduction ................................................................................................................. 18

3.2 Research Design.......................................................................................................... 18

3.3 Data Collection ........................................................................................................... 18

3.4 Data Analysis .............................................................................................................. 19

CHAPTER FOUR: FINDINGS AND DISCUSSION .................................................. 20

4.1 Introduction ................................................................................................................. 20

4.2 Interviews .................................................................................................................... 20

4.3 Forms of Cultural Diversity at BOA and UBA .......................................................... 21

4.3.1 Gender ................................................................................................................ 21

4.3.2 Age ..................................................................................................................... 21

4.3.3 Religion .............................................................................................................. 22

4.3.4 Nationality.......................................................................................................... 23

4.4 Management of Cultural Diversity ............................................................................. 23

4.4.1 Human Resource Management Systems ............................................................ 23

4.4.2 Higher Career Involvement of Women.............................................................. 25

4.4.3 Heterogeneity in Race/ Ethnicity/ Nationality ................................................... 25

4.4.4 Education Programs ........................................................................................... 27

4.4.5 Organization Culture and Cultural difference.................................................... 28

4.4.6 Mindsets about Diversity ................................................................................... 31

4.5 Management of Cultural Diversity and Performance ................................................. 31

4.6 Discussion ................................................................................................................... 35

4.6.1 Forms of Cultural Diversity ............................................................................... 35

4.6.2 Relationship between Cultural Diversity and Performance ............................... 36

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CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 41

5.1 Introduction ................................................................................................................. 41

5.2 Summary of Findings .................................................................................................. 41

5.3 Conclusions ................................................................................................................. 42

5.3.1 Forms of Cultural Diversity ............................................................................... 43

5.3.2 Cultural Diversity Management and Performance ............................................ 43

5.4 Recommendation ........................................................................................................ 45

5.4.1 Implication for Theory ....................................................................................... 45

5.4.2. Implication for Knowledge ............................................................................... 47

5.4.3 Implication for Managerial Policy ..................................................................... 48

5.4.4 Implication for Managerial Practice .................................................................. 49

5.5 Limitations .................................................................................................................. 50

5.6 Suggestions for Further Research ............................................................................... 51

REFERENCES ................................................................................................................ 52

APPENDICES ................................................................................................................. 59

Appendix I: Letter of Introduction.................................................................................... 59

Appendix II: Interview Guide ........................................................................................... 60

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 ACRONYMS AND ABBREVIATION

BOA Bank of Africa

CBK Central Bank of Kenya

EPRG Ethnocentric, Polycentric, Regiocentric, Geocentric.

RBV Resource Based View

SHRM Strategic Human Resource Management Practices

UBA United Bank for Africa

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 ABSTRACT

The world has become a global village, and companies have increasingly expanded their
markets across borders. Intensified internationalization of businesses has been achieved
through cross- border mergers, alliances, acquisitions and joint ventures. Although banks
in Kenya and the world at large are recognizing the importance of making workforce as
broad and diversified as customers, many are faced with unique challenges in managing
the culturally diverse workforce. The main objective of this study was to examine the
relationship between cultural diversity management and bank performance, with a
specific focus on international firms‟ subsidiaries in their host countries. The study
adopted a case study research design, comparing results from United Bank for Africa and
Bank of Africa. Data was collected using an interview guide. Data analysis was done
using content analysis which was summarized according to common themes. The
findings of the study indicated that the most common forms of cultural diversity in both
banks are gender, age, religion and nationality. However, the levels of cultural diversity
in the two institutions were found to vary. Further, the study established a relationship
between cultural diversity management and performance, indicating that effective
cultural diversity management led to better bank performance. Based on the findings of
the study, the researcher recommended that for a multinational company to gain
competitive advantage in a host country, cultural diversity management should form an
integral part of their management activities. The study was found to have various
implications for theory, knowledge, managerial practice, and managerial policy. There
was value addition to the RBV theory in the effective application of heterogeneous
internal resources to gain competitive advantage. Further, the upper echelons theory was
supported by the finding that managers‟ decisions are affected by their cultural
orientations and backgrounds. There seemed to be limited empirical data on local studies
for cultural diversity management and bank performance. The study sought to contribute
to a knowledge gap in the area of international business management within Africa by
looking at a case study in Kenya, hence providing a critical reading for the management
teams of international banks in their host countries within Africa. The findings and
recommendations of the study can contribute to the achievement of vision 2030 by
assisting policy makers in developing policies that are all inclusive. Most importantly,
this study will enlighten practitioners in the field of international business management to
inculcate cultural relativism in their organizations; acceptance and appreciation of
cultural diversity in order to create an enabling environment for all to thrive and enhance
the institution‟s overall performance.

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The globalization of businesses, technology advancement, free movement of goods,

services and labor across the world along with increasing number of transnational

mergers, acquisitions and strategic alliances have resulted in more organizational

workforce being multicultural and multinational (Tayeb, 1996). Relentless competition

has driven firms to constantly adapt, renew, reconfigure and recreate their resources in

line with the competitive environment which is characterized by complexity and

dynamism (Wang & Ahmed, 2007; Ansof & Suvillan, 1993). Further, this complexity

and dynamism has an effect in the internationalization of firms, presenting the challenge

of acculturation to the host country culture for sustainable competitive advantage.

According to Paul and Kapoor (2008), the analysis of the Ethnocentric, Polycentric,

Regiocentric and Geocentric (EPRG) framework reveals that the management‟s thinking,

philosophy and guiding principles towards the internalization of the company‟s

operations will divide the level of involvement of the firm‟s resources, including its

marketing activities and talents. There can be a negative impact on performance of a

foreign firm associated with poor management of cultural diversity in its various

subsidiaries in host countries. Ogutu and Samuel (2011) argue that creating strategies to

cope with cultural diversity is critical for the long term survival of any organization.

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The Resource- based view (RBV) theory as a basis for sustainable competitive advantage

of a firm lies primarily in the application of valuable tangible or intangible internal

resources in formulating strategy (Wernerfelt, 1984; Rumelt, 1984). Resources may

include people, machinery, finances, technology, skills, competencies and organizational

culture. People, being part of the firms‟ resources are driven in part by their cultural

orientations. The foreign firms ability to appreciate, manage and leverage on the benefits

and challenges that come with cultural diversity, is key for survival in a new and

competitive environment. Organizational resources which are distinctive relative to those

of rivals may become the basis for competitive advantage if properly matched to

environmental opportunities (Andres, 1971; Thompson & Strickland, 1990).

The upper echelons theory suggests that top management teams, who are part of the

human resources of the firm, make decisions that are consistent with their background

characteristics (Hambrick & Mason, 1984) which consists of psychological

characteristics and observable experiences. In addition, Hambrick (2007) proposes that

cultural factors such as experiences, values, personalities and other human factors have a

determining influence on an individual's behavior, hence the need to know the

managements‟ cultural orientation in order to understand the management of cultural

diversity in the organization.

United Bank of Africa (UBA) and Bank of Africa (BOA) are two diversely owned

foreign banks registered in Kenya with head offices in other parts of the world. The head

office for UBA is in Lagos, Nigeria while BOA has its head offices in Dakar, Senegal

and Benin, Cotonou. The duo offer commercial banking services through their branch

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networks while under the Central Bank of Kenya regulations. Both banks operate

internationally, with a presence in several countries, and are faced with the challenge of

managing cultural diversity in host countries as a result of the differences in culture at

national level, organizational level and individual level. Hofstede (1997) suggest that the

further a company moves out from the sole role of doing domestic business, the more it

needs to understand and manage cultural differences. In the corporate meeting room,

intercultural business meetings are an area where differences in cultural values, etiquette,

interpretations of professional conduct and corporate rules are at their most visible and

challenging to manage.

1.1.1 Cultural Diversity

Culture has been defined in many different ways, reflecting the variety of cultural

phenomena that can be observed, such as age, gender, ethnicity, language, religious

background, education values, beliefs, norms, and many others. Lederach (1995) defines

culture as the shared knowledge and schemes created by a set of people for perceiving,

interpreting, expressing, and responding to the social realities around them. On the other

hand, diversity refers to differences between individuals on any attribute that may lead to

the perception that another person is different (Williams & O‟Reilly, 2008).

Foreign firms operating internationally experience cultural diversity in various aspects of

business and personnel engagement, which can affect operations and performance.

Marvin and Girling (2000) argue that diversity is not only derived from differences in

ethnicity and gender but also based on differences in function, nationality, ability,

religion, lifestyle or tenure. Schneider (1988) concurs that foreign firms are increasingly

interested in promoting corporate culture to improve control, coordination, and

3
integration of their subsidiaries in the host countries. Further, these subsidiaries are

embedded in local national cultures wherein the underlying basic assumptions about

people and the world may differ from that of the national and corporate culture of the

organization.

Cultural diversity should ideally increase a firm‟s knowledge base and increase the

interaction between different types of competences and performance (O‟ Reilly, Caldwell

& Barnett, 1989). Tsui and O‟Reilly (2009) posit that as the cultural, background of

employees becomes more diverse, so does the knowledge base of the firm, on condition

that there is interaction and communication within the firm. The cultural baggage that

the employees bring with them to their workplace such as learning, motivation,

communication, conflict resolution, influences to a large extent the way they manage

themselves, with a likely influence on performance (Tayeb 1996; Okubo, 2010).

1.1.2 Organizational Performance

Machuki and Aosa (2011) refer to organizational performance as effectiveness and

efficiency in achieving various outcomes and results with respect to some criteria. The

measurement of performance can be expressed in terms of parameters or indicators that

are complimentary and sometimes contradictory (Kaplan & Norton, 1992). Delaney and

Huselid (2006) posit that organizational performance comprises the actual output or

results of an organization as measured against its intended outputs or goals and

objectives, and that performance of an organization can be measured in various ways

which include qualitative and quantitative, financial and non financial, among others.

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In the 1990‟s, performance was measured on the basis of the shareholder theory using

financial ratios (Porter, 1980). Critics of this measure argued that it was historical in

nature and could not explain how the performance measures were aligned to strategy

(Kaplan & Norton, 1992). Further refinement of financial ratios led to the development of

the balanced score card (Kaplan & Norton, 1992) which incorporated non- financial

measures such as customer perspective, internal business processes into the financial

ratios. In addition, in order to incorporate environmental and social aspects into the

performance measurement the sustainable balanced score card framework was developed

(Elkington, 1997; Hubbard, 2009).

Cox (1991) identifies six areas of business performance that are impacted directly by

cultural diversity management, which include cost, attraction of human resources,

marketing success, creativity and innovation, problem solving quality, and organizational

flexibility. The researcher will adopt Cox‟s (1991) model in addition to the non financial

measures of the balanced score card.

1.1.3 Commercial Banks in Kenya

There are 43 commercial banks in Kenya, 30 of which are locally owned and the other 13

are foreign owned (CBK, 2014). Of the 13 foreign owned commercial banks, 10 are

locally incorporated subsidiaries of foreign banks and 4 are branches of foreign

incorporated banks. Kenya‟s financial landscape has considerably changed over the

period 2006-2013 and the sector has grown in assets, deposits, profitability and products

offering. The growth has been mainly underpinned by an industry wide branch network

expansion strategy both in Kenya and in East Africa community region as well as

automation of a large number of services and a move towards emphasis on the complex

customer needs rather than traditional „off-the-shelf‟ products. Among these innovations

5
include moving from the traditional decentralized banking to one branch banking that has

been enabled by integration of various business functions (PWC, 2013). This means that

customers from any part of the world can be served in any branch, and subsequently by

any representative who works for the bank to which the customer subscribes.

There is a need therefore for a workforce that is as culturally diverse as its clientele, in

order to sufficiently meet customer expectations. 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 a robust ICT

platform, while staying sufficiently agile. Consumers will continue to demand

individualized services, and to demand them faster than ever before (CBK, 2014).

1.1.4 Bank of Africa and United Bank for Africa

The Bank of Africa was established in Bomako, Mali, in 1982 and today, the institution is

established in 17 countries around the world. BOA began its operations as a commercial

outfit in Kenya in 2004 through acquisition of the Kenyan branch of Credit Agricole

Indosuez. The Kenyan subsidiary provides commercial banking services to corporate,

SME and retail clientele through the various branches in Kenya under the supervision of

the Central Bank of Kenya regulations and its operations in Kenya are headed by a

managing director assisted by several departmental and branch managers.

United Bank for Africa began its operations in Kenya in 2009 as a wholly owned

subsidiary of United Bank for Africa PLC, one of Africa‟s oldest financial institutions

offering banking services for over 40 years, with a presence in 22 locations around the

world. With its head office in Nigeria, the Kenyan subsidiary provides commercial

6
banking services through several branch networks under the supervision of the central

bank of Kenya. The institution is headed by a chief executive officer assisted by various

sectional heads and line managers, with a diverse workforce of both local and foreign

origin.

Preliminary investigations by the researcher show that the two banks differ in the way

they manage cultural diversity. Given that they are foreign institutions, having come in

with their own organizational and national cultures, they, like their foreign competitors in

the same market, each have their own approach to cultural diversity management. This

study seeks to compare the two approaches in relation to the performance of both banks.

1.2 Research Problem

One of the most challenging issues facing organizations today is that of managing

cultural diversity in the workplace be it at a national level, organizational level,

occupational or individual level. Trompenaars (1993) observes that international

managers must operate on premises that arise from their culture of origin, the culture in

which they are working and the culture of the organization which employs them.

Recognizing and valuing cultural diversity is imperative in order to enhance productivity,

effectiveness, and sustained competitiveness. Understanding and applying the concept of

cultural relativism rather than ethnocentrism in the management of cultural diversity can

help a firm to gain competitiveness in a foreign market. The one size fits all approach to

cultural diversity management may not be appropriate for ensuring maximum

performance. The EPRG model (Wind, Douglas & Perlmutter, 1973) as a framework for

a firm to better pinpoint its strategic profile in terms of international business strategy,

identifies the various orientations of organizations undergoing the internationalization

process. The firm can either be ethnocentric, polycentric, regiocentric or geocentric.

7
UBA and BOA are two foreign banks that are doing business in the Kenyan market and

are competing with other banks for a share of the market. They both are faced with the

challenge of managing costs, attracting human resources, achieving marketing success,

creativity and innovation for the survival of their subsidiaries in Kenya, their host

country. These, according to Cox (1991) are the six areas of business performance that

are impacted directly by cultural diversity management. Through preliminary

investigations by the researcher, it was established that although both banks are of West

African origin, have different approaches to cultural diversity management in their

Kenyan subsidiaries hence the choice for comparison.

Pitts, Hicklin, Hawes and Melton (2010) studied the factors that influence the

implementation of diversity management practices and found that diversity management

springs from a series of complex and nuanced environmental factors. This was supported

by other researchers (DiMaggio & Powell, 1983; Hannan & Freeman, 1977; Meyer &

Rowan, 1977) who opined that the environment dictates the structures and organizations

of firms, and that managerial behavior is severely constrained by the external

environment. On the other hand, some scholars (Child 1972; Hambrick & Mason, 1984)

argue that individuals possess considerable free will in charting their own courses of

action, an argument anchored on the upper echelons theory. The above mentioned

studies and their findings were done in business environments abroad, hence the need to

examine cultural diversity management and performance in companies within the East

African region.

8
Locally Muhura (2012) studied the influence of workforce diversity and strategy

implementation among manufacturing firms. He established that workforce diversity

leads to improved decision making, enhanced implementation of customer related

strategies and result in the achievement of strategic targets. Ikama (2010) study on the

benefits and challenges of workplace diversity management established that high

performance is exhibited where teams include diverse age, ethnicity, nationality gender

and other differences. K‟obonyo and Dimba (2007) examined the influence of culture and

strategic human resource management (SHRM) and deduced that culture has a great

influence on SHRM practices in multinational companies in Kenya.

Though management of cultural diversity and the impact on performance have been

studied these have been confined mainly to local firms in the various countries that the

studies were carried out. The researcher did not find any study that looks at the influence

of cultural diversity management on performance of foreign firms in host countries. The

study seeks to answer the question, what is the influence of cultural diversity

management on performance of foreign banks in Kenya?

1.3 Research Objectives

The objective of the study was to:

i. Examine the forms of cultural diversity in the Bank of Africa and United Bank for

Africa in Kenya;

ii. Determine the relationship between management of cultural diversity and

performance in Bank of Africa and the United Bank for Africa

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1.4 Value of the Study

The findings of this study will add value to the RBV theory and to theories of

organizational culture by shedding more light on the relationship between cultural

diversity management and performance. The results of the study will lay bare the,

understanding of the antecedents of multiple dimensions of cultural diversity

management and may allow international managers to carefully evaluate the trade-offs

associated with increasing team diversity while maintaining heterogeneity balance.

Furthermore, the results of this study may assist human resource teams in evaluating

individual executive profiles and their fit to the existing composition of potential

employers.

The findings of the study will also give insights about the strategic and performance

consequences of cultural diversity management, and, in particular, complementarities

between backgrounds of individuals and experiences that are of direct relevance to the

overall performance of the team. The findings of the study will benefit other foreign

owned subsidiaries of banks and all other related industries as they will understand the

influence of a culturally diverse workforce on performance of organizations and the

challenges facing the banking industry in Kenya with regard to adoption of cultural

diversity management activities in their recruitment and selection processes.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

The chapter provides information from publications on topics related to the research

problem. It examines what various scholars and authors have said about the effect of

cultural diversity on organizational performance. The chapter covers the theoretical

foundation of the study, concept of cultural diversity, organizational performance and

effect of cultural diversity on organizational performance.

2.2 Theoretical Foundation

The relationships in the study will be anchored on resource based view (RBV) theory

(Wenerfelt, 1984; Barney, 1991) and the upper echelons theory (Hambrick & Mason,

1984). The basis of the RBV is that successful firms will build competitive advantage on

the development of distinctive and unique capabilities, which may often be implicit or

intangible in nature. The intangible resources include information (Sampler, 1998),

knowledge (Spender, 1996), and dynamic capabilities (Teece, Pisano & Shuen, 1997). A

recent extension of the RBV theory is the knowledge based view, which focuses on

knowledge as a key resource which incorporates the human, social and organizational

capabilities next to economic and technical capabilities. Blomqvist and Aino (2008)

summarize knowledge from a management perspective as a fundamentally human issue:

a product and vehicle of human activity, bounded by the limitations of human cognitive

and other psychological capacities, and by the social and cultural environment of activity.

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Some scholars (Priem & Butler, 2001) however argue that the RBV theory has

contributed very little to the explanation or prediction of competitive advantage. They

further recommend that the core connections between resources and the environment

should be addressed because, while resources represent what can be done, the

competitive environment represents what must be done to compete effectively in

satisfying customer needs.

The application of valuable tangible or intangible internal resources in formulating

strategy for the sustainable competitive advantage of the foreign firm is a key managerial

responsibility. However, the management, who also constitute the human resources of the

firm, influence organizational performance through the decisions they make, and

observable experiences are systematically related to the psychological and cognitive

elements of orientation (Hambrick & Mason, 1984; Finklestein & Hambrick, 2009). This

is supported by the upper echelons theory which builds on the idea of the dominant

coalition to propose that organizations outcomes, strategic choices and performance are

predicted by the managerial background characteristics. In view of the resource based

view and the upper echelons theory, it is safe to say that cultural orientation which

defines the basis for cultural diversity in the organization, affects the work force as a

whole, and this study seeks to examine the relationship between management of cultural

diversity and performance of a foreign firm in the host country.

2.3 Forms of Cultural Diversity

Cultural diversity takes different forms such as gender, ethnicity, and age among others.

Mkoji and Sikalieh (2012) suggest that managers need to be aware that there might be

gender differences regarding the relative importance assigned to distributions and

communication. This may imply different communication strategies for dealing with

12
male and female subordinates as management tries to create an optimal environment of

fairness. Failure of communication among different gender may lead to unfavorable

performance in an organization.

According to Kochan et al. (2002), providing an equal job opportunity to women, a

societal mandate that has been adopted the world over and eliminated formal policies that

discriminated against certain classes of workers and raised the costs to organizations that

failed to implement fair employment practices, is vital to improve the performance of

employees in an organization. Gender-based inequities in organizations are reinforced

and justified by stereotypes and biases that describe positive characteristics and therefore

a higher status to the males (Leonard & Levine, 2003).

Zgourides, Johnson and Watson (2002) studied ethnic diversity and leadership, group

process and performance, and found that the differences in cultural characteristics were

predictive of team scores, thereby implying that having ethnically different views for

team problem solving could increase team performance after the teams learn how to

utilize the differences to their benefit.

According to Timmermans, Ostergaard and Kristinson (2011) innovation is an interactive

process that often involves communication and interaction among employees in a firm

and draws on their different qualities from all levels of the organization. In addition,

members of the minority group can experience less job satisfaction, lack of commitment,

problems with identity, perceived discrimination among others. Ethnicity can be used as a

proxy for cultural background and diversity in ethnicity can be expected to be positive for

innovative performance, since it broadens the viewpoints and perspectives in the firm

(Richard, 2000; Timmermans et al., 2011).

13
Bell and Marvin (2007) explain that the modern individual has four generations working

side by side: the traditionalists, baby boomers, generation x and generation y. Further,

because of these demographic realities, managers must develop new programs to attract

younger workers and entice older productive workers to delay retirement. With an

increase in age diversity of the work force, comes higher levels of perceived age

discrimination climate which is potentially related to performance, hence, age

discrimination is not only an issue that should be avoided from a normative and ethical

point of view, but it might also have business consequences if not adequately addressed

(Kunze, Boehm & Bruch, 2011).

2.4 Management of Cultural Diversity

Thomas (1996) defines managing cultural diversity as a planned, systematic and

comprehensive process for developing an organizational environment in which all the

employees with their similarities and differences can contribute to the strategic and

competitive advantages of the organization and where no one is excluded on account of

factors unrelated to productivity. On the other hand, Fuhr‟s (1994) postulates that

managing diversity is the creation of a working environment in which everyone has a true

sense of belonging and worth where the barriers of the fulfillment of human potential has

been removed. This is further supported by Daniel (1994) who states that diversity

management is the process of developing an environment that fosters awareness, gives

employees opportunities and judges them fairly on their talents and contributions and

hence attempting to address expectations and remove or reduce bias and stereotypical

behavior.

14
Kreitner (2001) emphasizes that diversity applies to the entire spectrum of individual

differences that makes people unique, describes differences among them as well as

similarities and the responsibility of managers to integrate the collective mixture of

similarities and differences between into the organization. Grobler (2003) further insists

that diversity management is a planned systematic and comprehensive management

process for developing an organizational environment in which all employees with their

similarities an differences can contribute to the strategic and competitive advantage of the

organization, and where no one is excluded on the basis of factors unrelated to

productivity.

Cox (1991) refers to management of cultural diversity as a variety of management issues

and activities related to hiring and effective utilization of personnel from different

cultural backgrounds. In his view, the activities include proper management of

organization culture, mind-sets about diversity, cultural differences, education programs,

HR management systems, higher career involvement of women and heterogeneity in

race, ethnicity and nationality (Cox 1991). However, according to Grobler (2003),

diversity management programmes have not had great success in firms as top

management view diversity as a human resource issue that does not contribute to the

organization‟s long term success, while line management often see diversity management

as another activity that complicates their current role.

2.5 Cultural Diversity Management and Organizational Performance

Since the 1990‟s relentless competition has driven firms to constantly adapt, renew,

reconfigure and recreate their resources in line with the competitive environment (Wang

& Ahmed, 2007), which is characterized by complexity and dynamism (Ansof &

15
Suvillan, 1993). Further, this complexity and dynamism has resulted in the

internationalization of firms, in a bid to adapt to the ever changing environment, bringing

together people from different origins, back grounds, beliefs and norms.

Scholars have studied the relationship between cultural diversity management and

organizational performance and have produced mixed results. Awino, Muchemi and

Ogutu 2011; Hambrick et al., 1996). Awino, Muchemi and Ogutu, (2011), posit that

heterogeneous groups may have the advantage of being more creative and effective in

their decision making processes if conflict resolution is well managed. Diversity on the

other hand can be disadvantageous to organizational performance (Hambrick et al.,

1996), in which homogenous top management tends to produce better results than

heterogeneous top management.

Larner (2007) concurs that firms with diverse cultural connections may have better access

to international markets; national governments have increasingly used high-skill diaspora

communities in development strategies, so that the wide membership is constituted by

identity and governmental action. Fernandez (1993) argued that good workforce diversity

practices in the area of human resources are believed to enhance employee and

organizational performance.

Conversely, Alesina and La Ferrara 2004 established that organizations may find it more

difficult to make decisions as a result of inability of a diverse set of managers to

communicate which negatively affects the generation of ideas with a likely influence on

performance. It can be observed that the manner in which cultural diversity management

is undertaken by top managers across firms‟ influences performance. From the above, it

can be postulated that cultural diversity management has an influence on organizational

performance.

16
From the literature review, the empirical studies that have been done on the relationship

between cultural diversity management and performance have failed to address the

problems international businesses face when managing cultural diversity in the host

countries, and how it affects their performance. This study therefore seeks to address the

forms of cultural diversity at UBA and BOA, and their different approaches to

management of cultural diversity. Further, the researcher seeks to determine the

relationship between cultural diversity management and performance at UBA and BOA.

17
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the methodology that was used to carry out the study. The chapter

describes the proposed research design, the target population, data collection instruments

and the techniques for data analysis.

3.2 Research Design

The research project adopted a case study method on United Bank for Africa and Bank of

Africa, so as to make a comparison of the two foreign firms‟ performance in relation to

their approach on cultural diversity management. Kothari (1990) describes a case study

as a form of qualitative analysis that involves a careful and complete observation of a

social unit. He further describes a social unit as a person, family or institution.

The researcher adopted a case study in order to have an in depth understanding of the

complex social phenomena at UBA and BOA, which include the individual, group,

organizational, social and political phenomena. Case study method also allowed the

researcher to find the holistic and meaningful characteristics of the real life events such as

individual life cycles, organizational and managerial processes (Robert, 2002).

3.3 Data Collection

The data collection was done with the help of an interview guide. Interviewing is a way

to collect data as well as to gain knowledge from individuals. Kvale (1996) regards

interviews as an interchange of views between two or more people on a topic of mutual

interest, sees the centrality of human interaction for knowledge production, and

emphasizes the social impact of research data.

18
The researcher personally conducted the data collection exercise through face to face

interviews with the respondents. In order to get a full representation of the workforce, the

researcher collected information from two senior managers, two mid level managers and

two clerical staff in each of the banks.

3.4 Data Analysis

The qualitative data collected was analyzed using content analysis. Nachmias and

Nachmias (1996) define content analysis as any technique used to make inferences

through systematic and objective identification of specified characteristics of messages.

Kothari (2004) also explain content analysis as the analysis of the contents of

documentary and verbal material and describes it as a qualitative analysis concerning the

general import of message of the existing documents and measure pervasiveness.

Prior to embarking on content analysis, the researcher assessed the written material for an

accurate representation of what was said. The researcher further enlisted and summarized

the major issues contained in the interview guide responses. This enabled the structuring

of data in a way that made it easier for analysis and interpretation.

19
 CHAPTER FOUR

FINDINGS AND DISCUSSION

4.1 Introduction

This chapter presents data analysis, findings, and discussions. Data analysis involves

categorization, manipulation and summarization of data to obtain answers to the research

problem. Since the data collected was qualitative, content analysis technique was used to

make inferences by systematically and objectively identifying and specifying

characteristics of the information and relating it to the study.

4.2 Interviews

Interviewees were drawn from BOA and UBA with two senior managers, two mid level

managers and two clerical staff from each bank making a total of twelve interviewees. Of

the twelve interviewees targeted, only eight agreed to participate in the study. It can be

said that the respondents interviewed were qualified for the positions which they held

since all had more than three years in their areas of specialization, having risen from

lower positions. This implied that the interviewees were knowledgeable and the

information collected from them was reliable.

The interview guide consisted of 31 questions covering the forms of cultural diversity

within the two organizations, the activities involved in the management of cultural

diversity, the performance of both banks based on the six measures suggested by Cox

(1991) and the relationship between cultural diversity management and performance.

20
4.3 Forms of Cultural Diversity at BOA and UBA

The interviewees were asked to define cultural diversity. All the interviewees had a

mutual understanding of what cultural diversity denotes. They indicated that cultural

diversity is a mixture of race, religion, culture, age and ethnic groups. One interviewee

stated that:

“It denotes ethnical mixture of employees in terms of the gender, age, religion, ethnic

background and nationality‟.

4.3.1 Gender

Cultural diversity at BOA and UBA has been broken down into four main forms, namely

gender, age, religion and nationality. When asked about the gender diversity in the

organization, the interviewees from BOA concurred that the ratio of male to female

employees is somewhat balanced, with the male employees at 53 percent, and female

employees at 47 percent.

The study shows that gender composition in the two banks is a form of cultural diversity.

The management of diversity represents a challenge to organizations because different

gender have diverse expectations.

4.3.2 Age

The interviews in UBA and BOA mentioned age as a form of cultural diversity. The

interviewees in BOA described majority of employees as being young falling in the age

bracket of 25-35, followed by employees in their mid-careers in the age bracket of 36-

45years and minority of the employees are over 45 years.

21
In UBA, the interviewees concurred that employees in the age bracket of 25-35 years

were the highest, followed by 36-45 years and the least were 46-60 years. There seems to

be a mutual understanding among the interviewees that majority of the employees in both

banks are fairly young. In addition interviews stated that the employees are distributed in

different age brackets. This represents a challenge in the banks pertaining to the retention

of employees representing a form of cultural diversity.

4.3.3 Religion

From the interview responses, the interviews responded that the highest majority of the

staff as Christians followed by Muslims. However UBA represented a wider variety

consisting of Muslims, Hindus, Buddhist and atheists. The general feeling of the

interviewees was that Christianity was more dominant as compared to the other religions.

Religion has been a contentious issue in major organizations around the world and

largely influence the culture of people. In addition, religion determines the dressing code,

work ethics and values of people. The diversity of religion suggest that managers need to

put mechanisms in place to ensure that employees are not discriminated because of their

religion. Moreover, managers need to ensure that policies and procedure they have in

place treat all employees fairly. In addition it requires the management to take into

consideration the different religious holidays followed by different employees in the

organization.

22
4.3.4 Nationality

Nationality was another form cultural diversity mentioned by the interviewees in both

banks. The interviewees had a common feeling that most of the staff members were of

Kenya descent. The interviewees from BOA commented that only about 2 percent were

expatriates from other countries. On the other hand, the UBA, submitted a higher

representative of expatriates from other countries especially Nigeria. They also said that

there were employees from China, Korea and India presenting a more diverse workforce

as compared to BOA.

The composition of workforce in terms of nationality is a Major consideration in internal

business. This is especially with the diversity of stakeholders‟ expectations that

organizations decision making should reflect diversity. In addition, to overcome barriers

such as language barrier, a racial diverse workforce underscore the importance of

managing diversity.

4.4 Management of Cultural Diversity

The activities of cultural diversity management were adopted from Cox (1991). The

interviewees responded to questions formulated to guide the interviewees on management

of cultural diversity. The responses from the UBA and BOA are discussed in this section.

4.4.1 Human Resource Management Systems

The interviewees were questioned on whether or not the HR management systems were

bias free, and those from UBA had a feeling that there were unfair human resource

practices pertaining to appraisal, training and workload allocation. Some of the

interviewees commented that appraisal of the employees is undertaken in Nigeria and the

23
employees are not involved in the process. They generally felt that this process can result

to biasness especially if the objective of performance appraisal is for compensation or

promotion purposes. In addition, the interviewees cited discrimination in selection of

staff to undergo training. They complained that lower level employees „missed out on

training opportunities‟. Other interviewees also felt that training mostly favored the

foreigners and the locals were often neglected.

The interviewees generally agreed that most of the employees are happy with their

compensation. They felt that their compensation package was slightly higher in

comparison to their colleagues in other banks holding similar positions. Another

interviewee lamented that there was undue heavy workload allocated to the employees.

The interviewee also felt that the difference in time zones between Kenya and Nigeria

complicated the working hours of employees at the expense of their personal lives. The

interviewees generally agreed that on most days they have to stay in the office up to

around nine o‟clock which has an effect on their personal lives.

The interviewees in BOA reported some challenges ranging from employee retention and

competition from other banks. Further, they felt that the staff morale had been negatively

affected due to the recent acquisition of the bank by Banque Marocaine du Commerce

Exte‟rier (BCME) without proper involvement of employees and yet the cultural

diversity management style of BCME is a great variance to the previous ownership. The

perceived lack of cultural integration has created a sense of fear in the employees who

seem disillusioned about their future prospects in the bank.

24
As opposed to the UBA system of appraisal, the interviewees from BOA were contented

with their performance appraisal systems. The appraisals were carried out locally

between the employee and their supervisor. In addition, the interviewees agreed that

training was fair and continuous among the different cadres of employees. Similar to their

colleagues in UBA, the interviewees also had a general feeling that compensation was

fair as compared to the market rates in other commercial banks.

4.4.2 Higher Career Involvement of Women

The interviewees in UBA generally cited heavy work load as a major problem in the

bank. Some interviewees stated that heavy work load and unfavorable working hours has

a negative impact on career women work life balance. Some male interviewees seem to

sympathize with their female colleagues who have young children. In addition, the

interviewees in UBA complained that „chauvinism is a norm in the bank‟. Male

employees are generally reluctant in taking instruction from the female employees due to

the high domination of male employees. Furthermore, UBA has employees from different

nationalities who have different views on the role of women in society.

On the other hand, the interviewees in BOA seemed not to have any problem with the

career involvement of women. They cited more accommodative hours for their fellow

female employees. They said that working hours are friendly, there is continuous training

provided for all employees, thus providing the women with an opportunity for growth.

4.4.3 Heterogeneity in Race/ Ethnicity/ Nationality

Heterogeneity can be described as diversity in race, ethnicity and nationality. The

interviewees in UBA felt that stereotyping is wide spread in the bank. The interviewees

seemed to profile the employees according to their nationalities of origin. For instance,

25
one interviewee stated that their Nigerian colleagues are „pushy, loud, bossy and have a

feeling of superiority’ as compared to their Kenyan colleagues. On the other hand, the

interviewees also felt that the Nigerian employees had a negative perception of Kenyan.

They perceive Kenyans as unprofessional, lack-relevant skills to make strategic

decisions, lazy.

Generally, the interviewees felt that stereotyping has affected the cohesiveness between

different groups in the bank especially Nigerians and Kenyans creating a perception of

„us „verses „them‟. Further, stereotypes have affected execution of decision. The

interviewees complained that decision making takes a long time and most instances does

not reflect the view of local employees.

The interviewees in BOA said that heterogeneity in nationality has had little effect on

cohesiveness, conflict and staff morale. However, the employees complained of language

barriers between the English speaking and the French speaking employees at top

management which they largely felt has speed of decision making. The interviewees felt

that there is no problem of ethnocentrism as the management of the bank has adapted to

the host country culture. To a large extent the bank has facilitated the socialization

between employees of different nationalities and cultures by enrolling them in health

clubs and social club membership. This provides an avenue for networking and for

appreciation of diverse cultures and acceptance. It also promotes free communication

among the different cadres of employees hence enrolling the employees in the vision of

the bank.

26
4.4.4 Education Programs

Despite the various problems facing the banks, various initiatives have been instituted to

provide solutions to challenges of cultural diversity management. Interviewees from

UBA unanimously agreed that the bank has deployed a senior member of staff from the

head office in Nigeria to study the culture and the market needs of Kenya in a bid to

understand and appreciate the cultural orientations in the host country which may

contribute towards integration of nationalities in the bank.

On their Part, the interviewees from BOA agreed that the bank has taken steps to embrace

cultural diversity management through continuous educational programs both formal and

informal. They cited the „Sema Sessions‟ as an example of efforts by the bank to gain

acceptance and openness in sharing ideas. This has created an enabling environment for

effective cultural diversity management.

BOA has also undertaken informal steps by engaging in social activities including

games such as scrabble, chess; health clubs where employees can free interact regardless

of their positions and challenge each other. This breaks down cultural barriers and

promotes communication and team work. Informal relations are also created enabling

free flow of information and minimize resistance for change. In addition, the bank

encourages holding regular meeting with employees promoting integration of the

employees different cultures.

27
4.4.5 Organization Culture and Cultural difference

Organization culture is defined as a company‟s prevailing ideas, values, attitudes and

beliefs which subconsciously guide the way in which its employees think, feel and act.

An organization culture that enables employees of different backgrounds to value

differences amongst themselves, accommodate other cultures and accept prevailing value

systems, scores highly in the management of cultural diversity. The interviewees from

UBA and BOA had diverse opinions pertaining to organization culture.

Interviewees from UBA opined that there is lack of integration of culture between the

nationality of the parent company in Nigeria and that of its Kenyan subsidiary. For

instance, there interviewees reported a general mistrust between the Nigerian employees

and Kenyan employees; head office and Kenyan subsibidiary‟s inability to make

independent decisions. Some interviewees stated that one of the major reasons for

mistrust was hostility created by discriminative appointment at the managerial level. One

of the interviewee commented: ‘It is a preserve for non-Kenyans.’

Another interviewee said:

‘Top managerial positions being held by Nigerians who are from a different country with

different cultural orientation with a feeling of superiority’. This shows that there is a

problem of acceptance of individuals from other countries, thus need for prudent cultural

management practices.

Some of the interviewees cited the culture of micro management in the bank by the

parent company, who seem to have control on all decisions made, even by the managing

director. This has fueled the communication problems being experienced in the bank,

28
since the channel is purely from the top, downwards and never two ways. Further this has

had an effect on the attitude of employees inhibiting creativity, lowering their morale and

creating suspicion. In addition, this scenario has inhibited employee‟s involvement in

sharing the vision of the bank, thus deterring the growth and competitive advantage of the

bank.

When questioned about whether the mother country has taken initiative to understand the

host country culture, the interviewees from UBA pointed out that: “The ownership of the

bank assumes that what works in mother country will automatically work in the host

country like Kenya”. This has led to a myriad of problems in the bank. This is an

indicator of lack of appreciation of host country culture.

The interviewees in UBA viewed insufficient education on valuing cultural differences as

a major issue in the bank. The bank focuses more on buying employees rather than

making them. That is, the bank is bent on poaching employees presumed to have the

requisite skills at the expense of developing and promoting internally. This has an effect

on the morale of the employees who feel less valuable and may resist any changes

associated with newcomers. In addition, the „poached employees‟ may impose their

cultural orientation from previous employers as they feel more superior to the internal

employees complicating the cultural integration progress. Other interviewees observed

that only employees in top management have an opportunity to visit Nigeria where the

head office is located. This hampers effort by the bank to implement sound cultural

diversity management due to lack of sound understanding of cultural values of host

country culture.

29
In terms of importance attached to cultural diversity majority of interviewees in UBA

reported that cultural diversity has insignificant benefits to the bank. The interviewees

noted that the bank has incurred a lot of retention cost. This implies that when an

employee leaves the bank, the bank incur extra cost in recruitment and selection, and

orientation. In addition it has contributed to heavy workload on the remaining employees

as they have to redistribute the tasks from time to time

Interviewees from BOA pointed out that the management has taken positive initiatives

towards culture integration of different nationalities in the bank. This has been achieved

through localization of practices such as recruitment and selection, marketing. The

interviewees perceived open door policy and the „sema sessions‟ as positive steps

undertaken towards recognizing and appreciating all employees regardless of their

cultural orientation. In addition, the interviewees agreed that socialization has assisted in

employee‟s appreciation of other cultures leading to reduced conflicts and easier adoption

of change. However, there was feeling of anxiety amongst some interviewees who felt

that the recent acquisition from BCME could impede proper management of culture

diversity. The perceived lack of cultural integration has created a sense of disillusionment

about their future prospects affecting their morale.

The interviewees in BOA felt that management of cultural diversity has a significant

benefit to the bank. For instance, ease of recruitment, faster decision making, better

problem solving, and innovativeness in introduction of new products.

30
4.4.6 Mindsets about Diversity

When asked about the mindset of the bank in regard to diversity, the interviewees in both

had very diverse answers. The interviewees from UBA felt that management of cultural

diversity has barely addressed the challenges facing the bank in Kenya. To a large extent,

the interviewees agreed that the bank has made very little effort towards management of

cultural diversity, hence has not leveraged in opportunities that cultural diversity offers to

better enhance its performance.

The interviewees reported that there is little buy in by the majority culture to support the

banks effort to manage culturally diversity. The majority culture in this case was referred

to Kenyan culture. The interviewees felt that perceived lack of cultural diversity

management has created resistance towards minority cultures and vice versa. Thus

management of cultural diversity has created more problems than opportunities for the

bank.

On the other hand, the interviewees from BOA view management of cultural diversity as

an opportunity for the bank to improve on their performance. They said that this has been

achieved through attraction of employees with innovative ideas and unique skills, better

decision making capability. The interviewees cited the localization of marketing practices

brought about by cultural sensitivity that diverse members bring on board.

4.5 Management of Cultural Diversity and Performance

The interviewees were asked to comment on how cultural diversity management

contributes to performance as measured by Cox‟s (1991) dimension of cost, resource

acquisition, marketing, creativity, problem solving and system flexibility. The

interviewees‟ responses on the influence of cultural diversity management and

performance differed across the banks.

31
The discussion depicts that UBA has not been successful in integrating the culturally

diverse employees. This has created a problem of turnover, absenteeism, and low staff

morale affecting the productivity of the bank. Slow decision making has also been a

major problem in the bank. For instance, the interviewees reported that the MD has to

consult with the head office for every approval pertaining to credit management. This

takes time in consultation sometimes leading to loss of business and customers. Generally

the interviewees pointed that customer retention is a major problem in the bank

contributing to dwindling profits.

On the other hand, the interviewees from BOA described the effort of the bank in

integrating the culturally diverse employees as successful due to acculturation of bank

practices to fit into the Kenyan culture. The cost savings from integration from successful

integration of culturally diverse employees has seen less turnover, high employee morale,

better decision making and good communication. This has had a positive improvement

on the operations of the bank in terms of attraction of customer and less cost staff

retention cost. Thus, BOA the management of cultural diversity in BOA has a positive

impact on performance as compared to UBA.

Due to the management of cultural diverse practices, UBA has not been able to develop a

reputation as a favorable prospective employer in the market. One interviewee

commented that the bank has resulted to poaching which has a cost implication since the

poached employees have to be paid higher than their colleagues in the market. The

interviewees in BOA expressed their satisfaction in general outlook of their bank as

employer of choice. Some interviewers cited the recent recruitment of management

32
trainees from a pool of young qualified candidates as a positive step towards internal

development of skills and capabilities rather than poaching which is costly. Internal

development and training of employees has a positive impact on morale and retention.

Reports from the banks on the influence of cultural diversity on their marketing practices

differ. UBA is driven by mother country marketing practices and has not localized their

strategies to meet the local needs. One interviewee stated UBA has not made effort to

learn the market needs of Kenyans. For instance, Kenyans value for prime land as

collateral is not appreciated in the same way by the mother country. This narrows the

accessibility to credit to business banking with UBA sometimes leading to customer

turnover. The BOA on the other hand, has made some efforts to localize their market

practices in order to accommodate the various customer need in Kenya. BOA has

continuously come up with innovative and creative products in the past such as venturing

into retailing marketing, introduction of „chama accounts‟ to meet the small businesses

and women needs.

Due to cultural diversity management of heterogeneous workforce at both UBA and

BOA, the interviewees gave diverse answers pertaining to ability to solve problems

through critical analysis of issues and a wider range of perspectives. As earlier discussed,

the UBA team views heterogeneity of the workforce as a problem, rather than an

opportunity, to enhance organizational performance. The ethnocentric nature of UBA

management has not accommodated the ideas from the Kenyan employees on how to

33
compete locally, hence they unsuccessful attempt to solve problems related to market

growth and retention, competitors. The problem solving and decision making is

centralized and executed from the mother country down to Kenyan subsidiaries without

the cultural inclusion of all the stakeholders.

BOA on their part has taken advantage of the heterogeneous workforce. Through the

effort towards acceptance and valuing of all cultures within the bank, they have produced

better decisions through a wider range of perspectives. One such example is the decision

to go into retail business which was arrived at after critical analysis of the market

situation through the involvement of all the staff which has led to growth of the market

share of the bank. The bank has made tremendous steps towards integrating the needs of

employees, provision of cheap study loans at two percent per annum, team building

initiatives, interactive sessions between management and subordinates, inclusion of

minorities in their policy making and many other initiatives. On the other hand, the

interviewees from UBA did not mention any initiatives by their employer to leverage of

the heterogeneous workforce through integration, cultural inclusion and valuing of

cultural differences by the staff. However, one interviewee shared the intention of the

bank to send one employee from Nigeria to come to Kenya and study the culture.

A culturally diverse management should have an influence on the company‟s adaptation

to change. Both banks have differences in flexibility to adoption of the changing

environment. UBA has had problems in adapting to changes in Kenyan industry

environment due to centralization of their operations in the heads office. This hinders

creativity, flexibility and speed at which decisions are made. This explains why UBA has

not been able to meet the needs of the local customers. BOA has decentralized their

34
operations, appreciation of local employees. In turn, they have been able to respond to

various customer needs by coming up with products that are relevant to the Kenyan

market. In addition, decisions in UBA are still made in mother country regardless of

changes in business environment.

4.6 Discussion

This study sought to examine the relationship between cultural diversity management and

performance, more specifically of foreign firms‟ subsidiaries operating in their host

countries. The researcher utilized a case study method to compare the cultural diversity

management approaches used by two foreign commercial banks in Kenya. The data was

collected by use of interview guides within the precincts of each of their offices. Out of

the 12 targeted, only 8 of them agreed to participate in the study. In the discussion,

confirmatory patterns and inconsistencies with previous studies were identified. The

sections are arranged according to the objectives of the study.

4.6.1 Forms of Cultural Diversity

The most popular forms of cultural diversity in the study were gender, age, religion and

nationality, respectively. Although UBA had many more male employees than there were

female, BOA‟s male employees were slightly more than the female employees, thereby

presenting a more balanced outlook of gender representation in the bank. UBA seemed to

have majority of their staff aged 35 years and under, while the rest were over 35 years

old. BOA on the other hand had a more balanced representation of age groups with one

half of the staff aged 35 years and under, while the other half were over 35 years old.

35
In terms of religion, both banks had majority of their employees as Christians and the rest

were Muslims, with UBA having a small representation of Buddhists and Atheists in

addition to the two main religions represented. Despite both banks having more than one

nationality represented, UBA was observed to have more diverse workforce in terms of

nationalities with Kenyan, Nigerian, Korean, Chinese and Indian employees in the bank.

The high levels of cultural diversity in both organizations is supported by Richard‟s

(2000) argument which draws upon the resource based view of the firm to position

cultural diversity as a source of competitive advantage. Ely (2004) also found that

workforce diversity enhances organizational effectiveness and productivity by

contributing to higher-quality decisions and by taking advantage of a broader range of

alternatives and new ideas.

4.6.2 Relationship between Cultural Diversity and Performance

The findings indicated that there is a difference in the management of cultural diversity in

BOA and UBA, such as the HR management systems, organization culture, mindsets

about diversity, cultural differences, education programs, higher career involvement of

women and heterogeneity. These differences have indirectly affected the performance of

both banks in various ways which were established by use of the performance measures

suggested by Cox (1991). These performance measures consisted of six arguments,

namely: cost, resource acquisition, marketing, creativity problem solving and system

flexibility arguments.

The HR management systems of UBA were found to be wanting as they were not free

from bias, with interviewees citing unfairness in appraisal, recruitment and selection

processes, promotion, training and work load allocation. This is inconsistent with the

36
argument of Nyambegera (2002) who posits that managers cannot afford to ignore the

diversity of their human resources, which influence behavior, because if they are not well

managed, the promises inherent in HRM cannot be realized. The effect is low staff

morale, high staff turnover and reputational costs for the bank. On the other hand, BOA

has made efforts to ensure appraisal systems were fair and interactive between the

supervisor and the employee, balanced recruitment and selection of candidates, frequent

and all inclusive training for staff and fair work load allocation. Both banks however are

competitive in their compensation packages, with the salaries at UBA being generally

higher and those of BOA being the same as those of the other banks in their tiers.

The career involvement of women in UBA was found to be very low, due to heavy

workload, unfavorable working hours and chauvinism. This could explain the findings on

the forms of cultural diversity in UBA where the women population in was much lower

than that of the men. Further, the situation can be likened to Kanter‟s (1977) findings on

her study of organizational ethnography which showed how gender roles, relative

numbers, network structures and sex- specific reward systems kept women from

advancing in their careers. BOA seemed to have scored highly on the career involvement

of women, with accommodative hours of work and continuous training for the betterment

of career for all.

Profiling and stereotyping according to nationality, race and ethnicity seemed to be a

major issue at UBA. From the study, it was evident that there is a cultural rift between the

Kenyan and Nigerian staff, some degree of ethnocentrism from the Nigerian staff which

greatly affected their performance due to lack of team cohesiveness, hence difficulty in

decision making on critical issues as a team. This is in line with Trice (1993) argument

that ethnocentrism sets the stage for conflict with management and makes it difficult for

37
the team to work together cohesively. BOA on the other hand seems to have benefitted

from heterogeneity in different Nationalities, by engaging in practices that have enhanced

the appreciation of diversity within the workforce. They however mentioned the language

barrier between the French speaking management and the English speaking team making

it difficult to communicate directly with one another easily. Ethnocentrism seemed not to

be an issue at BOA.

In as far as education programs on cultural diversity awareness within the organization

were concerned, UBA seemed not to have put in as much effort as BOA. The findings

show that only one employee was deployed to Kenya to learn about the cultural

orientation and how best to do business with Kenyans. The move was supposed to inform

the head office where all decisions are made on the market need of Kenya and best

practice when it comes to doing business. However, this does not take into consideration,

the other expatriates who were sent from the head office without prior orientation, hence

their failure and poor performance in management of cultural diversity. Similar study by

Stewart and Mendenhall (1990) showed that 16% to 40% of all expatriate managers who

are given foreign assignments fail or end their assignments early because of their inability

to adjust to the foreign environment. Conversely, the findings show that BOA has made

efforts to initiate regular interactive sessions to enhance interaction, exchange ideas and

break down cultural barriers within the work force.

The organizational culture at UBA was found to be characterized by ethnocentrism,

displayed by the parent company in its Kenyan subsidiary; mistrust between the Nigerian

expatriates and other colleagues; discriminative appointments at the managerial level; a

culture of micromanagement, with communication channels purely from the top

38
downwards and never in the reverse. There is a belief that what works in the parent

country will work for its Kenyan subsidiary, hence the centralization of the locus of

control of crucial management activities and decisions. This has led to a myriad of

problems for UBA such as irrelevance of products and services offered, high staff

turnover due to low morale and poor decision making by the management. This is in line

with the results of Black and Porter (1991); Raslton et al. (1995). The said scholars found

that the rules of good business are not the same everywhere and that what works in one

culture may have little or negative effect in another cultural context.

The localization of practices such as marketing, recruitment and selection has enabled the

Kenyan subsidiary to gain competitive advantage through the attraction and retention of

the right candidates for the jobs, and market penetration and market share acquisition by

use of relevant techniques based on the market needs in Kenya. The open door policy,

culture of all inclusiveness, socialization and interaction at BOA have contributed to the

staff‟s appreciation of cultural diversity and also demonstrated the importance of cultural

diversity to the bank. BOA bears characteristics similar to Cox‟s (1991) description of the

features a multicultural organization. They include pluralism, full structural integration of

all cultural groups, full integration of minority culture groups, an absence of prejudice

and discrimination, equal identification of minority and majority group members with the

goals of the organization, and minimal intergroup conflict based on race, gender,

nationality and others.

39
The study findings indicate a negative mindset on cultural diversity at UBA, with the

staff feeling that cultural diversity has created more problems and benefits due to its poor

management. There is little buy in by the majority culture, which is the Kenyan culture to

support the efforts of management in the management of cultural diversity. BOA

employees on the other hand have a positive mindset on cultural diversity and they

attribute the bank‟s lower costs of staff retention, attraction resource acquisition,

marketing success and problem solving prowess to proper management of cultural

diversity.

40
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the summary, conclusions, and recommendations from the study

findings in line with the research objectives. The chapter begins with a summary of major

findings covering the two objectives of the study. The major conclusions are presented,

and finally, recommendations are provided, including the implication of the study to

theory, knowledge, policy and practice. The limitations of the study as well as

suggestions for further research are also presented.

5.2 Summary of Findings

The findings indicate that there is a difference in the management of cultural diversity in

the two foreign banks, UBA and BOA. Although the most dominant forms of cultural

diversity in both banks were age, gender, nationality and religion, there is a difference in

the demographic characteristics. For instance, BOA‟s representation of men to women

was more balanced than that of UBA; UBA seemed to have more nationalities

represented in the organization than BOA; Both banks had a small representation of other

religions with a majority of Christians, although UBA had a wider variety of religions

such as Christians, Hindu, Muslim and Buddhists while BOA had only Muslims and

Christians; UBA had a larger number of young people under the age of 35 years while

BOA had a more balanced mix of age groups.

There was a general laxity in the cultural diversity management activities by UBA, which

had an impact on the performance of employees and consequently, the overall

performance of the bank. BOA on the other hand seemed to get the activities of cultural

diversity management right in many aspects, hence the better outcomes based on Cox‟s

41
(1991) six areas of business performance that are impacted directly by cultural diversity

management, which include cost, attraction of human resources, marketing success,

creativity and innovation, problem solving quality, and organizational flexibility.

5.3 Conclusions

The topic of the research project was on cultural diversity management and performance,

more specifically, on foreign firms‟ subsidiaries operating in Kenya. A case study was

carried out on UBA and BOA for comparison purposes, and the primary data collected

was qualitative, in form of an interview guide comprising of 31 questions. Of the twelve

interviewees targeted in UBA and BOA, only eight agreed to participate in the study. The

research project was anchored on two theories: the RBV and upper echelon theories. Two

research objectives were formulated to guide the study. The first research objective was

to examine the forms of cultural diversity at UBA and BOA. The second objective was to

examine the relationship between cultural diversity management and performance at

UBA and BOA.

The spheres of activities in cultural diversity management and performance indicators

were adopted from Cox (1991) and they included proper management of organization

culture, mind-sets about diversity, cultural differences, education programs, HR

management systems, higher career involvement of women and heterogeneity in race,

ethnicity and nationality. Based on the findings of the interview guide, the performance

of both banks varied in terms of cost, attraction of human resources, marketing success,

creativity and innovation, problem solving quality, and organizational flexibility,

according to the performance measures suggested by Cox (1991). The results showed that

there are different forms of cultural diversity at UBA and BOA, however, the levels of

diversity differ, with BOA being more culturally diverse and balanced in terms of the

42
demographic characteristics. Further, the management of cultural diversity at BOA was

better in comparison to UBA, based on the results of their performance, using the

measures adopted.

5.3.1 Forms of Cultural Diversity

The first objective of the study was to examine the forms of cultural diversity in UBA

and BOA. The findings of this study indicated that the interviewees identified cultural

diversity in form of demographic characteristics such as age, gender nationality and

religion as the most dominant forms of cultural diversity. The results indicated that BOA

had a more balanced representation of cultural diversity as compared to UBA. Thus it can

be concluded that BOA scores higher than UBA in terms of cultural diversity.

Overall benefits and problems of a culturally heterogeneous organization can be closely

related to how effectively it is managed. A culturally diverse organization has the

opportunity to benefit from enhanced problem solving capacity, cost reduction, resource

acquisition advantage, marketing success, creativity and system flexibility. A culturally

heterogeneous workforce that is properly managed can be seen as an asset and a resource

for the organization. This is true for organizations that need to introduce new products in

the market and review strategies for marketing.

5.3.2 Cultural Diversity Management and Performance

The second objective of the study was to examine the relationship between cultural

diversity management and performance in UBA and BOA. As per the findings of the

study, BOA has leveraged on their cultural diversity to achieve higher performance. The

results from the interview guide point that BOA has successfully integrated cultural

diversity through open door policy, interactive sessions, inclusiveness, thereby explaining

better organizational outcomes and positive employee behavioral outcome. Conversely,

43
the reports from the interview guide point that UBA has not fully integrated the culturally

diverse workforce. They have faced problems ranging from low staff morale, poor

reputation for resource acquisition in the market, slow decision making and slow decision

making.

Conclusively, the comparative results of BOA and UBA depicts a variance in

performance based on the cultural diversity management practices. For a foreign firm

operating in a host country to gain competitive advantage, there is a need to properly

manage cultural diversity. The activities involved in the management of cultural diversity

include proper management of organization culture, mind-sets about diversity, cultural

differences, education programs, HR management systems, higher career involvement of

women and heterogeneity in race, ethnicity and nationality (Cox 1991). This will yield

better results in cost reduction, attraction of human resources, marketing success,

creativity and innovation, problem solving quality, and organizational flexibility, hence

gaining competitive advantage for the foreign firm it it‟s host country.

In conclusion and consistent with the RBV and the upper echelon theory, it seems that

when an organization has a heterogeneous workforce Organizations that apply resources

that are heterogeneous, unique, valuable it can achieve competitive advantage. In

addition, the study is consistent with the upper echelon theory by demonstrating that top

management teams are influenced by their cultural background and orientation. Thus,

management of culturally diversity is a practice that foreign firms subsidiaries operating

in host countries should adopt in order to be competitive in the ever changing

environment.

44
5.4 Recommendation

The study recommends that cultural diversity management of foreign banks‟ subsidiaries

should form an integral part of their management activities for enhanced competitive

advantage. The understanding and recognition of the importance of cultural diversity in

the institutions, management of cultural diversity, and the relationship between cultural

diversity management and performance has implication for theory, knowledge, policy

and practice. A comparison of the performance of both banks against the backdrop of

their cultural diversity management practices indicated that if well managed, cultural

diversity can enhance organizational performance and competitiveness. On the contrary,

if poorly managed, cultural diversity can pose a challenge to a foreign firm‟s subsidiary‟s

performance in the host country. Thus, the study has implication for theory, knowledge,

practice and policy.

5.4.1 Implication for Theory

The study on cultural diversity management and bank performance was guided by RBV

theory and upper echelon theory. The findings of the study have the following

implications to the theories.

The first objective of the study was to examine the forms of cultural diversity in UBA

and BOA. This objective was guided by RBV theory that proposes the application of

heterogeneous resources for the benefit of the organization. Results from the study

confirmed that the most dominant forms of cultural diversity in both banks were age,

gender, nationality and religion. BOA‟s representation of men to women was more

balanced than that of UBA; UBA seemed to have more nationalities represented in the

organization than BOA; Both banks had a small representation of other religions with a

45
majority of Christians, although UBA had a wider variety of religions such as Christians,

Hindu, Muslim and Buddhists while BOA had only Muslims and Christians; UBA had a

larger number of young people under the age of 35 years while BOA had a more

balanced mix of age groups. To a large extent, the heterogeneity has support of RBV, and

explains why BOA has better performance as compared to BOA.

The second objective was to determine the relationship between cultural diversity

management and performance. This objective is guided by RBV theory and upper

echelon theory. The results from the interview guide provide support for both theories. In

particular, the results show that top management teams‟ decisions are affected by their

cultural orientations and backgrounds as suggested by the upper echelons theory.

Managers being the drivers of strategy formulation and implementation come from

different cultural backgrounds as individuals which affect their world view and decision

making capabilities, which will in turn affect the performance of teams. The results also

depict the application of heterogeneous internal resources that are valuable, rare, and

inimitable to gain competitive advantage. This is a construct of the RBV theory. The

level of effectiveness in the management of cultural diversity in the organizations in both

organizations is reflected in their performance.

In addition, results suggest that performance is achieved through cultural diversity

management. The difference in performance in UBA and BOA suggest that an

organization can gain competitive advantage through cultural diversity management. The

results of the study indicate that BOA has better performance. There was a general laxity

in the cultural diversity management activities by UBA, which had an impact on the

46
performance of employees and consequently, the overall performance of the bank. BOA

on the other hand seemed to get the activities of cultural diversity management right in

many aspects, hence the better outcomes based on Cox‟s (1991) six areas of business

performance that are impacted directly by cultural diversity management, which include

cost, attraction of human resources, marketing success, creativity and innovation,

problem solving quality, and organizational flexibility.

5.4.2. Implication for Knowledge

Locally, there seems to be limited empirical research on cultural diversity management

and performance the field of international business management. A review of literature

shows that majority of studies on cultural diversity management are based on research

carried in United States, Europe and Asian countries. The results of studies suggest that

different countries have contrasting cultures and as observed by Adler (1991) conclusions

drawn from these studies assume a universal approach. Kamoche (2000) proposes that

studies must fit the cultural and institutional context under which they operate, as studies

undertaken in a developed country has a limitation of overlooking the cultural practices

and mindsets of employees in African context. The results of the study provide that

cultural diversity management has an influence on performance adding frontiers of

knowledge on international business management in a Kenyan Context.

The study is valuable not only to students and researchers in international business

management, human resources, organizational theory and cross-cultural management, it

is topical and much needed study. The study forms a critical reading for African

managers in MNCs and domestic managers in Africa (Kamoche, Nyambegera, Mulinge

47
2002). Furthermore, the study provides a point of reference for future scholars in field of

management. Specifically, the results of the study and suggestions thereafter, provide

insights to future scholars.

5.4.3 Implication for Managerial Policy

The results of the study has implications for the vision 2030 which states that Kenya‟s

journey towards prosperity involves building a just and cohesive society that enjoys

equitable social development in a clean and secure environment. This quest is the basis of

transformation of the society in seven key sectors: Education and training, health, water

and sanitation, environment, housing and urbanization; as well as gender, youth, sports

and culture as well as equity and poverty eradication. It also makes special provision for

Kenyans with various disabilities and previously marginalized communities.

The results of the study can assist policy makers in developing policies that are all

inclusive in terms of age, gender, religion and nationality in the wake of globalization of

businesses. Further, the results of the study can assist policy makers to implement

affirmative action programs which guide human resource practices in terms of

recruitment and selection, training, promotion, and compensation of women, minority

groups and the physically disadvantaged. In light of the results of the study, the level of

heterogeneity within the organization has an influence on creativity, innovation, problem

solving and marketing success.

The results of the study will be of value to policy makers in international business

management towards formulating policies from a perspective of cultural relativism as

opposed to ethnocentrism. This implies that foreign firms‟ subsidiaries should acculturate

48
their management practices to the host country culture. For instance, they need to learn

and integrate the host country culture into their cultural diversity management practices

in order to gain competitive advantage over other their competitors.

In addition, the research provides useful insights to local policy makers in both private

and public organizations in their human resource practices. This will assist the policy

makers in developing policies that are all inclusive and to achieve a culturally diverse

workforce for the benefit of the organization.

5.4.4 Implication for Managerial Practice

This research provides useful contribution for management of international business as it

provides the various forms of cultural diversity. The results of the study will assist

foreign firm‟s subsidiaries operating in host countries to manage cultural diversity.

Particularly, the study indicates that there are differences emanating from cultural

diversity management practices in UBA and BOA which create variances in performance

of both banks. UBA has not fully integrated cultural diversity management practices

which has affected the performance in terms of morale, problem solving, and

innovativeness. On the other hand, BOA has adopted cultural diversity management

programs in a way that has enhanced the performance of the bank.

The results of this study will assist international business managers in instituting human

resource management systems such as training, workload allocation, compensation and

performance appraisal, recruitment and selection that are free from bias. The

practitioners can also ensure that work life balance of employees is supported through

fair allocation of workload and favorable working hours. This was exemplified by BOA

which seems to have consistent and favorable working hours as compared to UBA which

49
seems to maintain the mother country time shifts which are two hours behind Kenya. In

addition, the results will assist practitioners in international business to educate their

employees on valuing cultural diversity through various interactive session and activities

such as sports, team building and open door policy. The adoption of policies of inclusion

would benefit management from taking advantage of diversity.

5.5 Limitations

The research project adopted a case study, which made a comparison between two banks,

UBA and BOA. Due to the sensitive nature of the information required, it was not easy to

for the participants to agree to an interview. Out of twelve, only eight of them agreed to

participate in the study. Some of the information collected was subject to biasness from

the participants, for fear of being said to have taken a negative position on certain issues.

This was however mitigated through reassurances on the confidentiality and use of the

data, purely for academic purposes.

Time was also a limiting factor as most of the interviewees kept on postponing the

appointments to reschedule tor a time of their convenience. Some interviewees declined

to participate in the study, citing time constraints as the main reason for declining. As a

result, only eight interviewees out of the twelve who were contacted agreed to the

interview within the limited time available to the researcher. Some meetings had to be

arranged very early in the morning in order to get the interviewees to participate before

the start of their daily routines.

50
5.6 Suggestions for Further Research

The research project‟s main objective was to examine the forms of cultural diversity and

the relationship between cultural diversity management and performance of foreign

firms‟ subsidiaries in their host countries, with a specific focus on foreign banks in

Kenya. A case study was carried out on BOA and UBA in order to compare the results,

and the findings revealed that there is a relationship between cultural diversity

management and bank performance. In addition, the findings depicted that if cultural

diversity is effectively managed, it can enhance the performance of the organization.

Further research could be carried out on cultural diversity management and performance

of foreign firms‟ subsidiaries in their host countries, with a specific focus on other

industries that are regulated both locally and internationally, such as the mining industry

and horticultural industry. This would shed light on the complexities, challenges and

benefits, if any, of managing cultural diversity in an industry that is highly regulated both

in the host country and internationally.

51
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 APPENDICES

APPENDIX I: LETTER OF INTRODUCTION

59
 APPENDIX II: INTERVIEW GUIDE

1. What is the name of your institution?

2. In what tier does your bank fall in the Kenyan industry?

3. Describe the ownership of the bank.

4. How many countries does the bank operate?

5. What were the reasons for expansion to these countries?

6. What challenges did the bank encounter in the expansion?

7. What is your current position in the bank?

8. How many years have you worked in the institution?

9. What is your highest level of education?

10. How old are you?

11. What is your gender?

12. In your own words, what is your understanding of cultural diversity?

13. How important is cultural diversity to this organization and why?

14. Does the organization experience cultural values clashes? What are some of the

potential areas where these clashes cause problems?

15. What are the key benefits that the employees have experienced from a culturally

diverse organization?

16. What are the key benefits that the organization has experienced from a culturally

diverse organization?

17. In your view, what are some of the problems experienced in the management of a

culturally diverse organization?

60
18. Name some of the practices the management has put in place to manage culturally

diverse workforce.

19. To what extent would you gauge the organizations fairness in the management of

the following practices irrespective of age, gender ethnicity and nationality?

 Recruitment

 Training and development

 Performance appraisal

 Compensation benefits

 Promotion

 Work-life balance

 Affirmative action

20. Does the organization provide continuous training programs on valuing

differences among individuals from different backgrounds? Explain.

21. Does the management continuously sensitize employees on the importance of

cultural diversity? Explain.

22. Is there general acceptance of employees from different cultural backgrounds?

Explain.

23. Kindly classify the following factors as satisfactory or non satisfactory in your

organization:

 Socialization

 Friendliness

 Flexibility

 Teamwork

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  Trust

 Stereotypes

24. Please elaborate extensively, to what extent do you feel that the organization‟s

practices and strategies fit into the competitive banking environment and culture

in Kenya?

25. Does the organization have a cost advantage of integrating workers from different

cultural backgrounds? Explain.

26. Does the organization have a reputation of attracting the best pool of candidates

during recruitment? Explain.

27. To what extent is the marketing success of the organization driven by the

marketing practices of the mother country of your institution? Explain

28. To what extent is the marketing success of the organization driven by the

marketing practices of the host country (Kenya)? Explain

29. How often does your organization introduce improvements or new products and

services into the market?

30. Do the different opinions from employees result in critical analysis of issues in

the organization?

31. Does the organization react faster and at a less cost whenever there is

environmental change as a result of cultural diversity?

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