Culture Shock! Why capitalising on culture is long overdue

There’s no lack of cultural diversity in Australia. Our rich migrant history for the last 230 odd years, combined with the rich diversity of First Nations people prior to that has made us one of the most multicultural nations in the world. And, as many experts argue, the great international success story of multiculturalism.

But big business has been slow to take full advantage of the talents and capabilities that our culturally diverse workforce offers. This is perplexing, especially given Australia’s reliance on international trade and the enormous potential resources available from our culturally diverse workforce. 

Australia’s population is astoundingly culturally diverse – Australians come from more than 270 ancestries, speak close to 400 languages (including 164 Indigenous languages), and observe a wide variety of cultural and religious traditions. The 2011 Census revealed that over a quarter (26%) of Australia's population was born overseas and a further one fifth (20%) had at least one overseas-born parent. This represents enormous potential and an ever increasing talent pool, particularly at the top end among university graduates and Australia’s skilled migration program.

Unfortunately, Diversity Council Australia’s new research shows this diverse talent isn’t being harnessed at the leadership level in corporate Australia. Recently released, DCA’s Capitalising on Culture: A Study of the Cultural Origins of ASX 200 Business Leaders, for the first time ever has revealed the cultural origins of board members and senior executives in our major listed companies.

The good news is that we found a lot of cultural diversity – 1 in 5 (22%) business leaders are from culturally diverse backgrounds; with 57 different origins amongst directors, and 74 amongst senior execs. Also encouragingly, 30% of boards have reached a critical mass for cultural diversity (i.e. the level at which research tells us businesses start realising the bottom line benefits).

The bad news however, is that when you adopt a narrower definition of cultural diversity – that is you exclude people from North West European origins – levels of cultural diversity drop by half, e.g. directors drop from 22% to 11%.

People from Anglo Celtic and North West European origins are overrepresented in leadership roles, with other cultures underrepresented when compared to the general population. This is especially so for leaders with Asian origins, which is a real concern given the economic importance of Asia to Australia.

There is a growing realisation in some segments of corporate Australia of the importance of grappling with this question of cultural diversity and international engagement. PwC’s Luke Sayers and ANZ’s Mike Smith are among those Australian CEOs who really get it. For these business leaders, the imperative is critical to remaining competitive in the region. PwC’s recent announcement of a target of 5% of partners with an Asian background by 2016 shows just how important this issue is becoming in Australian boardrooms.

As Rupert Murdoch pointed out last week in his address to the Lowy Institute, “Immigration adds its own dynamism to any economy. But having a diverse immigrant population is also a precious resource as we engage the world. The nations that lead this century will be the ones most successful at attracting and keeping talent. There are countless thousands of intelligent university graduates around the world, and in particular in our Asian neighbours, looking for work and wanting to start businesses. We need to get the brightest of them here. That is how we will strengthen our human capital….Australia is on its way to becoming what may be the world's most diverse nation. This is an incredible competitive advantage. A nation as small as ours will increasingly depend on trade. The more people we have with ties to other parts of the world, the greater our advantage when we seek trade relationships with these nations.” So why aren’t more businesses getting to grips with cultural diversity and what can they do next?

There is a wealth of research which quantifies the business benefits of cultural diversity including the potential to boost local market share, enter international markets, create strategic alliances, maximise innovation and meet critical talent shortages. Greater regional and cultural understanding and capability are increasingly a key ingredient for business success.

The essential first step for corporate Australia is to recognise that cultural diversity needs to be part of the mainstream business agenda. This means starting by building organisational understanding of and engagement around this imperative, to ensure internal strategies and initiatives are sustainable and can deliver positive outcomes for organisations.

Companies need to measure their current levels of cultural diversity using the right tools, in order to understand what cultural diversity they have in their organisation right now. If there are gaps, they must critically review their systems and processes to see where and why diverse talent is being filtered out.

Real change will require transformational leadership; to start thinking differently. We must move beyond the idea that ‘merit’ will ensure talent in the pipeline makes it to the top. Our experience with the persistent lack of women in leadership has shown that it doesn’t work – and it won’t work for culturally diverse talent either.

Research still can’t tell us whether the problem arises because leaders tend to recruit people like them, perpetuating a dynasty of white Anglo Celtic male leaders. Or whether it is a consequence of our geographic isolation and historical migration patterns. Or whether it is simply that business hasn’t yet made the connection between its leadership and the need to reflect the diverse customer base it serves.

Building a truly inclusive culture, valuing cultural assets (like language and global experience) and building cultural capability are all fundamental. This can begin with small every day acts of awareness by all people leaders to understand colleagues who are different to them – and not assume that everyone will or should conform to the existing ‘corporate culture’.

There is an urgent business imperative for Australian business to capitalise on cultural diversity. Culturally diverse leadership drives business improvement through innovation; expanding market share in local multicultural and export markets; helping build new strategic alliances and joint ventures; cultivating a cultural diversity-differentiated reputation; and meeting critical talent shortages.

These compelling advantages mean that to stay competitive, businesses need to kick start their diverse talent agenda, or get ready for a real culture shock.

Nareen Young is DCA’s Chief Executive Officer

DCA has a wealth of research and tools focused on helping businesses to build their cultural capability.

• Access more imformation on the Capitalising on Culture research, including the full report, executive summary and the 11 recommendations for action.