Impact of Cultural Diversity on Employee Performance

Abstract

The aim of this study is the investigation of the impact of cultural diversity on the performance of employees within organizations. Developments in science and technology have made it possible for modern work organizations to have people of different cultural backgrounds working together as employees. This variety in cultural background or cultural diversity creates challenges in the workplace which lead to conflicts and affect team work when not properly managed. This study sheds light therefore on how differences in cultural orientations can affect the productivity of employees and organizations. The quantitative research method was adopted for data collection. Data was collected via questionnaires. The target population of study was the number of the employees worked in SME’s in Islamabad and Rawalpindi. This study used the sample size formula with 95% confidence interval and 5% margin of error, so samples are 357 employees of SMEs according to formula. SPSS was used to test the hypotheses formulated and the findings presented and discussed. The findings show that cultural diversity significantly affects the performance of employees if they work in heterogeneous group then there performance will be better and more productivity and innovative ideas will be generated but it can also cause conflicts among team members and if they work in homogeneous groups there will be low productivity. Since conflict arising from cultural differences wastes time and reduces employee morale, this study recommends that organizations should strive to create organizational culture that not only incorporates and enhances the cultural diversity of its workforce composition, but also enables employees to build relationships and acknowledge each other regardless of their differences of origin and background. In order to develop and gain competitive advantage, organizations need to accommodate cultural diversity and create an atmosphere that is open and flexible.