“Diversity is inefficient.”
This wasn’t what I expected to hear at a talk about leveraging diversity. But with closer scrutiny, these words from Takashi Hata, Senior Vice President of Nissan, made perfect sense.
Hata spoke at GLOBIS Professional Seminar, “Leveraging Diversity to Stay Fit in a Fast-changing World.” During his talk, he revealed his candid thoughts after years of international experience in a range of companies.
“Change is happening around us all the time. Are you ready for the next wave of change?” he asked.
Hata himself has gone through several geographic, cultural, and industry shifts in his professional career. Some notable examples include moving from an almost bankrupt Japanese trading company to an American conglomerate’s plastics division and subsequently to a Saudi Arabian petrochemical firm. Shortly after that, he was cherry picked by Nissan’s Carlos Ghosn to lead JATCO, an automotive transmission company, despite having no knowledge of the industry. He then served as Nissan chairman for the Africa, Middle East, and India (AMI) region. This eventually led to his current leadership role as senior vice president.
So, how did he cope with all the changes he has seen?
He answered this question by quoting Charles Darwin: “The one who survives is he who is the most adaptable to change.”
Are you prepared to deal with mega-changes?
Hata challenged the audience to think about some examples of “mega-changes”—changes on a grand scale that happen at a remarkable speed.
Perhaps the most relevant example was the demographic shift underway in world population which, the United Nations says, will hit 9.6 billion people by 2050. As the global population continues to grow and Japan’s continues to age, how will a country like Japan survive? What are the challenges people will face, and what are the opportunities?
Another example Hata cited was the leap in the inequality gap between the rich and the poor (also by expected 2050). Hata cited Thomas Piketty’s Capital in the Twenty-First Century, which predicts that the world’s combined economic growth rate (closely related to an ordinary laborer’s income) will dip to below 2%, while the pure rate of return on capital (closely related to a rich person’s income) will rise to above 4%. Today, this gap sits at only 0.5%.
Mega-changes such as these present immense difficulties—as well as numerous opportunities—for those ready to adapt.
Diversity’s role in business
How does diversity come into play at work? For Hata, the answer was simple: diversity is an indispensable source of competitiveness. “It is there to create greater value,” he says.
He emphasized that in order to manage diverse teams, the key leadership skill to develop is the ability to understand and accept different ideas while maintaining your own opinions.
Referring to his experience in Nissan, he added, “Diversity exists to create a positive conflict from people with different values.”
In Nissan’s case, diversity was sustainably managed with great help from the Nissan Way, which helped unify a very globalized company. Nissan has over 37 nationalities represented at its headquarters in Yokohama. The company opened a Diversity Development Office, as well as a Diversity Steering Committee to oversee the entire organization. For two years running, it was named one of DiversityInc’s 25 Noteworthy Companies.
There is a growing body of research to support this strategy. McKinsey & Company found that “companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians.”
To be truly successful, Hata suggested that leaders need to bridge the gap between sympathy and empathy.
Sympathy allows a leader to support the organization by “standing on the other side.” Empathy takes it a step further by creating opportunities to “be in the other person’s shoes.” This increases the leader’s ability to accept and harness differences between people.
“Start with sympathy—then lead with empathy,” Hata stressed.
Diversity is no panacea
In today’s world, where “diversity” has become a huge corporate buzzword, Hata cautioned not to think of it as panacea, as by its very nature diversity can be cumbersome, even inefficient.
Organizations should always be able to answer the question: “How much is diversity worth to you?”
If you can answer this honestly, making decisions regarding diversity becomes a whole lot easier. To illustrate this point further, he cited the differences between monocultural teams and multicultural teams in terms of effectiveness.
“Diverse teams may work, or may not,” he said.
In school, for example, a monocultural group may be the most efficient team and easily get the job done, but might only receive a B+. A multicultural group, will experience more difficulties, but have different opinions and may receive either an A+ (when diversity is working) or a C- (when diversity fails).
“Focus on the experience of diversity. Take advantage of each opportunity because diversity is everywhere,” Hata encouraged. “The pain and difficulty of managing diversity will harness your strengths.”
Taking it further, he touched on the typical globalization strategy of Japanese companies, giving it the nickname “Japan Co. Ltd.” For these companies, globalization means sending its Japanese leaders to head overseas operations but keeping the home base in Japan, conducting meetings and retaining documents in Japanese, and maintaining a 70:30 ratio of international-to-domestic business revenue composition.
As Hata put it, “Japan Co. Ltd may be efficient in getting the work done today, but will this model be sustainable?”
Diversity is a business decision
Hata clarified that at the end of the day, managing diversity and responding to changes is still the company’s ultimate decision.
However, he cautioned that companies should always consider changes in the environment (especially mega-changes) and evaluate if its decisions and strategies will still enable competitiveness.
“The strategies that enable you to get a B+ today may no longer be adequate to get a B+ tomorrow,” he warned.
When asked why a company should gamble shareholder value for the sake of diversity, he said, “Diversity is not the only answer. It’s a deliberate choice, and it makes a significant difference.”
Before concluding his talk, he offered a few final words of advice:
“Take the harder path—aim for the A+.”
“Be sensitive about the cultural differences around you, and recognize that these differences are just on the surface.”
“Look deeper, and you will understand that at the end of the day, we are still all human beings.”
Touching on the importance of authentic leadership, he added: “Leadership is a personal style. You cannot be exactly like somebody else. Your character is a summation of what you have experienced which nobody else can imitate.”
“Good communication can earn you respect, but the depth of your character will magnify that respect.”
In short, implementing diversity can be inefficient and difficult, but it is also indispensable in modern business.