Multiculturalism and the Accounting Profession: Enhancing Employee Productivity and...

As a service industry, accounting is committed to delivering client satisfaction. The nature of its workforce and client base is changing dramatically as American society undergoes fundamental changes in its racial composition. Culturally different clients and racially diverse workforces are

The Racial Composition of American Society is Changing

The racial composition of American society is changing as a result of high levels of immigration, rising rates of intermarriage, and the increasing globalization of business. The Census 2000 form lists as many as six racial categories. Interracial marriages accounted for more than 1.46 million in 1990, and these figures do not include marriages between non-Hispanic whites and Hispanics, which have risen substantially during the last decade.

It is estimated that, by the year 2050, Hispanics in the U.S. will number 133 million, as opposed to the present 36 million. Currently, there are some 11 million Asian-Americans, and this number, too, is expected to increase sharply in the future. The Hispanics and the Asians make up the fastest-growing population groups in the United States today.

The Ethnic Market is Lucrative For the Services Industry

America's huge ethnic market needs services and is responsive to firms that cater to their special needs. Thus, "diversity marketing' or pursuing customers based on race and language characteristics, makes good business sense in an increasingly multicultural America. The American society is changing and businesses have to respond accordingly. [1]

Client Satisfaction is Central to the Accounting Profession

The marketing concept teaches us that a firm should do all in its power to satisfy customer needs and thereby achieve its own goal of profit. Being a service industry; the accounting profession should focus on client satisfaction as the primary goal of the organization.

Accounting firms need to define their businesses in terms of satisfying customer needs, rater than in terms of a product or set of products. Accountants today are much more than experts in financial record keeping. They are knowledgeable in a variety of areas such as computer software, finance, management, marketing, investments, and taxes. Studies have shown that in accounting, customer satisfaction is the most important measure of business performance--more important than other measures such as profit or market share. A high level of customer satisfaction in this business generally results in client loyalty and positive recommendations by the client to others. [2]

Cultural Characteristics of Ethnic Markets in America

Each of the ethnic subcultures in America is a potential target market and requires different treatment. Approaches that work with established clients may not be appropriate for non-traditional clients. Therefore, it is important to research their cultural characteristics to better serve their needs.

In many societies, business and culture are not mutually exclusive. Indeed, management style, corporate behavior, and business practices in ethnic cultures are permeated by a variety of cultural influences, many of which differ from those in the West. Some of these cultural characteristics of Asian cultures are explained below.

Long-term Relationships Are Valued

In Asian, and in Latin cultures too, long-term business relationships are valued and take precedence over "quick deals" arranged during a hasty meal. The Asian business culture places a high value on Confucian "guanxi" relationships based on family, village, clan or other ties. These relationships are long-term, holistic friendships based on trust and loyalty, as well as utilitarian factors, such as the need to know business partners. These relationships are held together by constant communication and mutual commitment. Many business decisions are based on these long-term relationships rather than on strict market factors.

"Face" Must be Preserved

Another key element in the Asian business culture is the notion of preserving one's "face" or dignity. Confucius stipulated that every effort should be made to save not only one's own face, but, as members of a group, that of others as well. Thus, it is not common practice to engage in open criticism of other people, because to do so would cause others to lose "face," Competition is acceptable as long as it is not overtly done through negative means. Instead, competitors distinguish each other through background, specialization, territory and reputation.

Small Businesses are Run in Authoritarian Ways

In accordance with cultural traditions, the majority of Asian ethnic businesses continue to be small, family-owned entities headed by an authoritarian figure. Even large Asian businesses are run the same way as small businesses. Family members fill most of the top management positions. Other senior managerial posts are usually awarded to close relatives or family friends. Professional outsiders are rarely allowed to enter the inner family circle.

The leadership styles in these Asian businesses are authoritarian. Information is tightly controlled. Higher authorities make decisions, essentially top-down in nature, and the rest of the organization simply implements these decisions.

Decisions are Made by Groups

Another example of the influence culture plays in Asian business practices is the emphasis placed on a consensual group decision-making process. In this "ringi" system, a proposal will originate in one department and then be passed on to other departments for comments. It is then passed up through layers of management until it reaches the president of the company. This method ensures that all decisions are a shared, joint effort requiring group consensus. It also allows individuals to be an integral part of the group, thereby promoting loyalty and morale, as well as spreading the responsibility of the decision to the group.

Of course, the "ringi" system of decision making is time-consuming. Many precious hours are wasted in endless discussions. But, Asian businesses accept this as an opportunity cost to do business.

Lack of Transparency

The highly authoritarian, relationship-based Asian business system leads to a lack of transparency in business operations, particularly in accounting and bookkeeping practices. Since information is tightly controlled, outsiders have limited access to inside information. The financier possesses unusual powers and has an incentive to cooperate with the borrower even in times of insolvency. Thus, due to these long-term relationships, highly leveraged companies are still allowed to borrow. This often leads to high default rates on bank loans and the eventual collapse of some distressed banks.

Conclusion

It is important for accounting firms to become culturally sensitive to ethnic client and employee needs. As America becomes more and more multicultural, failure to take cultural differences into account can be costly. An understanding of the way a particular culture drives behavior can enhance employee morale and client satisfaction. Accounting firms need to employ more ethnic workers and promote multicultural training in order to become more culturally savvy.

References

(1.) Carla Johnson (1995), "Cultural Sensitivity Makes Good Business Sense," HR Magazine (November), 1-5.

(2.) Hershey H. Friedman, Kreindy Giladi and Barbara Jo Lewis (1999), "Is Your Accounting Firm Truly Marketing Oriented? A Checklist," National Public Accountant, 44:3 (May), 16-34.

Professor Anindya Bhattacharya (B.A., Cambridge University, M.A., Johns Hopkins University and Ph.D., Columbia University) is Assistant Professor of Business at Brooklyn College of the City University of New York. Previously he held the post of Senior Economist at the U.S. General Accounting Office in New York and has served as a consultant to the United Nations. He is a member of the Academy of International Business and he has authored several books and articles on international business and finance.