Contextual Diversity in International Compliance Functions

Thomas Fox
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Compliance Evangelist

Cultural differences are a critical issue that every Chief Compliance Officer (CCO) or compliance practitioner in a multi-national company must deal with in operationalizing compliance. I often write about how you can create an effective compliance program across many different and even disparate cultures. Yet not as much attention is paid to the cultural differences within a corporate compliance function at a multi-national organization. Here the challenges can be equally as great yet different in focus. I was therefore very intrigued by a recent article in the Harvard Business Review entitled, “Research: How Cultural Differences Can Impact Global Teams” by Vasyl Taras, Dan Baack, Dan Caprar, Alfredo Jiménez, and Fabian Froese. The key is contextual diversity.

In this piece, the authors posit that cultural diversity can be both a benefit and a challenge to global teams. Focusing on the last year during the pandemic, the authors unpack their recent research on how diversity works in remote teams, concluding that benefits and drawbacks can be explained by how teams manage the two facets of diversity: personal and contextual. Contextual diversity is key to aiding creativity, decision-making, and problem-solving, while personal diversity does not. Moreover, teams with higher contextual diversity produced higher-quality work and their solutions were more creative and innovative. When it comes to the quality of work, teams that were higher on contextual diversity performed better.

Contextual diversity is “diversity in the environments that the team members live in, such as the different levels of economic development and different types of institutions and political systems of their countries.” On the other hand, “Personal diversity includes differences in easily observable personal characteristics such as age, gender, language, skills, and values.” Interestingly since the authors research was conducted over the past year, all of the teams were virtual. That seems to me to add validity to the authors’ findings.

The finding that personal diversity can negatively affect a team seems straight-forward. Factors such as different cultures, different ages, not fluent in the team’s working language, “or differ otherwise at the personal level, they tend to find it less enjoyable to spend time together, trust each other less, make less favorable attributions about each other’s motives, and generally communicate less. As a result, they experience less cohesion and have more conflicts and misunderstandings.”

However contextual diversity can positively affect task performance. The authors note that “When the team members come from countries with different institutions, economic, and political systems, they understand a wider range of contexts, have access to more diverse pools of knowledge and experiences”. This allows for more views and differing perspectives, all of which aids creativity, decision-making, and problem-solving. The authors go on to state that “Contextual diversity appears to be particularly beneficial when teams work on challenging tasks that require creative, unconventional approaches. The variety of perspectives and understandings aids idea generation, and more ideas on the table provide for a better solution to the problem.”

Compliance Team Implications

When designing a multi-national compliance team, CCOs need to consider the nature of the tasks at hand. First any compliance projects or initiatives which “require creativity and unconventional thinking would benefit from contextual diversity. This includes not just the ethnic or demographic diversity, but the diversity of contexts the team members come from and understand.” However for “projects that require completion of more routine tasks where there is no need for innovation or complex problem-solving, a team lower on personal diversity might complete the project quicker and more efficiently. For routine projects like this, there is no need to focus on differences when building the team.” Rather, CCOs “should proactively assist the team to ensure more effective communication, interpersonal dynamics, and a more collegial team climate.”

The authors conclude with two strategies to more fully utilize the benefits of team diversity while addressing the challenges. First, to minimize the adverse effects of personal diversity, CCOs should employ cross-cultural communication and diversity awareness training to improve cultural intelligence and interest in working with people from other countries. Such training is a good step to help to “reduce prejudice and stereotypes and promote friendly interaction among diverse team members would benefit any diverse team.” Additionally, training on online communication and collaboration tools is useful for global teams working virtually.

Second, the boost that contextual diversity can provide for creativity and innovation can be maximized “when team members freely exchange ideas and knowledge.” This means the compliance function must “promote such exchange and provide opportunities for brainstorming, friendly feedback and discussions, as well as constructive criticism and disagreement. People who affiliate with multiple cultures and, thus, can serve as bridges between team members from different cultures would be particularly valuable on such teams.”

The authors conclude that “it is not always possible to separate contextual and personal diversity. For example, more nationalities on the team usually result in both higher contextual and personal diversity. Therefore, the potential challenges caused by personal diversity should be anticipated and managed, but the benefits of contextual diversity are likely to outweigh such challenges.” Every CCO leading a multi-national and multi-cultural team can benefit from studying these concepts. By employing the authors suggestions, you can help create a more efficient process leading to more effective compliance outcomes.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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