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Diversification and the Rise of Cultural Sales

June 1, 2013

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Xiao-Ping Chen, PhD, Dong Liu, PhD, and Rebecca Portnoy, PhD

Since 1970, the U.S. immigrant population has risen dramatically. In fact, foreign-born citizens represent 12.5% of the entire U.S. population (Census Bureau 2008). As would be expected, this dramatic shift in the makeup of the population represents an important shift in the makeup of the U.S. workforce.

As scholars study the impact of a diversified workforce, significant evidence shows that workplace diversity is beneficial at the firm-level, helping companies generate higher earnings, net profits, and return on investment (Hartenian & Gudmunson 2000; Herring 2009; McCormick & Kinloch 1986; Erhardt, Werbel, & Shrader 2003). Other studies, though, have shown less-favorable impact of diversification on corporate culture, including greater misperception, miscommunication, and increased tension, among others (e.g., Adler & Gundersen 2008; Thomas 1991; Tsui et al. 1992).

Although the specific impact will continue to be debated, a more culturally diverse business environment is an important reality for the real estate industry. Not only does a changing population result in a more diverse workplace, it also represents a shift in customer demographics. As minorities and immigrants are the fastest growing home-buying segment, real estate professionals must understand and learn how to leverage the opportunities that exist within a diversifying population (PR Newswire 2010).

Motivational Cultural Intelligence and Diversity Climate - Our Study

Our research team set out to examine the area of motivational cultural intelligence (CQ) as a driver of cross-cultural sales performance. Motivational CQ refers to an individual's ability to direct and sustain energy toward learning about and functioning in situations characterized by cultural differences (Ang et al. 2007). Relative to other dimensions of cultural intelligence or CQ (e.g., cognitive CQ, behavioral CQ), we believe that motivational CQ is the most accurate in terms of predicting an employee's cross-cultural task performance. Therefore, using motivational CQ as a foundation, we sought to take an integrative view of individual motivational CQ, firm motivational CQ, and firm diversity climate to learn more about how these variables influence employee cultural sales (i.e., the number of transactions occurring between people of different cultural origins).

The real estate industry provides a strong context to study these variables, as real estate professionals serve in a role that directly engages the increasingly diverse workforce and customer base in the U.S.

For our study, we surveyed 305 real estate sales agents from 26 real estate firms in the northwest United States using both online and paper-based questionnaires. In addition to demographic data, our survey measured four key variables shown in the appendix.

What We Learned

Our research provides strong support for the impact of both the individual real estate sales professional's personal motivations and for the impact of the real estate firm's ability to shape cross-cultural sales exchanges. Specifically, our data show:

  1. An individual real estate professional's motivational cultural intelligence (CQ) is positively related to volume of his/her sales exchanges which span the cultural divide. This means that as real estate brokerage firms seek to develop a customer base that reflects the diverse marketplace, identifying and recruiting individuals to represent the firm who have higher levels of motivational cultural intelligence is a key strategy. Hiring managers might consider the full battery of questions that we used to measure this trait by considering our full article.
  2. The impact of the firm's motivational cultural intelligence (CQ) shapes the level of cross-cultural sales that the firm generates. The individual real estate agent's motivational cultural intelligence, assuming a moderate to high level, will be enhanced (in academic circles, we call this a moderating effect) by the firm's motivational cultural intelligence. Leaders of real estate firms and brokerage houses can facilitate the organization's motivational cultural intelligence by creating opportunities for agents to engage across cultural boundaries in non-sales-related situations which will serve to enhance the agents' ability and motivation to do the same in the real estate sales role. The end result will be even greater cross-cultural sales exchanges which will allow the firm to penetrate more diverse markets.
  3. Firms that provide a climate in which diversity is acknowledged and even celebrated provide a context that enhances the individual's motivational cultural intelligence (CQ). Offering diversity training, having an agency in which everyone, regardless of cultural background, has opportunities for leadership and clearly celebrating the firm's rich cultural tapestry produces another accelerating (what scholars call moderating) impact on the individual's ability to achieve cross-cultural sales. Individuals having a moderate to high level of individual motivational cultural intelligence (CQ) will experience even greater levels of cross-cultural sales if they are engaged in an operation having a strong diversity climate.

What This Means for Real Estate Professionals

The results of this study have important implications for the real estate industry. At the firm-level, leadership must reinforce an environment that encourages employees to engage in accelerated development of motivational cultural intelligence (CQ). Companies might consider shifting resources into training initiatives to help agents recognize cultural cues and to empower employees to respond positively in diverse cultural environments. Engaging in cross-cultural training programs aimed at orienting and acclimating employees with prominent local or regional cultures will also drive cross-cultural real estate transactions for the organization. Cross-cultural training initiatives can also yield business development opportunities as employees are introduced to a new network of prospective clients.

Additionally, an organizational culture that promotes diversity in leadership and in the body of its employees can be an important differentiator among competitors. For real estate agencies, this could mean incorporating intentional diversity management and hiring strategies to encourage a more ethnically-robust workforce. Our findings support the notion that a diverse organization can increase a firm's intercultural business success.

Finally, the impact of the individuals' motivational cultural intelligence also matters for cross-cultural real estate transactions. Taking the time to understand how a prospective agent thinks about and cares to engage with others who are cultural different from his/herself is an important strategy for those in leadership positions at real estate firms. The environment can accelerate the cross-cultural sales process but the individual must have a propensity to want to engage in such exchanges in the first place.

Conclusion

Cross-cultural effectiveness goes beyond simply recruiting a diverse workforce. Companies (and individuals, alike) need to adopt a strong diversity-centered climate to leverage the opportunities that exist in the increasingly diverse U.S. population. Agencies and agents who engage in important cross-cultural training initiatives and promote an intentionally diverse employment strategy can influence cultural sales success.

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Appendix: Sample Survey Measures

  1. Individual Motivational Cultural Intelligence (CQ)

    • I enjoy interacting with people from different cultures.
    • I am confident that I can socialize with locals in a culture that is unfamiliar to me.

  2. Firm Motivational Cultural Intelligence (CQ)

    • Agents in my firm enjoy interacting with people from different cultures.
    • My firm shows confidence that it can socialize with locals in an unfamiliar culture.
  3. Firm Diversity Climate

    • Diversity is a part of relevant education and training activities in the organization.
    • Organizational members have equal access to leadership opportunities.
  4. Cultural Sales

    • The number of sales transactions, involving clients/agents from cultures who differed from an employee's own culture.

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References

Adler, N. J. and A. Gundersen (2008), International Dimensions of Organizational Behavior, Cincinnati, OH: South-Western College Publishing.

Ang, S. and A.C. Inkpen (2008), "Cultural Intelligence and Offshore Outsourcing Success: A Framework of Firm-Level Intercultural Capability," Decision Sciences, 39, 337-358.

Chen, Xiao-Ping, Dong Liu, and Rebecca Portnoy (2012), "A Multi-level Investigation of Motivational Cultural Intelligence, Organizational Diversity Climate, and Cultural Sales: Evidence From U.S. Real Estate Firms," Journal of Applied Psychology, 97(1), 93-106.

Erhardt, M. L., J.D. Werbel, and C.B. Shrader (2003), "Board of Director Diversity and Firm Financial Performance," Corporate Governance, 11, 102-111.

Hartenian, L.S. and D.E. Gudmundson (2000), "Cultural Diversity in Small Business: Implications for Firm Performance," Journal of Developmental Entrepreneurship, 5, 209-219.

Herring, C. ( 2009), "Does Diversity Pay? Race, Gender, and the Business Case for Diversity," American Sociological Review, 74, 208-224.

McCormick, A.E. and G.C. Kinloch (1986), "Interracial Contact in the Customer-Clerk Situation," Journal of Social Psychology, 126, 551-553.

PR Newswire (2010), Real Estate Industry Adapting to Increasing Cultural Diversity, (accessed May 5, 2013), [available at: http://www.prnewswire.com/news-releases/real-estate-industry-adapting-to-increasing-cultural-diversity-71840057.html].

Thomas, R. R. (1991), Beyond Race and Gender, New York, NY: Amacom.

Tsui, A.S., T.D. Egan, and C.A. O'Reilly (1992), "Being Different: Relational Demography and Organizational Attachment," Administrative Science Quarterly, 37, 549-579.

U.S. Census Bureau (2008), 2008 American Community Survey: Selected Social Characteristics in the United States, (accessed May 1, 2013), [available at: http://www.census.gov/compendia/statab/cats/population.html].

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About the Authors

Xiao-Ping Chen, PhD
Professor of Management, Chair, Department of Management and Organization,
Foster School of Business, University of Washington

Xiao-Ping Chen received her PhD from University of Illinois at Urbana-Champaign. She is currently Professor and Chair of Department of Management and Organization at the Foster School of Business, University of Washington. She is also Editor-in-Chief for Organizational Behavior and Human Decision Processes and Executive Editor for Chinese Management Insights. Her research interests include cooperation and competition in social dilemmas, teamwork and leadership, entrepreneur passion, Chinese guanxi, and cross-cultural communication and management. Professor Chen has published her research in top-tier management journals such as Academy of Management Review, Academy of Management Journal, Journal of Applied Psychology, and Organizational Behavior and Human Decision Processes. She was on the faculty previously at Indiana University and Hong Kong University of Science and Technology. She served as the second President for International Association for Chinese Management Research (IACMR).

Dong Liu, PhD
Assistant Professor of Organizational Behavior,
Scheller College of Business, Georgia Institute of Technology

Dong Liu is an Assistant Professor of Organizational Behavior at the Ernest Scheller Jr. College of Business, Georgia Institute of Technology. He received his PhD in Business Administration from the Michael G. Foster School of Business at the University of Washington. He also holds an MPhil in Management from the Faculty of Business Administration at the Chinese University of Hong Kong. Dr. Liu's research interests include creativity, turnover, leadership, teams, and international entrepreneurship, with particular focus on exploring the multilevel interface between individuals and organizational context. His research has been published in the Academy of Management Journal, Journal of Applied Psychology, Journal of Management, Journal of Occupational and Organizational Psychology, Academy of Management Best Paper Proceedings, and Ivey Case Publishing.

Rebecca Portnoy, PhD
Assistant Professor of Management,
Washington State University - Vancouver

Rebecca Portnoy is an assistant professor of Management at Washington State University. She received her PhD in Management at the Foster School of Business, University of Washington. She received her BA from the Cornell University School of Hotel Administration. The recurring question across her research is "How do employees find support at work?" Her interest in this question has been explored from multiple perspectives including cross cultural contexts, culturally diverse situations, workplaces with underemployed immigrants, workplaces where coworkers share meals, and most recently organizations that support employees with shared leave programs. Rebecca's research has been published in the Journal of Applied Psychology, Journal of Experimental Social Psychology, and the Personality and Social Psychology Bulletin. Rebecca's research has been highlighted in the Wall Street Journal, the Miami Herald, and the Lewiston Tribune.

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