As workplaces become increasingly multicultural, U.S. corporations are recognizing the importance of prioritizing diversity and inclusion in their human resource programs. A 2020 report by McKinsey & Co. found the most culturally diverse quartile of companies performed 36% better financially than the least diverse quartile, and diversity has also been shown to improve collaboration, innovation and other operational elements.

Diversity in the workplace refers to intentionally hiring staffers who are varied by characteristics such as race, ethnicity, gender and sexual orientation. Inclusion goes further, by creating a work environment in which employees from all cultures feel included — treated fairly and respectfully and given equal access to opportunities. This, in turn, can help employees feel psychologically safe.

An essential ingredient of inclusion is cultural competence. Without it, a manager who comes from one cultural background may find overseeing employees from other backgrounds challenging, and may drive away employees who feel unsafe in their work environment. That’s why the benefits of cultural competence in the workplace often include improved recruitment and retention of workers. In a 2020 survey, Glassdoor found 76% of job seekers considered diversity and inclusion important in choosing an employer, and 32% would not apply for a position with a company lacking diversity.

Cultural competence is the ability to work productively with people from different cultures. A culturally competent company benefits from creating a psychologically safe workspace, in which people from all backgrounds feel comfortable being their authentic selves and aren’t afraid to raise concerns. That sense of safety can enhance work in several ways, especially in organizations that emphasize teamwork.

Cultural competence benefits the cohesion of teams by reducing misunderstandings and frictions. The relationship between cultural competence and collaboration repeatedly arose in a 2021 Built In interview with 15 human resources and diversity, equity and inclusion (DEI) leaders. One DEI recruiting manager highlighted cultural competency skills such as active listening, empathy and adaptability as drivers of improved teamwork in her company.

Employees who feel their company is promoting DEI values are more likely to be happy with their work. A 2021 CNBC/SurveyMonkey survey found that the “Happiness Index” score for employees satisfied with their company’s DEI efforts is 12 points higher than that of those who feel their company should do more.

Culturally competent management can increase productivity for diverse teams. A 2021 article in EHS Today quotes Jeff Sorensen, PwC industrial products leader: “When we look at companies that report above-average diversity in their management teams, their revenue is 20% higher than those below average.”

From in-depth interviews with interculturally experienced professionals in a range of fields, psychological researchers Winston Sieck and Louise Rasmussen found four core skills to be developed:

Like a diplomat, a culturally competent manager seeks to understand the other party’s attitudes and intentions while being aware of their own unconscious biases.

No single book or class can make a person culturally competent. Successful managers broaden their understanding of other cultures through multiple experiences, relationships and readings.

When surprised by something an employee says or does, a culturally competent manager avoids making a snap judgment. They try to take the other person’s perspective when considering how to explain their behavior.

Reaching out and making an effort to connect through another person’s culture can help to build empathy and trust, such as by learning a bit of their native language or recognizing a holiday they celebrate.

There are many companies striving to increase diversity and improve inclusion. Many are incorporating the benefits of cultural competence into their human relations strategies. Here are some examples:

• Unilever. Since 2016, the consumer packaged goods giant has educated 5,000 marketing employees in courses about the experiences of Black, Latinx, LGBTQ+ and Muslim individuals, according to cultural competence consultant Language & Culture Worldwide, which developed the courses. It has trained leaders to recognize and correct unconscious cultural biases. In 2021, Unilever announced it would celebrate Juneteenth, a date marking the end of slavery, as a companywide holiday
• Merck. The pharmaceutical multinational celebrates the differences among its employees in 65+ countries through regular Diversity Days, as well as on such occasions as International Women’s Day, Pride Month and Black History Month. The firm also encourages networking among employees of African, Asian, Hispanic and Indigenous descent through employee business resource groups.
• Accenture. This global consulting company often assigns employees from multiple countries to the same team. To assist them in working together, Accenture offers cross-cultural trainings, live interviews with panels of workers from other countries and an online learning program that lets individuals delve into business practices of other cultures.

In an increasingly multicultural country — and world — the skills for interacting productively with people from different cultures, ethnicities, lifestyles and backgrounds are more important than ever. Cultural competence is one example of how applied psychology combines insights from human behavior, consumer psychology and organizational psychology to address the practical realities of the workplace.

USC’s Applied Psychology masters online covers cross-cultural psychology, as well as classes on group dynamics and leadership, employee selection and assessment, and the psychology of interactive media. Explore how USC’s program can give you an edge as a leader in today’s diverse companies.