Why building cultural competence is a business imperative – and how to do it

Dr Mahmoud Gad, an Associate Professor of Accounting at Lancaster University Management School and a member of the Pentland Centre for Sustainability in Business., emphasises: "Developing cultural competency within accounting firms is essential for fostering stronger client relationships and enhancing overall firm performance."

While a diverse workplace ensures legal compliance and promotes social justice – the Equality Act 2010 and subsequent legislation prohibit workplace discrimination and unfair practices – it also fosters a more inclusive, innovative and sensitive environment for both employees and clients.

However, statistics paint a bleak picture of the current landscape. Despite efforts to promote diversity, a 2020 study found that just 11 of almost 3,000 equity partners at the Big Four accounting firms were black (although each have now created the equivalent position of chief diversity officer).

Recent research carried out by BDO also found 38 per cent of females believed their gender would affect their job application, compared to 25 per cent of males and 45 per cent of mixed-race respondents.

More widely, research by Druthers Search in 2022 found only one in 16 top management positions in the UK are held by ethnic minorities; only 19.7 per cent of employees on company or organisational boards are female, and 29.8 per cent of LGBTQ+ employees reported employment discrimination.

By fostering cultural competence, accounting firms can not only broaden their client reach but also enhance client relationships, drive innovation, and ultimately, thrive in an increasingly diverse marketplace.

Diversity is good for business

Figures from Pearn Kandola, a firm of leading business and DEI consultants, show the average cost to a large organisation without an inclusive culture is £20 million, while the cash flow diverse companies earn per employee is multiplied 2.5 times.

Conversely, a 2019 McKinsey report found that companies with more gender, ethnic, and cultural diversity were more likely to be highly profitable.

Studies have shown that diverse teams have the capacity to be more innovative and, also, to better understand and meet the needs of a diverse range of clients. They may also increase connection to a wider client base.

“Academic research suggests that firms with a strong, adaptable culture can better leverage the diverse skills and perspectives of their employees, ensuring that unique contributions from all team members are recognised and valued,” says Dr Gad.

Understanding and respecting diverse client backgrounds can also lead to more effective communication and trust-building, he adds.

Know your customer

Fostering cultural competence isn't just about ticking boxes or meeting diversity quotas; it's about embracing a mindset shift.

In the client arena, it's about more than just language barriers; it's about understanding the nuances of communication, acknowledging religious considerations, and fostering an environment where every client feels valued and understood.

To communicate effectively across diverse cultural backgrounds and build cultural rapport, says accountant and finance mentor at the University of Cambridge, Doug Williamson, it’s important to avoid making assumptions about individuals based on their nationality or any other simplistic labels.

“Every country and region has numerous subcultures, and nobody appreciates being stereotyped,” he says. “Ask appreciative questions. Invest time and effort in advance in reading, listening and getting support from people who know more than you do.

“Take advice, including having a locally informed person accompany you. Work harder than usual on things that are in your control including names and forms of address, that are very important.”

Cultural competence can’t be achieved overnight. It’s a journey that requires firms to address underlying biases.

Professor Binna Kandola, co-founder and senior partner at Pearn Kandola, says the only way to foster real change is for firms to be honest about their own discrepancies.

How to improve diversity

1. Actively recruit from underrepresented groups: Diversifying talent pipelines is the first step towards building inclusive teams that reflect a broader client base.
2. Implement policies promoting inclusivity: From recruitment to promotion, every aspect of the employee lifecycle should be governed by policies that promote equality and diversity.
3. Foster an inclusive workplace culture: Creating an environment where everyone has a chance to be heard.
4. Provide training and mentorship programs: Employees need help to learn new skills and navigate cultural nuances as well as a safe space in which to increase competencies.
5. Engage in meaningful dialogue: Encourage open and honest conversations about diversity and inclusion in order to drive meaningful change.