Why Diversity Matters
Diversity and inclusion are two terms that in the business world were more about theories and concepts than actually putting them into practices. It’s not that most businesses actively tried not to focus on diversity and inclusion.
They did so to check the boxes, without realizing that it has real business advantages. There has been an increasing number of studies in recent years showing that businesses that put a premium on diversity and inclusion in the workplace have shown stronger financial performance.
The following are some highlights of relatively new research from McKinsey.
- McKinsey’s latest research shows companies in the top quartile for diversity, including in terms of gender, race, and ethnicity, are likely to have financial returns higher than medians for the national average. Companies in the bottom quartile are statistically less likely to make above-average returns. The takeaway from McKinsey on this is that companies that are willing to invest themselves to having diversity in the workplace and as part of leadership teams, are better able to get top talent to join their organization. They also tend to see higher levels of customer orientation and employee happiness.
- Companies in the top quartile regarding ethnic and racial diversity are 35 percent more likely to demonstrate financial returns above national medians for their industry.
- Companies in the top quartile regarding gender diversity are 15 percent more likely to see financial returns above the national median in their industry.
- In the U.S., McKinsey found there is a linear relationship between racial and ethnic diversity and higher levels of financial performance. The research indicated that for every 10 percent increase in racial and ethnic diversity on a senior-executive team, the earnings before taxes went up 0.8 percent.
Some other general benefits that can stem from dedication to diversity and inclusion in the workplace include:
- In the 18th Annual Global CEO Survey, 85% of participating CEOs who head up companies with a formal diversity and inclusion strategy say it’s improved their bottom line.
- According to a study from the Center for Talent Innovation, companies that focus on diversity gain higher market share and are more competitive when entering new markets.
- The talent gap is one of the biggest issues facing businesses right now, and it continues to become increasingly worrisome for many organizations as unemployment is at record lows. The demand for talent is high regardless, and with a skills shortage, it’s proving to be one of the biggest obstacles to growth in the coming years. Diversity and inclusion initiatives can help bridge that talent gap and allow businesses to attract the best talent.
- When a company employees a diverse workforce, they have more flexibility and adaptability which is beneficial for changing markets.
- Companies with broad diversity in the workplace are better equipped for innovation and creativity.
- Millennials demand diversity and inclusion in the workplace. According to a Glassdoor survey, 57% of respondents said they felt their employer should be more diverse. Other research showed 86% of females and 74% of males consider their employers’ policies on diversity, equality, and inclusion when deciding on a company to work for.
- $28 trillion could have been added to the global GDP if the pay gap for women were adequately addressed.
If you ask most CEOs and business owners what some of their biggest challenges are in the years ahead, they’ll likely first say the skills gap. Then, they’ll say the ability to remain innovative. We’re in a marketplace that’s incredibly fast-paced. Changes occur seemingly overnight, and to be successful, businesses of all sizes don’t just have to adapt. They have to lead and innovate.
When a company has a team of employees who are diverse, from unique backgrounds and can share their own experiences in an environment that makes them feel comfortable, involved and respected, it can bring so much value in terms of innovation and problem-solving.
Customer bases are growing increasingly diverse in the U.S., and it will be difficult for businesses behind the curve on diversity and inclusion to create the products and services that will speak to their needs and preferences. It will also be difficult to adequately market to a diverse customer base when unique ideas aren’t coming from the workplace.
How Do You Make It Happen?
It can be easy to talk about diversity and inclusion and its importance in the workplace, but how do you actually make it happen? First and foremost, companies need to be honest about where their shortfalls are, and where more needs to be done.
A good place to start is with current employees. Conduct surveys and research to see how they feel about diversity and inclusion in the workplace as it currently stands. Do diverse employees feel included and comfortable or do they feel shut out?
It’s also essential once some baselines are evaluated to think about how a combination of training and communication can be part of the equation. Employee training needs to be linked to a larger strategy, and buy-in for everything needs to start at the top. If employees don’t feel like company leaders are part of the quest to improve diversity and inclusion, they’re not likely to be active participants. Leaders also need to hold themselves accountable when it comes to meeting objectives for company diversity.
Finally, along with training, communication, and accountability, there should be a sense of transparency starting at the top. Company leaders need to come together and assess potential barriers to diversity and inclusion and openly share those with employees. That sense of transparency is what’s going to ultimately show a high level of dedication to not just talking the talk, but walking the walk.
For example, is there a significant gender pay gap? Company leaders need not to try and hide this or explain it away, but look at why it’s happening, and go to employers and get their thoughts and feelings.
Continue reading our next post about companies that do diversity and inclusion well.