3.4 Diversity and economic benefit
Eswaran (2019), writing for the World Economic Forum, explains why the business case for diversity in the workplace is now overwhelming, siting substantial research that demonstrates the advantages, including:
- A study from Boston Consulting Group that found companies with more diverse management teams have 19% higher revenues due to increased innovation.
- A Hays Asia Diversity and Inclusion report in which respondents identified improved company culture, leadership and greater innovation as the top three benefits of a diverse workforce.
- The Deloitte Millennial Survey, which shows that 74% of respondents believe their organisation is more innovative when it has a culture of inclusion.
Asif Sadiq has this to say:
Another useful resource is the Diversity Wins report (Hunt et al, 2020), which also explores the business case for inclusion and diversity. This report is the third in a series by McKinsey & Company, and shows that the ‘relationship between diversity on executive teams and the likelihood of financial outperformance is now even stronger than before.’ For example, their analysis finds:
- Companies in the top quartile for gender diversity on executive teams were 25% more likely to experience above-average profitability than peer companies in the fourth quartile. This is up from 21% in 2017 and 15% in 2014.
- Companies with a gender split of more than 30% women on their executive teams are significantly more likely to outperform those with between 10 and 30% women, and these companies in turn are more likely to outperform those with fewer or no women executives.
- In the case of ethnic and cultural diversity, companies in the top quartile outperformed those in the fourth by 36% in terms of profitability in 2019, slightly up from 33% in 2017 and 35% in 2014.
The report goes on to suggest five areas of action for companies, based on best practices from the firms they surveyed:
- Ensure representation of diverse talent. Companies should focus on advancing diverse talent into executive, management, technical and board roles, setting the right data-driven targets for representation.
- Strengthen leadership accountability and capability. Companies should place their core business leaders and managers at the heart of the agenda and strengthen inclusive leadership capabilities, holding all leaders to account for progress.
- Enable equality of opportunity through fairness and transparency. Companies should deploy analytics tools to build visibility into promotions and pay processes and criteria. They should de-bias these processes and work to meeting diversity targets across long-term workforce plans.
- Promote openness and tackle microaggressions. Companies should uphold a zero-tolerance policy for discriminatory behaviour and actively build the ability of managers and staff to identify and address microaggressions, establishing norms for what constitutes open, welcoming behaviour, and assessing each other on how they are living up to them.
- Foster belonging through unequivocal support for multivariate diversity. Companies should build a culture in which all employees feel they can bring their whole selves to work. Managers should communicate and visibly embrace their commitment to diversity, building connection with diverse individuals and supporting employee resource groups to foster a sense of community and belonging.
Activity 6 Researching the benefits
Using your preferred search engine, spend some time investigating the different ways in which a diverse workforce and leadership team can lead to increased company profits. Note your findings in the box below.
Profits might be increased through:
- access to new markets,
- improved interaction with customers,
- increased job satisfaction and motivation,
- better staff retention,
- role models attracting new talent,
- greater innovation, etc.
There are many ways in which a diverse workplace can impact on the financial bottom line and more and more business leaders are becoming aware of that fact.
With this range of potential benefits in mind, and a growing body of evidence to support them, it is clear that for any organisation, diversity and inclusion will play a vital role in future success.