Diversity and inclusion is often discussed as being a virtue in itself – but there are also solid commercial reasons for encouraging diversity in your organization
Research has shown there is a direct correlation between increased diversity and improved profitability. The Peterson Institute for International Economics found that earnings in companies where 30% of the leadership are female are 6% higher than in those without female leadership, for instance. Likewise, Forbes reports that companies in the top quartile for racial and ethnic diversity are 35% more likely than less diverse companies to have financial returns well above the national industry average.
While it is clear that diversity and inclusion translates directly into improved bottom-line performance, the question is, why is this the case and how can you reap the benefits?
Three reasons why diversity really matters
Apart from the aspect of virtue, there are solid, practical organisational reasons why diversity and inclusion is good for a company.
Countering group think
First and foremost, increased diversity can broaden the perspective of the company. In highly homogenous organisations, it is all too easy for group conformity to produce easy agreement. This can be fatal in customer-facing businesses, such as those in retail or entertainment, especially where the customer base is itself diverse – and of a very different in composition to the leadership of the organisation. Diversity in leadership and frontline staff can help ensure that the people served by the company are really understood by the company.
Potential for increased business creativity
Closely related to the first benefit, increased diversity can help improve the quality of problem solving and innovation. Bringing together people with a variety of different perspectives and experiences will inevitably produce greater insight than examining the same problem from one angle or perspective alone. The Centre for Talent Innovation has found, for instance, that diverse and inclusive workplaces bring products to market 75% more quickly than those that are less diverse. Diversity enhances the ability of the organisation to look at a problem in the round, from every angle. According to Korn Ferry Research, those working in such organisations are 87% more likely to make better decisions than those working in homogenous workplaces.
Employee wellbeing and retention
Organisations that demonstrate diversity and inclusion are attractive places to work for many people. Diversity, when incorporated into the organisational processes to ensure inclusion, has been demonstrated to create greater well-being and satisfaction for employees, leading to enhanced effectiveness, higher rates of retention, and greater productivity. The Deloitte Global Millennial Survey 2020, for instance, highlights diversity and inclusion as one of the key ways to improve employee retention.
Hardwiring diversity the benefits of diversity into the organization
When embraced wholeheartedly, diversity and inclusion has the potential to renew and reinvigorate the business. In order to reap its full benefits, however, diversity and inclusion needs to be embedded deep within the organisational design and practice.
The luxury brand Louis Vuitton is recognised widely as an example of how a company can become inclusive. Louis Vuitton has long been committed to furthering workplace diversity. Its journey started back in 2007 with the launch of “EllesVMH,” a programme designed to support women’s professional development in all positions and levels of experience. It has since then put in place numerous initiatives oriented to women’s professional development, including those for coaching, mentoring and training. Today, women account for 62% of its executive workforce. Its achievements in race and ethnic diversity are equally impressive: just 49% of the Paris-based brand’s employees are white.
For diversity and inclusion to transform at this level, it needs to be applied at every level of the organisation:
Board and Leadership
One place that many start on this journey is at the Board or C-suite level. Diverse Boards and management groups signal the organisation’s true intention. As you might expect, when they are truly diverse and inclusive, they also make better decisions.
Processes: Organisations realize their intention through their processes. A strategic ambition for diversity and inclusion needs to be reflected as a priority in both the recruitment process and talent development path, as well as in the progression and rewards systems. Diverse recruitment, of itself, is only the beginning.
Change happens in meetings. This is one place where it is possible to demonstrate that everyone is heard and valued. Greater openness to a diversity of voices creates a space for a variety of different opinions and prevents the same people from dominating the conversations. This is the basis for increased creativity. Meetings need to be structured so that they are more inclusive in format and encourage people’s participation, whatever their level in the organisation.
Team processes that are highly collaborative and cooperative are often also inherently inclusive in nature. Systems such as Lean and Agile are based on team processes that have been shown to be far more productive in their outcomes than the alternatives.
Organisations that adopt very flat organisational structures are well placed to be truly diverse and inclusive. In many cases, they have also proved to be the most productive of businesses. For instance, Harvard Business Review names W.L. Gore & Associates, the producer of Gore-Tex, as one of the most successful firms in the world. Gore has just three levels in its organisational hierarchy, even though it has over 10,000 employees. All decision-making is done through self-managing teams of 8-12 people. No one is peripheral in Gore.
Technology can also be an enabler of inclusiveness. Buurtzorg, a health and social care organisation that started in the Netherlands, has moved entirely away from hierarchical structures. Its management is enabled entirely through digital technology applications.
Last but not least – celebrate, celebrate, celebrate. Happy employees are always more productive than unhappy ones.
Shaping your ambition
Don’t aim to be diverse and inclusive unless you are serious about the task and believe it really will benefit your business. Diversity and inclusion, done well, takes a great deal of time and effort, as Louis Vuitton demonstrates. If it is to be more than a mere box-ticking exercise, the changes required will run deep throughout the organisation, transforming it from top to bottom.
If you do take on diversity and inclusion as a strategic goal, expect it to shape the way you do business. Its benefits are profoundly tangible.