Many executives, business leaders, or political leaders understand the needs of Equity, Diversity, and Inclusion in today’s business world. However, even today the various type of DEI / EDI (Equity, Diversity, Inclusion) strategy and plannings are created as a requirement for compliance and a mean to demonstrate the values and social responsibilities of a company or organization as an employer. It is still not a popular belief that being a diverse employer can lead to tangible measurable profit.
In this article, you will learn:
- What are the benefits of Diversity and Inclusion in the workplace?
- How to create a business case for Diversity and Inclusion at work?
- Why you should create a diverse environment in today’s workplace?
- Why Diversity and Inclusion is a competitive advantage?
Diversity in the Workplace Benefits – The Definitive Guide in 2020
Today I am going to share a few tangible reasons to be a diverse and inclusive company. I will start with some hard facts based on a McKinsey Report called “Diversity Matters”. In the report, they have examined over 350+ companies in different countries, and here are what they found.
Diversity & Inclusion is the new Competitive AdvantageBrian Chan, Chief Diversity Officer, Diversity Social
- Diversity Employers in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
- Diversity Employers in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.
- Diversity Employers in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).
- Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.
- While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile on both dimensions.
- The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies.
Diversity & Inclusion Increases Profitability
Deloitte also thinks that Diversity can be a benefit because diversity also brings a diversity of thinking in a Diverse Work Environment. The different thinking from groups of employees coming from a diversity of backgrounds can reduce risks by 30% while improving innovation by 20%. The fact is that if you want to build teams or organizations capable of innovating, you need diversity. Diversity enhances creativity. It encourages the search for novel information and perspectives, leading to better decision making and problem solving. Diversity can improve the bottom line of companies and lead to unfettered discoveries and breakthrough innovations. Even simply being exposed to diversity can change the way you think. This is not just wishful thinking: it is the conclusion I draw from decades of research from organizational scientists, psychologists, sociologists, economists and demographers.
A Diverse workforce Improves Customer Experiences
The Diversity.Social Diversity and Inclusion Best Practice is to intentionally structure your companies based on your target customers. You can’t focus on your customers if you don’t understand how they think. Having a diversity of thinking allows your team to understand and design better customer experience, which leads to better customer satisfaction. Better customer services. A diverse and inclusive workforce can improve customer services. As a matter of fact, a diverse workforce will often mean diverse expertise, talent, experience and capabilities in the employees. If a manager understands the intricacies and complexity of how to manage diversity effectively, he will be able to put the right person into the correct position, by minimizing his weaknesses while enhancing the particular employee’s strength. From this perspective, a diverse workforce enables a manager to choose the correct candidate for a particular position in the organization. For example, someone with a cheering personality and has the ability to build rapport fast with customers can be sent to the customer services department.
- Teams with a high deviation from the “standard” perspective (in other words, cognitive diversity) are more likely to solve a problem than non-diverse teams, according to an experiment run by the Harvard Business Review.
- In 2018, the Bank of England launched its first-ever internal cognitive diversity survey to find out how the workforce feels about inclusion and its impact on problem-solving/performance. Black, Asian, and Minority Ethnic (BAME) indicated lower ratings, showing the way forward.
- A Deloitte report found that cognitively and demographically diverse teams can enhance innovation by 20% and identify/reduce risks by up to 30%.
- Gartner predicts that through 2022, 75% of organizations that boast of a diverse and inclusive culture among frontline decision-makers will exceed their financial targets.
- In 2019, IBM announced its effort to embrace neurodiversity by hiring high-functioning individuals with autism spectrum disorder (ASD). The company stated that “Neurodiverse people approach problems differently and have to think harder to get around what the rest of us accept.”
Diversity in the workplace brings in new markets
There is a huge business case for diversity. You will be making products for people you don’t understand, you don’t interact with. If you don’t have an inclusive, diverse workforce, it makes you myopic.Renee James
Minority Market. Women and LGBT+ consumers care and value companies that value Diversity and Inclusion. They know for a fact that these company knows of their existence and care enough to think of them. Some minority consumer groups also wield their influence proactively. The so-called “ pink pound” refers to the influence of lesbian, gay, bisexual and transgender (LGBT) consumers. The Pink Pound consumer will become a major consumer segment as women become more independent with an increasing purchasing power.
Workplace Diversity enhances Reputations
Another business benefit of Diversity and Inclusion is about Brand and Reputation enhancement. Diversity in the workplace is vital for employees because it manifests itself in building a great reputation for the company, leading to increased profitability and opportunities for workers. Workplace diversity is important within the organization as well as outside. Business reputations flourish when companies demonstrate their commitment to diversity through aggressive outreach and recruiting efforts. An organization known for its ethics, fair employment practices and appreciation for diverse talent is better able to attract a wider pool of qualified applicants. Other advantages include loyalty from customers who choose to do business only with companies whose business practices are socially responsible.
It’s just common sense…when you put individuals with different worldviews together, you’re going to get a wide variety of ideas for solving problems or finding new, more efficient ways of doing things.
However, beyond the “common sense” factor, research backs this concept up.
One McKinsey study found that “Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.”
Think about what this could mean for your business.
Why is Diversity Good & Important?
Diversity is good, especially good with tangible benefits. There are many benefits of Diversity in the workplace. With the above, it further translates the benefit to tangible ones:
Increased market share.
Having a diverse workplace allows organizations to more effectively market, better serve and communicate to consumer groups from different cultures, races and religious backgrounds, which in turn may lead to increased sales and profits and access to a more diverse market. Mckinsey’s research shows that more gender diversity helps the performance of the company in general.
Productivity and innovation.
Diversity widens viewpoints and takes different ideas and perspectives into account. This can translate into creating richer solutions, obtaining better results and maximizing productivity, innovation and creativity.
Employee attraction and retention.
Recruiting from a diverse pool of candidates increases an employer’s chances of finding the best person for the job. Once onboard, employees that feel valued and respected and that are part of an inclusive work environment are less likely to leave. Doing both of these successfully can help reduce expenses related to recruitment and retention.
Another benefit of diversity and inclusion is it can lead to you explore the unknowns. A diverse workplace offers more than exposure to employees from different cultures and backgrounds. Employees learn from co-workers whose work styles vary and whose attitudes about work varies from their own. This is particularly true for employees within multigenerational work environments, as well as those who work in environments that are accessible to those with disabilities.
Diversity & Inclusion Improves Employee Engagement in the Workplace
Once you have a diverse workforce with an inclusive culture, your organization’s culture will change without you even knowing it. Your team from top to the bottom will interact with employees from different backgrounds, world views, or different life stages. And your employees will talk, they talk to each other, they work with each other. Your employees from diverse groups will have a better awareness of others’ world views.
A welcoming culture will increase engagement from employees because even your minority diverse employee will feel included in an inclusive workforce.
Prepare and Manage Risks with Diversity and Inclusion
Internally, being diverse and having a proper Diversity and Inclusion policy will protect the company from unexpected risks.
Yet another benefit and business case for diversity is the ability to operate effectively as well as efficiently in a global context. The fact that the entire world is a colourful depiction of diversity. Thus, to go global, a diverse workforce is some sort a basic requirement. If a business leader is serious about their business, having a diversity valued workplace can prepare an organization to go global and expand the business.
I am certain there are more benefits for a business case for Diversity and Inclusion, and the list of benefits will grow as companies measure and show ROI of it.
In the future, companies won’t have a choice. Why not start Diversity now?
Baby boomers are retiring, and the birth rate is dropping. The talent pool will be changing fast, and soon. If we want to continue to attract the best talent, we need to be reflective of the talent in the specific market and offer a work environment that employees want to be a part of.
If you know that diversity will be a key to success in 5 or 10 years, is it wise to start already?
In my next article, I will write about how to recruit for a diverse workplace for diverse staffing, hiring, and building a diverse workplace environment.
How does diversity help the workplace?
Reduce employee turnover
- A Glassdoor survey found that “57% of people think their company should be doing more to increase diversity among its workforce”
- A Deloitte University study reports that “83% of millennials are actively engaged when they believe their organization fosters an inclusive culture, compared to only 60% of millennials who are actively engaged when their organization does not foster an inclusive culture.”
As millennials make up a sizable portion (two-fifths) of the working-age population, they have a massive influence on the ways that companies (who want to thrive) need to think about doing business.
Therefore, it stands to reason that smart businesses need to purposely seek to fill their ranks with diverse employees if they want to compete in the marketplace both now and in the future.
Research published by the Harvard Business Review reported that “…people like to fit in, so they are cautious about sticking their necks out. When we have a strong, homogenous culture, we stifle the natural cognitive diversity in groups through the pressure to conform.”
Therefore, diversity in the workplace can lead to creativity in resolving problems as well as creating new products and services.
In fact, a study found that diverse teams “were [sic] shown to make decisions faster than individual workers, and benefitted from a 60 per cent improvement on decision- making.”
When you create a culture of acceptance, each individual is empowered to bring everything they’ve got to work…nobody is afraid that their point of view will be dismissed so they can each confidently share their ideas with the team.
A diverse team can help you compete in the global marketplace.
If you have employees who speak more than one language and/or understand other cultures you have an advantage over companies with a homogenous workforce.
The co-founder and CEO of Wattpad, Allen Lau, once shared how diversifying their workforce helped the company to grow quickly. He said, “In the early days of our business, my co-founder Ivan and I searched for a way to kick start our audience growth. It was painfully slow until we made the decision to support additional languages on our app. Luckily, we had worked with people who lived in these countries who could provide the insight we needed to strengthen our product.”
Having a diverse team of individuals with a variety of different cultural backgrounds can help you secure your place in the global marketplace. More and more potential employees are focused on diversity as a metric for deciding to work with a company.
Thank you for reading.
Frequently Asked Questions on Diversity and Inclusion Benefits
What are the benefits of Diversity and Inclusion in the workplace?
- Increase Marketshare in minority markets
- Improve Employee Engagement
- Improve Profit
- Enhance Reputation
- Increase Productivity
- Increase Customer Satisfactions
- Improve Diversity of Thinking and creativity
- Reduce Organization Risks to compliance
- Lead in minority markets
- Reduce and Avoid Employee Turnover
- Improve and Drive Innovation
- Reduce Hiring Time and make recruitment easier
- Improve diversity in society
- and more …
Should company create a Diversity and Inclusion Program?
Yes. There are many tangible and intangible benefits of investing in Diversity and Inclusion programs.
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