The common belief about diversity and inclusion is that it is a moral imperative, a charitable thing to do and good social etiquette. Why is this problematic? Because business leaders don’t prioritize charitable initiatives and therefore don’t act on diversity and inclusion. What few business leaders understand is the unfair competitive advantage of diversity and inclusion. As our society and our economy are rapidly changing, any competitive advantage is critical for any organisation to emerge stronger from a pandemic era. Let’s look at the real goal of diversity and inclusion for organisations and why it is actually extremely powerful:
Diversity and inclusion drives growth
McKinsey’s 2018 report titled “Delivering through Diversity” revealed that higher diversity in senior teams is linked to better financial performance. According to the report, diversity and inclusion represents a significant strategic opportunity for growth for many reasons:
Diversity and inclusion can enhance the problem-solving necessary to rethink businesses and reimagine industries in the face of unprecedented disruption
More diverse teams are better at anticipating changes in consumer needs and buying patterns, which can lead to more rapid product and service innovation
Strengthened by society-wide feelings of solidarity, remote work has the potential to widen talent pools, providing the chance to hire high-value, diverse talent and promote more agile, productive, inclusive work cultures
Diversity and inclusion drive productivity:
McKinsey research in 2018 found that companies with better gender diversity are 21% more likely to show financial returns above their respective national industry medians; firms with better ethnic diversity were 33% more likely to financially outperform their respective industry medians.
Diverse and inclusive organisations are more innovative:
Diverse and inclusive organisations are more innovative, which significantly helps respond to changing consumers needs. A Boston Consulting Group survey of 1,700 companies found those with above-average diversity produce a greater proportion of revenue from innovation (45% of total) than from companies with below average diversity (26%).
As our society becomes increasingly socially conscious, organisations that deprioritize diversity and inclusion are falling behind their competition. In 2019, the bottom quartile of companies for gender diversity were 19% more likely to underperform their peers.
If you want to learn how to become a diversity champion in your own organisation, download our free ebook: The Ultimate Diversity Champion Guide.
Diversity and inclusion boosts reputation
If your organisation is not viewed as being inclusive and diverse, many customers will shy away from giving you their business. This is especially true of socially conscious Millennial and Gen Z customers. These two generations are incredibly socially conscious. As a result, they may prefer inclusive companies when considering purchases in both their personal and professional lives. If you aren’t seen as supporting diversity, you may miss out on opportunities to increase sales, foster strong customer relationships, and ultimately enhance your profitability. But this is also true for any customer from a group that is usually under-represented in leadership: women, non-white individuals, LGBT+ individuals, disabled individuals, neurodivergent individuals, older individuals, etc...
A multi-cultural, diverse organisation is much better placed to serve diverse clients and stakeholders. A one-size-fits-all approach does not fit today’s society; being able to relate to a global market is critical.
An Australian Deloitte study revealed that employees are more likely to have higher rates of engagement, attendance and performance in diverse organizations. Employees that feel comfortable, valued and respected in their place of work are motivated to continue contributing to the ongoing success of the business and to better serve customers.
According to a study by Deloitte-owned agency Heat, “brands that show a broad variety of cultural and demographic groups in their advertising see improved perception among consumers and stock market gains.” Brands with the highest diversity scores showed an 83% higher consumer preference. Interestingly, Heat found that the stocks of financial services companies performed particularly well during the study period. To learn how to foster inclusion in your organisation, watch 4 Ways to Foster Inclusion at Work Every Single Day.
Diverse and inclusion helps attract and retain talent
Research shows that diverse companies are more profitable and more appealing to work for than companies lacking diversity. This reinforces best practice to potential employees and clients, which will impact the success of your business.
The 2019 ADP report found that employees who trusted their team leader were 12 times more likely to be fully engaged. 51% of workers say that they feel belonging in the workplace when they can freely share their opinions, and 50%, when they feel comfortable being fully themselves, to which end being part of a diverse and inclusive team, makes a big difference. In fact, ADP found that teamwork was the biggest driver of engagement, and employees who identified as part of a team were 2.3 times more likely to be fully engaged.
Organisations that actively hire diverse talents create opportunities for employees to spend more time with individuals from different backgrounds, which increases their appreciation for different cultures and ways of thinking and reduces negative thoughts like racism and sexism. In the context of Black Lives Matter and Metoo, organisations will particularly benefit from mitigating racism and sexism in the workplace by hiring diverse talents because the risks of employee lawsuits, bad publicity and brand damage due to racism and sexism are at an all-time high. Many investors now include #MeToo clauses in startup deals to prevent sexism and more startups now include anti-racism in their diversity and inclusion. Diverse and inclusive organisations will better retain diverse talent. For daily diversity and inclusion tips, follow me on Linkedin, Twitter, Facebook or Instagram.
The common belief that diversity and inclusion is simply a moral imperative could not be further from the truth. In business, the real goal of diversity and inclusion in the workplace is to drive growth, boost reputation and attract and retain top talent. When business leaders understand the real goal of diversity and inclusion, they embrace it and deliver it successfully. In today’s rapidly changing society and economy, the gap between diversity and inclusion winners and laggards is increasing and only organisations embracing diversity and inclusion as their competitive advantage will emerge stronger.