Diversity in business is a hot topic right now. There are diversity awards and diversity surveys, and governments in many countries have implemented or strengthened diversity and equality legislation to ensure equal opportunity in the workplace.
But why exactly should you promote diversity in your own business? To put it bluntly, what’s in it for you?
Plenty, as it turns out. There’s a growing body of research indicating that businesses with more diverse workforces perform better on a whole range of measures, from making more money to being more innovative.
In fact, in this article, you’ll learn ten key ways in which your business can benefit from having a more diverse workforce. I'll go through some and examples to show you why, beyond just being a “good thing to do”, there's also a strong business case for increasing diversity.
Promoting diversity in your business is easier said than done, and later in this series, we’ll look at how to do it effectively. But for now, let’s concentrate on the why.
(By the way, “diversity” can mean a lot of different things. We’ll look at those in more detail in the next article, but for now, just keep in mind that it has a variety of dimensions—it can be about age, race, gender, sexual orientation, religion, nationality, disability, and more.)
1. Make More Money
Let’s start with the bottom line. To put it simply, studies have shown that companies with more diverse workforces make more money. Quite a lot more money, in fact.
For example, research by McKinsey found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have above-average financial returns. For gender diversity, that number is 15%. And companies in the bottom quartile for diversity were less likely to achieve above-average results.
In the U.S., the research found that for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rose 0.8%. That increase was even higher (3.5%) in the U.K.
If you’re a business owner, you know how hard it is to move the needle on your profits. So results like this are definitely significant.
And remember that this McKinsey research is just one example. There are plenty of other studies that have come to similar conclusions. Check out this Catalyst report for a good summary of research from around the world, mostly focused on gender diversity, showing again and again that more diverse companies tend to outperform their competitors.
2. More Innovation
Another key advantage: more diverse teams tend to be more innovative. A Deloitte study found that when employees “think their organisation is committed to and supportive of diversity and they feel included,” there’s an 83% increase in their ability to innovate.
It makes sense, after all. New ideas tend to come about when people are confronted by different opinions and forced to rethink their assumptions. If you want to be on the cutting edge, having lots of employees who think the same way is not a good recipe.
Want more evidence? This 30-year study of U.S. patents in the IT industry found that teams with a mixture of men and women produce patents that get cited by other researchers 30-40% more often than average (citations are often used as an indicator of value in research). The study concludes that it’s possible that “originality and diverse thinking” are responsible, although more research is necessary to prove the causation.
3. Better Decision-Making
As Twitter CEO Jack Dorsey remarked at the 2015 Grace Hopper Celebration of Women in Computing:
“Any time you bring together diverse perspectives, it just creates a bunch of potential that you weren’t really expecting.”
That can lead to better decisions, as you get the benefit of a wide array of viewpoints and experiences. Some fascinating research from Northwestern University sheds further light on why that is. The authors found that:
“The mere presence of diversity in a group creates awkwardness, and the need to diffuse this tension leads to better group problem solving.”
In the study, groups of students were given tasks to complete. Some groups were homogenous (all the students were from the same fraternity or sorority), while others had a “newcomer” from a different fraternity or sorority. The more homogenous groups felt more confident in their collective decisions but were more often wrong. Those that benefited from an outsider’s fresh perspective completed the tasks with far greater accuracy.
4. Expanded Talent Pool
Hiring the right employees can be tough. Your business needs a certain set of skills, and finding people who possess those skills, who are available to work, who live in the right area and who also have the right personality and motivation to join your company is tricky.
Now imagine that you exclude half of the available talent. How much harder would it be to find the people with the skills you need?
That’s exactly what many companies are doing when they hire only men for key positions. They cut their options even further when they exclude gay people, disabled people, people of certain racial and ethnic backgrounds, and so on.
(Note that when I say “exclude”, I don’t necessarily mean in an overt, conscious way. Few firms these days would put up a sign saying that certain groups are not welcome. But if you have a workplace that’s not accessible to people with disabilities, you’ve excluded them by default. It’s easy to exclude other groups without intending to, as well. We’ll look at that later in the series.)
As Luke Visconti, CEO of DiversityInc, explained to CNBC:
“If people are created equal, then it is logical to assume that talent is created equally. Can you select enough talent from a homogeneous group to run a company well?"
5. Happier Customers
Guess what? Your customers are diverse too. They are old and young, they are from different countries and ethnic groups, and so on. So shouldn’t your workforce reflect that diversity?
If you champion diversity, it can have important benefits in customer satisfaction and even sales. One study of the fashion industry found that black women in Canada and the U.S. were 1.5 times more likely to purchase a fashion product advertised by a black model. White women were just as likely to purchase, regardless of the race of the model. The white participants said: “they believed the brand upheld the values they aspired to, such as empowerment and inclusion.”
6. Improved Attraction and Retention of Staff
Having a reputation for inclusiveness can also help you attract and retain employees. Consider this survey by recruiting firm Glassdoor, which found that 67% of people said a “diverse workforce was an important factor when evaluating companies and job offers.” The same survey found that more than half of employees think their employer should be doing more to increase the diversity of its workforce.
While the rates were higher for the minority groups who would benefit from such policies, diversity was an important factor for people from all backgrounds. Although some heterosexual white males may feel threatened by diversity initiatives, many others welcome them. By promoting diversity, you’re attracting talented people who share those values.
7. Awareness of Trends for Different Demographics
It’s key in business to be able to understand and anticipate your customers’ needs. But as we saw earlier, your customers are a diverse bunch of people. Do you understand all of their needs?
If you have a workforce that reflects the diversity of your customer base, you’re more likely to be aware of what’s important to them and to be able to market to them effectively.
You’re also more likely not to offend them. Businesses are attracting bad headlines all the time for cultural insensitivity—a Canadian gin company, for example, was accused in 2016 of using inaccurate caricatures of Inuit people in its marketing.
If you include people from diverse backgrounds within your business, you’re less likely to come up with tone-deaf marketing clangers, and more likely to speak to your customers in a voice that they understand and respect.
8. Improve Your Reputation
Companies of any size live and die by their reputation. If your firm’s brand provokes positive feelings among your customer base, they’re more likely to buy from you, and you’re more likely to make money.
Would you rather be known for being inclusive and winning diversity awards, or for being old-fashioned and exclusionary? Sometimes, companies can get negative media attention for their lack of diversity, as happened in the tech industry—for more, see the following articles:
- DiversityClosing the Gender Gap: What You Can Do to Promote Diversity in the Tech IndustryRachel McCollin
- DiversityHow Tech Firms are Becoming More Diverse by Changing the Way They RecruitRachel McCollin
- GenderWorking to Close the Gender Gap in Technology & EngineeringTom McFarlin
Instead of getting negative headlines, why not put your business on the cutting edge of diversity, and improve your reputation?
Again, there’s some science behind this. A 2009 study in the Journal of Management Studies found “a positive relationship between board racial diversity and both firm reputation and innovation.” That, in turn, helped to drive improved performance by companies with diverse boards of directors.
9. Avoid Litigation
Of all the reasons to promote diversity in your business, this is perhaps the worst one. Being afraid of getting sued is not a great motive for making a business decision, especially when there are so many positive ones out there.
The threat of litigation, however, is very real. In the U.S., the Equal Opportunity Employment Commission received 91,503 charges of workplace discrimination in 2016.
As I mentioned in the introduction, many countries have equal opportunity laws on the books, and some countries have strengthened or extended those laws in recent years. Actively promoting diversity in your hiring practices and in every aspect of your business is a great way to ensure you comply with all the laws.
You can never eliminate the risk of litigation, of course. But by demonstrating a genuine commitment to diversity, you can reduce the chances of having an employee, applicant or customer feel that they’ve been discriminated against, and you also give yourself a better chance of successfully defending any case that is brought.
10. It's the Right Thing to Do!
As you’ve seen in this tutorial, there are plenty of solid business reasons to promote diversity in your business. But as well as being a businessperson, you’re also a human being, and most of us like to do the right thing. So why not make a positive contribution to your society by improving diversity?
Increasing diversity sometimes gets bad press, with people claiming it’s about favouritism for particular groups or a restrictive kind of “political correctness”. If a diversity strategy is implemented poorly, those can sometimes be valid criticisms—it can become little more than a box-checking exercise or an unsophisticated quota system.
But those cases are rare, and they don’t apply to diversity as a whole. In the rest of this series, you’ll learn how to improve diversity the right way in your business. When you do it that way, there’s nothing unfair or restrictive about it—quite the opposite.
Quite simply, diversity is about giving everyone a fair chance. It’s about making your business welcoming and open to all kinds of people. It’s about meritocracy. It’s about treating people as individuals and seeing past the surface differences. Who wouldn’t want to do that?
So although I started this article by saying there are more reasons to increase diversity than just feeling it’s the “right thing to do”, I’m ending it by saying that it is the right thing to do, and that’s a good reason for doing it too.
In this article, you’ve seen ten good reasons to start increasing the diversity within your workforce today.
But as I’ve alluded to within the article, achieving a more diverse workforce is harder than it sounds. To start, you have to be aware of the many different dimensions of diversity—things like race and gender may spring to mind, but it’s also about age, sexual orientation, religion, disability, and more.
You may also have to make a lot of changes to your hiring practices in order to reach out to people from more diverse backgrounds, and then you may need to look seriously at your workplace culture and make changes to ensure that your new arrivals feel welcome and want to stay. And don't forget your existing workforce either—they may need more training or help to overcome any challenges that come from the changes you make.
We’ll look at all of these topics in the rest of this series, so please check back soon, or subscribe to our newsletter to be notified of the latest additions to our library of free business tutorials.
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