Diversity and Inclusion Are Good for Business

Diversity has long been considered a social good and a cultural advantage, especially in the melting pot country of the United States. Research has shown that those advantages extend to the business world. Companies who have a more diverse staff and leadership team perform better than those that are more homogenous. A conscious effort to create and maintain diverse teams could lead to higher profitability for your business.

A global study by McKinsey & Company of over 1,000 large businesses shows that companies who are the most diverse in terms of gender and race are more likely to earn higher financial returns than their industry average, while those scoring low on diversity are more likely to earn less – and that gap is only getting wider over time. While diversity itself is not necessarily a direct cause of increased profits, the correlation suggests that it is a competitive advantage in the marketplace. Researchers and business leaders have many hypotheses as to why diversity leads to profitability.

One contributing factor is that diversity matters to customers. Google has found that consumers are more likely to consider or purchase a product after seeing an ad they considered to be diverse or inclusive, especially if they are from a background that is likely to be less represented. Consumers are increasingly expecting advertising to reflect their real lives, and that includes representing all different kinds of people. These kinds of inclusive ads are more likely to come from teams that are themselves inclusive and diverse, and such teams are also less likely to miscommunicate those messages.

Research conducted by the French company Sodexo found that companies who had a roughly equal mix of men and women in management positions had higher scores on their key performance indicators (KPIs) than others. However, that number plateaued when companies had more than 60 percent women in leadership, which implies that the advantage comes from having a mix of perspectives, not just overrepresenting one kind of team member, even if they are typically from an underrepresented group.

Diversity is also linked to greater levels of innovation in the workplace. This can happen naturally as differing perspectives are able to bounce off one another, but inclusivity is an additional factor. Fostering a work environment where employees from all backgrounds feel safe to provide new ideas helps ensure that all voices are valued.

Other possible reasons for this correlation have to do with company culture. A company’s dedication to diversity can help them win top talent they might have otherwise missed. Many high-performing employees report that diversity is important to them, and seeing many voices represented in a company helps reassure them that their own voices will be heard also. Companies that have a diverse leadership team already are more likely to attract stellar employees of all backgrounds, and new hires are more likely to find mentors and role models they can grow with. In addition to recruiting top talent, conscious diversity and inclusion efforts help retain those employees, reducing turnover.

Implementing diversity and inclusion policies can be a challenge, especially in industries with largely homogenous workforces. Employers are challenged to consider more than just skill sets and experience and open themselves up to seeking workers of various backgrounds. When this is not done carefully, companies run the risk of tokenizing their diverse workforce, which can lead to resentment from those employees. This is why diversity and inclusion are twin initiatives of equal importance. Diversity helps a company foster innovation, and inclusion helps that work environment remain welcoming for all employees.

Employers are not the only ones who have difficulties when it comes to diversity. Employees also face challenges when breaking into these historically homogenous industries. Women who occupy predominantly male positions face stigmas that they are less qualified to do the same work as men. However, women are proving those stigmas wrong, and they are more likely than ever to occupy a position that would have traditionally been held by a man.

Researchers and business leaders are not advocating for diversity for its own sake but rather the demonstrable benefits that arise when diversity is implemented well. Diversity can also refer to more than just race and gender; age, socio-economic status, immigration status and more can also be dimensions of diversity that can add value to your team. If you find yourself in a position of seeking new candidates for a position at your company, it may be worth taking diversity into consideration to give yourself the biggest advantage, financially and culturally. By embracing many voices, you are giving yourself the best shot at hearing the best ideas.