Technology giants Google, LinkedIn, Facebook, and Apple recently acknowledged the lack of diversity among their employees, most of whom are white or Asian and male. They pledged to do a better job in recruiting, retaining, and developing diversity in their workplaces, understanding that workforce diversity is linked to their customers and ultimately, to their profitability. They are right to do so. These organisations are aware of the profits they leave on the table when they don’t leverage diversity in the workplace.
Workforce diversity delivers
Organisations rich in ethnic, gender, and sexual orientation diversity are more adaptable and demonstrate better decision making and problem solving, which leads to an improved bottom line. Diversity also helps employers more effectively offer a broader range of services because they retain employees with a deeper set of skills and experiences (like language and cultural understanding) that can give their organsations a competitive advantage by providing more effective services on a global basis. Diverse organisations also foster a variety of viewpoints, and when CEOs and leaders really take heed, can generate better ideas that lead to improved creativity and innovation.
There have been a number of studies that demonstrate the benefits of workforce diversity:
- A 2012 study by business professors Cristian Deszo and David Ross from Columbia University found that having women at top management levels led to an increase of $42 million in firm value.
- The Deszo and Ross study supported earlier research by Orlando Richard and colleagues. Richard et al.’s 2003 study of 177 U.S. banks concluded that banks with racial diversity and an innovation mindset experienced better performance and had an improved competitive advantage
- A 2012 study by Credit Suisse Research International found that organizations with one or more women on their boards had higher average returns on equity and higher average growth rates.
- Other studies confirm that teams with racial diversity significantly outperform teams with no diversity, and that when people hear disagreement from others who are different from them, it provokes more thought than when the disagreement comes from someone who looks like them.
All of these studies show that organisations that reflect the diversity of their customers will come out ahead in the marketplace.
How to foster diversity in the workforce and the marketplace
There is no single “one-size-fits-all” approach to diversity. Corporate leaders should be aware of each minority group’s similarities, differences, wants, and needs. There are a few steps that can be taken to improve diversity in the workplace:
- Conduct a diversity needs assessment to ensure the workforce, board, and leadership reflect the communities and customers it serves. If it doesn’t, target recruiting efforts to include local organizations with connections to minority groups the organisation is seeking.
- Obtain CEO support for diversity efforts using bottom-line reasoning.
- Develop a diverse leadership pipeline now. If there is a lack of diversity in the talent development and succession plans, organisations should consider adding mentorships, sponsorships, and other targeted programs that simultaneously accelerate diversity and bench strength and also consider tying bonus compensation to progress at the management and senior levels.
- Develop a corporate culture that allows everyone to be who they are while working together to achieve organisational strategies and plans. Foster an organizational attitude of open thinking and encourage employees to express their ideas and opinions in their own cultural context.
Research has shown that workforce diversity can improve organisational innovation, creativity, decision making, problem solving, adaptability, and the bottom line, yet many organisations are remiss in even assessing diversity levels in their organisations, let alone taking steps to improve it. The U.S. is poised to welcome the most diverse population ever as women, Millennials, and Hispanics contribute their own unique perspectives in the workplace. Companies that fail to recruit, retain, and develop these groups will also lose their competitive advantage. Boards and CEOs must take a hands-on leadership approach to accelerate workforce diversity to boost understanding of their market opportunities, to create value, and to generate sustainable profits.