A lot has been written about how to create a diverse workplace. We all know it’s the right thing to do, because it creates opportunities for women, ethnic minorities and others who often feel they are not fully included in the corporate space. But less attention has been paid to the benefit for company that manages to create an inclusive workspace.
First, let’s review the difference between diverse and inclusive. Diversity is simple: you count the number of people with gender, ethnicity, religion, age and sexual orientation who are unlike the majority. Inclusivity is more complex. In inclusive cultures, people who are different from the majority feel they belong and can speak their mind without having to change dramatically. Their voices are heard and evaluated in non-biased ways. They are able to fully contribute.
We all intrinsically know this is a good thing. We understand that diverse opinions and approaches bring teams new ways of solving problems. Unfortunately few academic studies have quantified the economic benefits of creating an inclusive workplace. Experience shows that teams with greater diversity find better solutions, so long as team members feel included and fully engaged.
ROI in a competitive market
Diverse employees are less likely to stay if they don’t feel valued. And any manager can tell you that hiring talented people is expensive. If you have a talented employee, it’s far cheaper to keep them engaged and happy, than to replace them. In fact, companies say it costs at least twice the salary to replace an employee – excluding any severance costs.
The cost of replacing talented people who leave becomes increasingly expensive as the battle for talent intensifies – a situation that is getting worse as baby boomers retire.
There’s a growing workforce shortage. ManpowerGroup’s annual survey of more than 41,000 hiring managers in 42 countries and territories found that 38% of employers are now having difficulty filling jobs — up 2% from 2014.
In fast growing markets, like Asia, top talent have many choices from multinational to national to mid-sized firms to start-ups. When talent feels they are not included, particularly in a global company, they move. In the financial services sector, I watch top men and women leave not just for more money but because they feel their career isn’t going anywhere – largely because they feel it’s too hard to get their voices heard in headquarters. On exit they will say it’s because of salary, what started the search in the first place was a lack of inclusion. As one executive said recently, “When someone gets to the point of imagining not working here anymore, we have already lost them.”
Your reputation matters
Employees talk and to more people than you might imagine. What they say about their experience matters. A young very talented woman recently while considering a job offer, canvased through social media the reputation of the company for woman – it’s no longer just her friends and family. A number of websites are now encouraging people to post their experiences with an employer. Glass Door is one but there are others.
Take the very recent example of the IBM’s #hackahairdryer campaign. The campaign aimed to "reengineer misperceptions about women in tech, and to focus on what really matters in science" and included a video that asked women working in science and tech to "hack a hair dryer", then share their work on the IBM website.The campaign drew the scorn of thousands of female scientists on twitter who ridiculed it as sexist and patronising.
Now IBM, which apologised and withdrew the video, has a potential reputation problem among women. One might question whether such an event could have occurred if women’s voices were heard at IBM.
These kind of brand issues affect not only the employer brand – how other potential talented women and minorities would feel about working there – they also impact a company’s brand overall. Customers notice. Companies that get a bad reputation for inclusivity can easily become the target of customer boycotts (such as Volkswagen, Walmart, etc).
Change of mindset needed?
While quantifying the benefits of inclusivity may not be as easy as tracking sales, tracking costs is easier. Let me offer one simple idea about the costs of non-inclusive workforces. Given all the effort to recruit women into the company, losing a woman has a real cost – both reputation and replacement costs. Retaining a woman can have a direct impact to the bottom line.
Creating an inclusive culture requires consistent effort on the part of managers, starting at the top and going right through to anyone who manages employees. Before throwing money at yet one more program, stop to understand the nature of the real barriers to inclusivity. Introduce an audit of practices and procedures throughout the company. Then, engage managers in understanding the story that is uncovered.
Armed with better understanding of root causes, most managers will make smarter choices in developing and retaining female talent. If diverse talent feels included, feels they fit in, feels their voice is represented at the table and trusts their managers, then you have an inclusive culture. The benefits will accumulate.