Why do some organisations’ diversity and inclusion efforts seem to contribute more significantly to commercial success than those of others? Research by Heidrick & Struggles reveals interesting findings.
Increasingly, business leaders are focused on building organisations that are not only diverse but inclusive. The evidence correlating diversity with improved business performance is clear. Diversity, though it can be hard to achieve on its own, is just a start – all colleagues need to feel included in order to contribute. And building inclusive workplaces is tricky.
Research by Heidrick & Struggles among 412 executives across different regions, functions and levels of seniority reveals the breadth of the gap between corporate efforts to ensure employees feel included and the perceived contribution of diversity and inclusion (D&I) to business success.
It also identifies the ‘D&I vanguard’ — a group of companies closing this gap — within the countries surveyed (Australia, Canada, France, Germany, Mexico, Spain, the UK and US). Notably, the companies in the vanguard group generated a five-year revenue compound annual growth rate (CAGR) 62% higher than that of the other companies in the survey. What are they doing differently?
Analysis suggests two key differences. First, these organisations more often align D&I goals with the commercial aims of the business and monitor progress toward these. Second, they take more formal and specific steps to build inclusion and link it to business strategies.
The more often participating companies reported taking these actions “to a large extent”, the more they said that D&I was a significant contributor to their business success.
Links to business strategy
The research indicates that communicating the importance and objectives of D&I is critical to establishing inclusive cultures. Those 20% of survey respondents forming the vanguard group stated that their companies clearly define D&I goals and communicate these to the wider organisation.
Two-thirds (66%) of the vanguard respondents said that, “to a large extent”, their companies’ (formal or informal) inclusion efforts are explicitly linked to specific strategic goals. This compares with 45% of other respondents.
D&I vanguard companies also tend to define “inclusive workplaces” and “inclusive cultures” in specific ways that leverage the broader benefits of inclusion, such as ensuring diverse voices are heard and recognising contributions from people from diverse backgrounds.
Perhaps, in part, because they so often link inclusion efforts to wider strategic goals, vanguard companies, more often than other organisations, have formal strategies for creating inclusive working environments at both national and team levels: 83% of vanguard companies have such strategies at a team level, compared with 69% of other companies.
While inclusion is a leader-led process, it takes leadership at all levels: inclusion becomes operational and meaningful when people understand how it affects the work they do every day. In this context, it’s particularly notable that vanguard companies view D&I initiatives as contributing most significantly to business success by increasing employee engagement. They more often say this than non-vanguard companies.
Creating the right conditions
Organisations are at different stages on the road to D&I and many stall early on. Some focus solely on numbers and targets around diverse representation and many question whether their investment in inclusion initiatives is making a tangible difference. But our research shows that pledging a commitment to employees and stakeholders around D&I is central to innovation, to delivering value to customers and to building lasting business success.
Judging by the full results of our survey, there are good intentions and much positivity around inclusion within organisations, constituting a solid base upon which leaders can build. Our findings, linking effective D&I initiatives to CAGR, will, we hope, motivate all leaders to create the conditions for inclusion to contribute strongly to their business success.
Q&A with Lyndon Taylor, lead partner, Heidrick & Struggles’ Diversity & Inclusion Advisory Services
What did your D&I research aim to find out?
Our gut feeling was that more inclusive organisations perform better: they gain more ideas, have more innovation and better risk-management.
We asked: “Are organisations defining diversity? Are they defining inclusion? If so, are they linking those efforts to business performance? Are they communicating and measuring it?” We then considered whether there was a differential between the organisations that were defining, communicating, measuring and monitoring D&I, and the others. We found out there was.
Should the emphasis be on inclusion?
If you don’t have a culture of inclusion, you won’t see the benefits of diversity. When diverse executives show up, they need to feel included, that they can speak up and be heard, and contribute to the business. Representation matters, but if you only focus on representation, which I think a lot of organisations do, it becomes an initiative. And in our view, D&I shouldn’t be an initiative; it should be a strategy, tied to wider business strategy and embedded in the culture of the organisation.
What does an inclusive culture look and feel like within vanguard companies?
There will be visible representation: an inclusive culture looks different at each level of the organisation; you will find more gender balance and ethnic diversity. But you will also find open communication at all levels. The organisation will probably feel more team-orientated than individualistic. It will be a place where individuals can have an impact on the business and feel they belong.
What is the role of leadership in D&I?
Business leaders are responsible for business strategy. Talent strategy (including diversity) is a critical part of that. Inclusive leaders are intentional about getting diverse representation and diversity of thought, and about communicating why inclusivity is good for business. They are true believers. Leaders lead the culture for the firm. If they role model inclusive behaviours, managers down the line will all role model these as well.
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