Diversity in the Workplace - Benefits, Challenges, and Profitability10th January 2020
First thing's first: What is diversity in the workplace?
When John F Kennedy in 1961 signed what was to be known as the "Affirmative Action", he laid down a foundation that would encourage companies to build a more diverse workforce. The order declared that employers were no longer allowed to discriminate applicants based on their creed, racial and ethnic characteristics, skin color, cultural belonging or origin. At the time, not many suspected that this would add a whole new dimension in businesses and over time build more profitable companies.
Today, companies that place emphasis on diversity are 35% more likely to have financial returns above the industry median. In fact, banks and investors have caught up with the financial findings of diverse companies and are adjusting their policies in support. Goldman Sachs recently announced that they will only help companies with at least one diverse board member go public. The policy change is based on the fact that diverse companies have higher financial returns in the long run.
"Look, we might miss some business, but in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders over time"
David Solomon - CEO, Goldman Sachs
Diversity in the workplace refers to the concept of employing people from a diverse range of different cultural backgrounds and socio-economic classes in order to get as many different views on your company as possible. Many businesses see the value of understanding, including and accepting people with a distinct set of unique characteristics and use it as a competitive advantage.
A diverse workplace is generally when the workforce has representatives from people with a wide range of different characteristics such as gender, race, sexual orientation, ethnicity, cultural belonging, and personal experiences.
But there are many types of diversity which can mean many different things depending on whom you ask. When the concept first made its appearance, the most common use for the term was concerning ethnic groups and racial belonging. Since then, the concept has been expanded to cover more characteristics such as:
- Political opinion
- Formal education
- Self-identified gender
- Spoken and written languages
- Sexual orientation
- Functional disabilities
- Religious beliefs
- Military experience
- Cultural inherence
- Geographic belonging
- Socioeconomic status
- Life experience, and many more...
Businesses more and more understand the opportunities that comes with harnessing employee uniqueness and individuality in order to increase value by incorporating a different cultural background, skill set, or previous experience. In today's competitive landscape it is a definitive must-have. If you aren't actively working to introduce more diversity in the workforce you may suffer the consequences. More on that further down..
After all, the world is a diverse place and companies with global business ambitions should reflect that.
Why Is Diversity In The Workplace Important?
For most people, it's obvious that men and women think differently and take different approaches when solving problems. That's a good thing as they together can solve the problem for a broader audience sense than what they could alone. This comes from the fact that men and women have different social biases and thus see things from a contrasting angle. The same is true for every new characteristic you introduce in a company. I.e - you gain a new unique way of looking at a problem.
As most problems in business life are multi-faceted, it makes a lot of sense to get as many different aspects as possible from a strategic point-of-view. Diversity is not only important from an internal, strategic standpoint but also from an external branding and reputation perspective.
Companies that are known to have a diversity-friendly attitude also open up for a more varied client base. Building a reputation of routinely employing minorities and other exposed society groups conveys their attitude towards social responsibility, inclusivity and being a good member of society. And having diversity in the workplace often goes a long way when attracting new customers.
12 Benefits of Diversity
# 1 - Expanded perspective
When you include talent from a broad spectrum of types, you also include their own cultural biases and points of view. This creates an opportunity to catch all sides of a problem and to solve it in the widest sense possible.
#2 - Added creativity
With a broader set of personal biases and experiences, there's a considerably higher chance that you can add something truly unique to your organisation. Creativity is, after all, a product of experience and ingenuity.
#3 - Increased pace of innovation
More diverse backgrounds - More diverse ideas - More innovation.
In a recent Forbes-survey of companies with an annual revenue of more than $10 billion, a whopping 56% stated that diversity is the main driver of innovation. Josh Bersin has shown that inclusive companies are 1.7 times more likely to take the innovation lead in their market.
#4 - Problem-solving on steroids
Cognitively diverse teams solve problems significantly faster according to a study in Harvard Business Review. The explanation lies in different social biases on how to tackle problems.
#5 - Next-level decision making
Forbes studied 600 business-decisions in more than 200 companies and found that inclusive teams make better decisions in 87% of the time, 2 times faster and with 50% shorter meeting time. In 60% of the time, the end result was better than those in uniform teams.
"Given the competitiveness of the tech industry, if you don't have women and diverse people involved in decision making at all levels, you are putting your company in a vulnerable position.".
Aileen Lee, founder of Cowboy Ventures.
#6 - Higher revenue
It's been proven that companies with better problem-solving skills outperform competitors financially. Mckinsey has found that companies with ethnical and cultural diversified employees are 33 percent(!!) more likely to have higher profitability than their peers.
#7 - More engagement among employees
Gallup has found a really interesting correlation that got published in The Journal of Leadership & Organizational Studies. According to researchers, companies focusing on employee engagement saw a 46% higher financial performance, while companies focusing on diversity saw a 58% increase. Both combined yielded an even higher output than put separately.
--> Diversity drives engagement which in turn drives profit.
"83% of millennials are actively engaged when they believe their organization fosters an inclusive culture, compared to only 60% of millennials who are actively engaged when their organization does not foster an inclusive culture.".
Caroline Forsey in Hubspot.
#8 - Longer employee retention
Happiness in the workplace is strongly linked to feeling accepted, valued and included. As companies with a broad diversity are generally much more inclusive, common sense suggests that diversified companies keep their employees for longer periods of time.
#9 - Reputation gainz
A diverse workforce manifests itself by adding terms such as "socially responsible", "more human" and "contributing member of society" to the list of adjectives. Not too shabby aye?
#10 - More applicants and higher acceptance rates
We can all agree that companies with a good cultural reputation have a higher chance of attracting new people, right? A company's reputation also has a high impact on the acceptance rate for offered positions.
#11 - A more diversified set of applicants
Not only will you get more applicants interested in your organization, having a diverse workforce will attract more diversity by default which in turn can spark a virtuous cycle leading to more people with different characteristics to look your way.
#12 - Easier entry to new markets
According to research by Harvard Business Review, companies with diversity in the workplace have a 70% higher chance of capturing new markets.
Promoting and Supporting Diversity in the Workplace
To maintain a diverse workforce it's important to make everyone feel accepted, respected, and part of the team no matter what culture, gender or ethnicity they belong to. As a leader in your organization, you have to be a mentor and role model for the kind of acceptance you want to achieve. Having different opinions is not always without dispute and that's ok as long as all opinions are accepted and respected.
The largest enemy in creating an open and accepting environment is unconscious bias. Being aware of your own bias as a leader and educating colleagues about unconscious bias will be key in the diversification.
Encourage all members throughout the organization to renew, challenge and question existing assumptions and prejudices to initiate a thought process. But be careful of accusing your colleagues of having harmful prejudices to avoid a defensive state. Unconscious bias and prejudices is a natural part of human behavior and there should be no shame in having them in the first place as long they are willing to challenge them. What is important is to help your peers understand how and why certain sorts of behavior have a negative impact on other individuals in your organization and can unconsciously reinforce unwanted bias.
The first step in training your organization to become more including in support of a diverse workforce is being conscious and aware of said bias. Inviting speakers with previous experience and arranging workshops is also a good idea to support the change your company is facing.
Overcoming and managing unconscious bias is a large step towards a better and more inclusive culture and simply can't be overlooked. The next step is looking over company policies to make sure they aren't introducing any unintentional maltreatment of employee groups. For example, do you acknowledge holidays for all represented religions and cultures? Setting important meetings on a cultural holiday is a good example of what not to do in an inclusive culture.
When it comes to promoting diversity in terms of team composition, it goes without saying that it makes sense to mix them up
What Will A Lack of Diversity Lead To?
By having a uniform group of colleagues you will not only lack all the benefits listed above but also add a few additional negative aspects.
In homogeneous groups, there is no opportunity to immediately understand perspectives from other target groups than the existing. Every idea benefits from being challenged by people with a different bias and worldview.
Toxic work environment
When diversity is lacking, the risk of harassment and discrimination is towering for those not fitting the template. These employees more often feel harassed by statements and decisions without intention to harm, which can cause isolation and a stressful environment for the outcast. Feeling alone at work also causes a lower willingness to report discriminating behavior which, of course, ads to the problem as management lacks a foundation to act upon. Unwillingness to report discrimination is likely to lead to resignation or even worse, to a workplace where harassment is overlooked leading up to a toxic environment.
By tone-deafness, we are referring to when marketing content, descriptions and product designs are crafted in a direct or indirectly inappropriate manner towards a target audience. A relatively recent example was a hoodie released by a large, well-known clothing company branded "Coolest monkey in the Jungle". It was modeled by a young black boy in a catalog which caused a hate storm towards the company in question and resulting in an enormous amount of negative press.
This lack of understanding of how the shirt would resonate among black audiences could easily have been avoided by having a more cultural diversified group behind the release and the idea would have never left the meeting room.
Other sorts of tone-deafness can include bad translations of various copy, low resonance with all but one target group and accidental use of inappropriate language.
Lack of mentors
Younger members in the workforce require someone senior to look up to, ask questions and learn from. If there's limited generational diversity among seniors in your crew, the process of acquiring knowledge, competence, and efficiency is much slower. This is a major cost drain for both the employer and the employee who gets left behind in his career by peers in companies with a better functioning diversity in the workplace.
Challenges Associated with Diversity
Initiating a diversity project is no small feat and should be dealt with utmost seriousness in order to succeed. Make no mistake, launching a project is a huge commitment and requires big investments both in money and time. Here are a couple of points to keep in mind when starting your diversity journey.
1. Getting everyone on board
A diversity program is a change that involves the whole company and requires cross-department cooperation. As a leader, you must make it crystal clear why this program is being initiated, why it's so important, and in what ways it will add value to the company.
Before moving forward with planning the project, make sure you've talked to key decision-makers and have their blessing as well as the financial resources to go ahead.
Identify who will cause the largest roadblock to roll out the program and set a strategy on how to woe them.
This means for example case studies from other companies and projections on returns and what else you can think of to convince them. Pay extra attention to have secured the trust and confidence of key managers in involved departments. You will be dependent on managers to ensure that decisions are properly prioritized and followed through.
--> How to tackle
Think of your diversity efforts like a game of chess. You need to be strategic in every step of the way to reach your end goal. Meticulously plan how to get key people on your side and then use them to convince their followers.
2. Ensuring that diversity and overall business goals align
A diversity program should not be based on the belief that it will move your company forward just because it has helped other companies in the past. Make sure you use well-established overall business goals as a guiding light when setting the agenda for the program. If you don't, you will have a hard time selling it in.
As overall goals are unique for every company, you can't rely on others' success stories alone. To promote diversity in a successful manner, you need a unique tactic tailored to your company, its goals, and its existing people and the company's culture.
Start by assessing which parts of your company would benefit most from a higher diversity and engage that department in dialogue. What kind of unique worldview are they missing? What competencies? What experiences? What cultural belonging and so on, and work from there when hiring.
Diversity in the workplace should not be implemented just because. It needs a solid base in the overall strategy to succeed.
--> How to tackle?
Consider your employees' opinions when identifying where diversity is most pressing. Ask them face to face or through an anonymous survey. Don't make unsupported assumptions before asking your colleagues. Diversity buy-in comes with impactful changes.
Diversity programs don't happen every day and chances are that most of your key personnel have little to no experience on how to conduct their part most effectively.
Identify those who are most important to the outcome of the project and make sure they know what is expected of them and what resources they have to achieve the goals. The next step is to set up tailored training sessions in order to help them in their roles.
As such a large responsibility resides with the department managers and cooperation between them, it makes sense to invest extra effort into training and educating them together.
--> How to tackle?
Without proper training, it is hard to do a good job. Investing in training will cement the foundation on which you build the project. Getting involved managers together early is important to form a relationship with each other and to smoothen teamwork and communication.
4. Advancing from planning to implementation
Taking all that planning and preparation to meet the reality is the next step in your diversity journey - and it's not always frictionless. You need a strong leader to back your planning and to execute it for it all to be fruitful. Make sure you have the team, the resources, and the supporting mandate before moving forward with your implementation.
--> How to tackle?
Consider assigning a designated role to be in charge of everything diversity-related. This shows everyone in the company that diversity is taken seriously and in long term and that change is coming. Stats show that these roles are way up in demand, so start hiring in time!
5. Managing diversity in the workplace
Anonymous surveys among managers show that fear of dealing with a diverse workforce is a clear reason not to employ people that don't fit the mold. And yes, diversified groups require more from you as a leader. But as we've seen above there's lots to gain if you can cope.
People make decisions based on their cultural background, social bias, and comprehension. You as a manager must understand, on an individual level, how these traits impact their role in your company and realize how to leverage them wisely in order to be an efficient leader.
Additionally, even more effort needs to be devoted to straightforward communication that is adapted to fit all kinds of employees in a language they understand.
Success Factors of the Most Diverse Company in The World
According to the most established and trusted source of diversity ratings - Refinitiv's Diversity & Inclusion Index, which weighs traditional financial performance with inclusion and diversity factors, Accenture takes a strong lead.
"Building a culture of equality where everyone can thrive is key to who we are as a company. We value each other's unique cultural backgrounds, skills, and experience and hold ourselves accountable for progress against bold goals. Embracing inclusion and diversity is one of the things that makes Accenture so special.".
Julie Sweet, CEO - Accenture.
Here are some of the measures behind Accenture's success:
- A highly diversified board of directors in terms of gender and geographical representation. (42% women).
- Aspiring to take equality to the next level by setting high goals. Eg. to have a 50/50 gender balance by 2025 across the company.
- Promoting diversity through global programs boosting over 100,000 members.
- Investing in equality-research and publishing findings. In 2019, Accenture published the 'Getting to Equal'-report that shows evidence that a diversity positive culture is "a powerful multiplier of innovation and growth".
"Our unwavering commitment to equality in the workplace has never been more critical. When people feel a sense of belonging and are valued for their unique contributions, perspectives and circumstances, they are more likely to advance and feel empowered to innovate.".
Ellyn Shook, CHRO - Accenture.
Why It Is So Hard to Achieve.
There's hardly anyone arguing against diversity in the workplace but if it's so great like everyone says, why isn't every single company on this like flies on a piece of sugar?
To start with, how do you know when you've reached your goal? How do you know when your company is diverse? What is the goal?
Everyone has their own definition of what a diverse workforce is and to what point equality is a good idea (which the infamous Google Ideological Echo Chamber Memo shows is a topic with widely different views).
Most agree that a 50/50 equality between genders is the holy grail, but how about ethnicities, religious belonging, seniority, and sexual orientation? What's the sweet spot there? Does it even exist?
Not at the business core
No matter how valuable diversity in the workplace is, it's seldom integrated into the core of the business itself. Workplace diversity programs that are not deeply rooted in support of growing and maintaining the economic values of a company are not sustainable and not very likely to have a direct impact on the results.
For example, even if Nokia would have had the world's most diversified and inclusive workforce before the smartphone came out, that fact would never have saved them from rapidly declining revenue. Many businesses face issues that are much closer to the core than that of diversity and thus move it down the list of prioritization.
Probably the number one reason leading up to and maintaining a homogenous workforce. Conscious as well as unconscious bias is something that's part of every human being. One must learn to not pretend like it doesn't exist, accept it and take measures in order to not let it get in the way of you and the best talent.
Bias is part of every step in the recruiting process from how the ad is phrased (certain words attract a certain target group), how the physical interview is weighted (confident women can come across as 'pushy', while confident men are distinguished) to the salary negotiation where men often come out on top in comparison to women.
Those benefiting from inequalities and bias aren't the first to complain. In an all-white, all-male-in-their-30's type of culture, there might be strong internal resistance to hiring someone different even though it might be best for the business and diversity in the workplace.
It's also a matter of what stage the company is in. For high growth companies that are taking in large amounts of new employees every month, it's a very different thing than for established companies trying to diversify an existing and steady workforce.
Diverse talent shortage
In certain markets, trades and areas the shortage of diverse employees is a pressing issue that's working against even the most ambitious diversity programs.
For example, in tech mecca Silicon Valley, women only make up for 20% of the total workforce according to The Times.
There are in fact similar complications interfering with the success of diversity programs present in virtually every local marketplace of job seekers.
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- “Why Diverse Teams Are Smarter” by Harvard Business Review
- “‘Diversity’ Is Rightly Criticized As An Empty Buzzword. So How Can We Make It Work?” by NPR
- An Experts Advice On How To Address Diversity In The Workplace By Forbes
- “Has ‘Diversity’ Lost Its Meaning?” by The New York Times
- “How to Increase Workplace Diversity” by Wall Street Journal
- “Why ‘Thought Diversity’ Is The Future Of The Workplace” by Business Insider
What is diversity in the workplace?
Diversity in the workplace refers to the concept of employing people from a broad range of different backgrounds and socio-economic classes in order to get as many different views on your business as possible.
Why is diversity in the workplace important?
As most problems in business-life are very multi-faceted, it makes a lot of sense to get as many different views as possible from a strategic point-of-view.
What are the main benefits of diversity in the workplace?
#1 — Expanded perspective
#2 — Added creativity
#3 — Increased pace of innovation
#4 — Problem-solving on steroids
#5 — Next-level business decisions
#6 — Higher revenue
#7 — More engagement among employees
#8 — Longer employee retention
#9 — Reputation gainz
#10 — More applicants and higher acceptance rates
#11 — A more diverse set of applicants
#12 — Easier entry to new markets
What will a lack of diversity in the workplace lead to?
- Narrow perspectives
- Toxic work environment
- Lack of mentors
What are the main challenges associated with workplace diversity?
1. Getting everyone on board
2. Ensuring that diversity and overall business goals align
4. Advancing from planning to implementation
5. Managing a diverse workforce
Why is diversity hard to achieve?
- Not at the business core
- Change resistance
- Diverse candidate shortage
Who are the thought leaders in workplace diversity?
According to the most established and trusted source of diversity ratings — Refinitiv’s Diversity & Inclusion Index, which weights traditional financial performance with inclusion and diversity factors, Accenture takes a strong lead.