10 Key Advantages of Promoting Diversity in Your Business

Diversity in business is a hot topic right now. There are diversity awards and diversity surveys, and governments in many countries have implemented or strengthened diversity and equality legislation to ensure equal opportunity in the workplace.

10 Key Advantages of Promoting Diversity in Your Business

But why exactly should you promote diversity in your own business? To put it bluntly, what’s in it for you?

Plenty, as it turns out. There’s a growing body of research indicating that businesses with more diverse workforces perform better on a whole range of measures, from making more money to being more innovative.

In fact, in this article, you’ll learn ten key ways in which your business can benefit from having a more diverse workforce. I’ll go through some and examples to show you why, beyond just being a “good thing to do”, there’s also a strong business case for increasing diversity.

Promoting diversity in your business is easier said than done, and later in this series, we’ll look at how to do it effectively. But for now, let’s concentrate on the why.

10 Key Advantages of Promoting Diversity in Your Business

(By the way, “diversity” can mean a lot of different things. We’ll look at those in more detail in the next article, but for now, just keep in mind that it has a variety of dimensions—it can be about age, race, gender, sexual orientation, religion, nationality, disability, and more.)

1. Make More Money

Let’s start with the bottom line. To put it simply, studies have shown that companies with more diverse workforces make more money. Quite a lot more money, in fact.

For example, research by McKinsey found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have above-average financial returns. For gender diversity, that number is 15%. And companies in the bottom quartile for diversity were less likely to achieve above-average results.

In the U.S., the research found that for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rose 0.8%. That increase was even higher (3.5%) in the U.K.

If you’re a business owner, you know how hard it is to move the needle on your profits. So results like this are definitely significant.

And remember that this
McKinsey research is just one example. There are plenty of other studies that
have come to similar conclusions. Check out this Catalyst report for a good summary of research from around the
world, mostly focused on gender diversity, showing again and again that more
diverse companies tend to outperform their competitors.

2. More Innovation

Another key advantage:
more diverse teams tend to be more innovative. A Deloitte
study
found that when employees “think their organisation is committed to
and supportive of diversity and they feel included,” there’s an 83% increase in
their ability to innovate.

It makes sense, after
all. New ideas tend to come about when people are confronted by different
opinions and forced to rethink their assumptions. If you want to be on the
cutting edge, having lots of employees who think the same way is not a good
recipe.

Want more evidence? This
30-year study of
U.S. patents in the IT industry
found that teams with a mixture
of men and women produce patents that get cited by other researchers 30-40% more
often than average (citations are often used as an indicator of value in
research). The study concludes that it’s possible that “originality and diverse
thinking” are responsible, although more research is necessary to prove the
causation.

3. Better Decision-Making

As Twitter CEO Jack Dorsey
remarked
at the
2015 Grace Hopper Celebration of Women in Computing:

“Any time you bring
together diverse perspectives, it just creates a bunch of potential that you
weren’t really expecting.”

That can lead to
better decisions, as you get the benefit of a wide array of viewpoints and
experiences. Some fascinating research
from Northwestern University
sheds further light on why that is. The
authors found that:

“The mere presence of diversity in a group
creates awkwardness, and the need to diffuse this tension leads to better group
problem solving.”

In the study, groups
of students were given tasks to complete. Some groups were homogenous (all the
students were from the same fraternity or sorority), while others had a
“newcomer” from a different fraternity or sorority. The more homogenous groups
felt more confident in their collective decisions but were more often wrong. Those
that benefited from an outsider’s fresh perspective completed the tasks with
far greater accuracy.

4. Expanded Talent Pool

Hiring the right
employees can be tough. Your business needs a certain set of skills, and
finding people who possess those skills, who are available to work, who live in
the right area and who also have the right personality and motivation to join
your company is tricky.

Now imagine that you
exclude half of the available talent. How much harder would it be to find the
people with the skills you need?

That’s exactly what
many companies are doing when they hire only men for key positions. They cut
their options even further when they exclude gay people, disabled people,
people of certain racial and ethnic backgrounds, and so on.

(Note that when I say
“exclude”, I don’t necessarily mean in an overt, conscious way. Few firms these
days would put up a sign saying that certain groups are not welcome. But if you
have a workplace that’s not accessible to people with disabilities, you’ve
excluded them by default. It’s easy to exclude other groups without intending
to, as well. We’ll look at that later in the series.)

As Luke Visconti, CEO
of DiversityInc, explained
to CNBC
:

“If people are created equal, then it is
logical to assume that talent is created equally. Can you select enough talent
from a homogeneous group to run a company well?”

5. Happier Customers

Guess what? Your
customers are diverse too. They are old and young, they are from different
countries and ethnic groups, and so on. So shouldn’t your workforce reflect
that diversity?

If you champion
diversity, it can have important benefits in customer satisfaction and even
sales. One study
of the fashion industry
found that black women in Canada and the U.S. were
1.5 times more likely to purchase a fashion product advertised by a black
model. White women were just as likely to purchase, regardless of the race of
the model. The white participants said: “they believed the brand
upheld the values they aspired to, such as empowerment and inclusion.”

6. Improved Attraction and Retention
of Staff

Having a reputation
for inclusiveness can also help you attract and retain employees. Consider this
survey
by recruiting firm Glassdoor
, which found that 67% of people said a “diverse
workforce was an important factor when evaluating companies and job offers.”
The same survey found that more than half of employees think their employer
should be doing more to increase the diversity of its workforce.

While the rates were
higher for the minority groups who would benefit from such policies, diversity
was an important factor for people from all backgrounds. Although some
heterosexual white males may feel threatened by diversity initiatives, many
others welcome them. By promoting diversity, you’re attracting talented people
who share those values.

7. Awareness of Trends for Different Demographics

It’s key in business
to be able to understand and anticipate your customers’ needs. But as we saw
earlier, your customers are a diverse bunch of people. Do you understand all of
their needs?

If you have a
workforce that reflects the diversity of your customer base, you’re more likely
to be aware of what’s important to them and to be able to market to them
effectively.

You’re also more
likely not to offend them. Businesses are attracting bad headlines all the time
for cultural insensitivity—a Canadian
gin company
, for example, was accused in 2016 of using inaccurate
caricatures of Inuit people in its marketing.

If you include people from
diverse backgrounds within your business, you’re less likely to come up with
tone-deaf marketing clangers, and more likely to speak to your customers in a
voice that they understand and respect.

8. Improve Your Reputation

Companies of any size
live and die by their reputation. If your firm’s brand provokes positive
feelings among your customer base, they’re more likely to buy from you, and
you’re more likely to make money.

Would you rather
be known for being inclusive and winning diversity awards, or for being
old-fashioned and exclusionary? Sometimes, companies can get negative media
attention for their lack of diversity, as happened in the tech industry—for
more, see the following articles:

  • 10 Key Advantages of Promoting Diversity in Your Business
    Diversity
    Closing the Gender Gap: What You Can Do to Promote Diversity in the Tech Industry
    Rachel McCollin
  • 10 Key Advantages of Promoting Diversity in Your Business
    Diversity
    How Tech Firms are Becoming More Diverse by Changing the Way They Recruit
    Rachel McCollin
  • 10 Key Advantages of Promoting Diversity in Your Business
    Gender
    Working To Close The Gender Gap in Technology & Engineering
    Tom McFarlin

Instead of getting
negative headlines, why not put your business on the cutting edge of diversity,
and improve your reputation?

Again, there’s some
science behind this. A 2009 study
in the Journal of Management Studies
found “a positive relationship between
board racial diversity and both firm reputation and innovation.” That, in turn,
helped to drive improved performance by companies with diverse boards of
directors.

9. Avoid Litigation

Of all the reasons to
promote diversity in your business, this is perhaps the worst one. Being afraid
of getting sued is not a great motive for making a business decision,
especially when there are so many positive ones out there.

The threat of
litigation, however, is very real. In the U.S., the Equal Opportunity
Employment Commission received 91,503 charges of
workplace discrimination
in 2016.

As I mentioned in the
introduction, many countries have equal opportunity laws on the books, and some
countries have strengthened or extended those laws in recent years. Actively
promoting diversity in your hiring practices and in every aspect of your
business is a great way to ensure you comply with all the laws.

You can never
eliminate the risk of litigation, of course. But by demonstrating a genuine
commitment to diversity, you can reduce the chances of having an employee,
applicant or customer feel that they’ve been discriminated against, and you
also give yourself a better chance of successfully defending any case that is
brought.

10. It’s the Right Thing to Do!

As you’ve seen in this
tutorial, there are plenty of solid business reasons to promote diversity in
your business. But as well as being a businessperson, you’re also a human
being, and most of us like to do the right thing. So why not make a positive
contribution to your society by improving diversity?

Increasing diversity
sometimes gets bad press, with people claiming it’s about favouritism for
particular groups or a restrictive kind of “political correctness”. If a
diversity strategy is implemented poorly, those can sometimes be valid
criticisms—it can become little more than a box-checking exercise or an
unsophisticated quota system.

But those cases are
rare, and they don’t apply to diversity as a whole. In the rest of this series,
you’ll learn how to improve diversity the right way in your business. When you
do it that way, there’s nothing unfair or restrictive about it—quite the
opposite.

Quite simply,
diversity is about giving everyone a fair chance. It’s about making your
business welcoming and open to all kinds of people. It’s about meritocracy.
It’s about treating people as individuals and seeing past the surface
differences. Who wouldn’t want to do that?

So although I started
this article by saying there are more reasons to increase diversity than just
feeling it’s the “right thing to do”, I’m ending it by saying that it is the right thing to do, and that’s a
good reason for doing it too.

Conclusion

In this article, you’ve seen ten good
reasons to start increasing the diversity within your workforce today.

But as I’ve alluded to within the article,
achieving a more diverse workforce is harder than it sounds. To start, you have
to be aware of the many different dimensions of diversity—things like race and
gender may spring to mind, but it’s also about age, sexual orientation,
religion, disability, and more.

You may also have to make a lot of changes
to your hiring practices in order to reach out to people from more diverse
backgrounds, and then you may need to look seriously at your workplace culture
and make changes to ensure that your new arrivals feel welcome and want to
stay. And don’t forget your existing workforce either—they may need more training or help to overcome any challenges that come from the changes you make.

We’ll look at all of these topics in the
rest of this series, so please check back soon, or subscribe to our newsletter to be notified of the latest additions to our
library of free business tutorials.