Diversity is good for business. Not just for the obvious reasons, like because it’s the right thing to do. There’s a raft of research that shows that diversity significantly impacts the bottom line, plus many more non-financial measures of success.
Hear Columbia University professor Katherine Phillips describe how the benefits of diversity can be a competitive advantage for businesses.
4 top diversity wins for businesses
📈 Provides a stronger bottom line
Financial performance is the ultimate diversity win for businesses.
You probably intuitively know that businesses tend to be least diverse in their most senior ranks. The 2019 McKinsey data again reveals a strong correlation between diversity in executive teams and profit:
- The most ethnically-diverse executive boards were 36% more likely to outperform their peers on profitability
- Companies with the most gender-diverse executive teams were 25% more likely to outperform their peers on profitability
The McKinsey studies also reveal the startling price of opting out. In 2017, the most homogenous companies McKinsey studied — in terms of gender and ethnic diversity — were 29% more likely to underperform their industry peers on profitability.
And there’s more. The longer businesses wait to do something, the further they get left behind. In 2019, the least diverse companies were 40% more likely to underperform.
💡 Drives innovation and creativity
Studies show that bringing together a team with a diverse set of backgrounds and perspectives naturally lends itself to innovative thinking.
The way that innovative teams generate great ideas is through a process and a culture known as creative abrasion, where ideas are productively challenged.
If you bring together two or more people with different perspectives on a challenge who are willing to both advocate for their point of view and also really listen, they’ll come away with a third solution that’s distinct from what they originally came to the table with — and stronger.
😊 Helps to better serve your customers
It takes a kaleidoscope of different experiences, backgrounds, and ways of thinking to most effectively connect with customers across demographics.
Take Fenty Beauty, the cosmetic line that disrupted the market with a foundation that came in 50 shades — a number rarely seen before. Many darker shades sold out and showed big brands the true value of the market they had been ignoring. A new standard of inclusivity was set, and the “Fenty effect” triggered other brands to attempt to catch up.
It’s clear that the advertising industry has a major incentive to meaningfully represent the demographics it’s trying to reach.
But the same is true for global businesses today that are trying to communicate to consumers across regions and cultures — and really all businesses trying to reach diverse audiences.
Beyond messaging and marketing, businesses need a deep understanding of their customers to deliver the best products, services and customer experience.
💪 Enhances team happiness and productivity
We are happiest and perform best when we can be ourselves; we all want to be valued for who we are.
An inclusive culture is one that embraces and celebrates our differences — differences in experiences, backgrounds, and ways of thinking.
There’s a lot of research indicating that inclusive businesses have more highly-engaged, motivated and productive workforces.
IBM identified this slew of hard-hitting outcomes that occur when a workforce is happy thanks to inclusion:
- A superior employer brand
- Greater loyalty & retention
- More referrals
- Stronger leadership bench
- Greater trust
Companies that actively pursue diversity and inclusion at all levels of the organization consistently outperform their competitors. Not only is it the right thing to do, but it’s a key driver of growth and competitive advantage.
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