How diversity of thought improves business productivity and creativity
There is no doubt whatsoever that diversity and inclusion (D&I) is high on the list of priorities for businesses, with the benefits of having a diverse workforce being well documented. But while initiatives have made tremendous strides in recent years, companies are still looking for ways to strengthen D&I in the workplace.
Following the release of an ‘anti-diversity’ memo by a now-former Google software engineer, the tech giant has been forced into defending itself with Danielle Brown, Google’s vice-president of diversity, integrity and governance, saying: “We are unequivocal in our belief that diversity and inclusion are critical to our success as a company.”
But while Google may be unequivocal in its “belief” about diversity, its own workforce is, by its own accounting, 69% male and just 2% African American. The figures also shift dramatically when it comes to tech and leadership roles, with males taking up 80% and 75% respectively when compared to just 20% and 15% with their female counterparts.
Lack of diversity in Silicon Valley isn’t exactly breaking news, with the US Equal Opportunity Commission (EEOC) finding that whites make up 47% of the entire workforce in a 2014 study across top tech firms. Women, meanwhile, made up just 30% of the workforce. Yet despite these figures, efforts are being made to increase diversity and inclusion in the workplace - and not just in the tech sector.
The reason? Because diversity breeds innovation. And innovation breeds business success.
The globalisation of business in 2017 has created a sophisticated, complex and competitive environment. In order to become successful, companies need to continually develop new ideas and solutions to ensure that they keep the competition at bay. One of the best ways to achieve this is to ensure that the development of new ideas is through a diverse and inclusive workforce.
A diverse and inclusive workforce is necessary to drive innovation, foster creativity, and guide business strategies. Forbes study, Fostering Innovation Through a Diverse Workforce, has identified workforce diversity and inclusion as a key driver of internal innovation and business growth, while it is critical in attracting top talent from around the globe.
For example, in 2012 a team of researchers at the Credit Suisse Research Institute studied 2,360 companies globally from 2005 to 2011. The report, which looked into the effects of having a diverse workforce and how it makes businesses ‘more creative’, ‘more diligent’ and ‘harder-working’, found that organisations with female representation in top management leads to an increase of $42 million in firm value.
Likewise in 2015, McKinsey published Diversity Matters, a report which looked into 366 public companies in Canada, the United States, Latin America and the United Kingdom.
The results showed that companies with high racial and ethnic diversity numbers are 35% more likely to outperform the median financial return of their industry peers. In the UK specifically, it found that for every 10 percent increase in gender diversity, earnings before interest and taxes (EBIT) rose by 3.5 percent.
A different study published in the Harvard Business Review also confirmed that, while companies with more diverse leaders tend to outperform competitors, female employees of companies without diverse leadership are 20% less likely than straight, white male employees to win endorsement for their ideas.
Having multiple voices in the workforce can lead to new ideas, new services, and new products, and encourage out-of-the-box thinking. It also helps companies understand the diverse groups which make up their customer base.
Companies no longer view diversity and inclusion efforts as separate from their other business practices, as they have identified that a diverse workforce can differentiate them from their competitors by attracting top talent and capturing new clients.
Diversity is a key profit maker, as reported in a study by Covenant Investment Management. It found that companies with diversity initiatives enjoyed over double the profitability of companies which do not focus as much on diversity. Researchers found that companies that received Department of Labor awards for voluntary affirmative action policies experienced rising share prices ‘within 10 days’.
In comparison, a study by Grant Thornton compared the performance of FTSE 350 companies who had all male executive boards to those with at least one female board member.
The difference in performance for the companies with all male board members was lower by 0.53 per cent. This doesn’t sound much but it equates to $74 billion lower Return on Investment.
Diversity is critical when taking into account the growth and prosperity of a company, whether that’s through perspectives, experiences, cultures, genders, or age. Studies have shown that diversity unlocks innovation and drives market growth—a finding that should intensify efforts to ensure that executive ranks both embody and embrace the power of differences.
Ultimately, businesses that don’t control their finances will suffer. Having a diverse workforce proves that it can be a great cost saving solution as shown by Market Inspector, which reports that increasing workplace diversity can boost the UK economy by £24bn per year.
In 2017, successful companies are not the ones that look at diversity as a nice-to-have attribute. Truly successful and innovative companies are those that build diverse teams because they understand the significance it plays in making them representatives of the industry.