4 Business Benefits of Diversity in the Workplace
The cry for diversity in the workplace has reached a boiling point. Last October, record 12,000 people attended the Grace Hopper Celebration of Women in Computing (GHC), the "world's largest gathering of women's technologists" according to the website. U.S. companies are spending millions annually on diversity programs and initiatives. And you can't peruse a news website or industry blog without stumbling across a diversity hiring headline. The unavoidable fact is that, despite great strides over the past fifty years, the American workplace still has a diversity problem. African-American workers are still offered $0.65 on the dollar as compared to white workers, and women make up a mere 18.75% of software engineers. From a moral standpoint, you can certainly argue that true equality would produce a workforce with similar diversity ratios to the overall population. But as good as your intentions might be, you're running a for-profit business. At the end of the day, you have to make money to pay your investors, your share holders, and, of course, your employees. If money talks, what does it say about diversity? You might be surprised. Below we've listed 4 proven benefits of diversity in the workplace:
1. Diversity initiatives expand the talent pool.According to the Manpower Group, 38% of employers across all industries had significant trouble filling positions in 2015. In certain fields, like tech, the numbers are likely much higher. In a CareerCast report on the 10 toughest jobs to fill in 2016, data scientists and engineers take top honors. In fact, the Conference Board estimated there will be 3x as many software engineer job openings in 2016 as there will be candidates, and the Bureau of Labor Statistics estimates there will be 222,600 open software engineering jobs by 2020. [clickToTweet tweet="Wow! This year, there will be 3x as many software engineer #job openings as there will be #candidates." quote="This year, there will be 3x as many software engineer job openings as there will be candidates." theme="style3"] Long story short? Engineers are hard to hire, period. (So are nurses, sales representatives, etc.) Effectively cutting the talent pool in half by not maximizing female and minority talent exacerbates the problem. Many of the steps needed to bring more diversity into the workplace are the same steps needed to expand the talent pool. Win-win.
2. Diverse teams make better decisions.
“Nobody knows everything, and no group of people knows everything. But a peculiar attribute of homogeneous groups is that they can be unusually blind to what they don't know.” — Matthew Yglesias in a Slate.com articleDecades of academic studies have shown that socially diverse groups are more innovative than their homogeneous counterparts. When people from different backgrounds, genders, and races come together to solve problems, they bring with them different information, opinions, and perspectives. This mix of perspectives brings a grab-bag of benefits to the table, including:
- Enhanced creativity
- Fuller understanding of market issues
- Fresher ideas
- More spontaneous breakthroughs
Being with similar others leads us to think we all hold the same information and share the same perspective. This perspective, which stopped the all-white groups from effectively processing the information, is what hinders creativity and innovation.The takeaway? If you value innovation and creative problem-solving, a diverse team is your best asset.
3. Diverse teams better serve their customer base.The world around us is changing, and one of the most compelling benefits of diversity in the workplace is that it better equips teams to serve their target markets. Take accounting software company Kashoo, self-described as a "typical start-up: younger, tech savvy, male dominated," as an example. When hiring for a customer support role, the Vancouver-based company decided to hire a middle-aged, female CPA based out of New Jersey (about as far away from Vancouver as you can get and still be in North America). Her limited tech know-how necessitated some basic Google docs and Skype lessons, but eight months into the job she was thriving — and the customers, many of whom happen to be her same demographic, love her (Inc.com). She may not have made sense had they just looked for a culture fit within their own team, but she made perfect sense when they took into account the customers she'd be serving. The lesson? Hiring a diverse team isn’t about ticking boxes —it’s about better serving your customer base. [clickToTweet tweet="Hiring a diverse team isn’t about ticking boxes — it’s about better serving your customer base." quote="Hiring a diverse team isn’t about ticking boxes — it’s about better serving your customer base." theme="style3"]
Let’s take a quick look at that customer base:Chances are good that many of your customers are women, especially if your company is business-to-consumer. 73% of all household spending in the US is controlled by women, whose earning and buying power increases each year (Catalyst). Your customer base is likely racially diverse too — and becoming increasingly so each year. Recent census data signals a “major, long-term shift” in America’s demographics (NBC). Experts estimate that minorities will make up half of children under 18 by 2018, and the rest of the population will be quick to follow, “due to aging baby boomers.” Who do you think has a better chance of making the right decisions for this changing marketplace? Wouldn't you rather have the insights of people who think like your target customer?
4. Diverse companies make more money.It doesn’t get much more “bottom line” than that. In a Catalyst report titled The Bottom Line: Corporate Performance and Women’s Representation on Boards, researchers found that Fortune 500 companies with the highest representation of women board directors performed better financially than those with the lowest representation of women on their board of directors. The companies were measured on three important measures:
- Return on Equity: The female-friendly companies outperformed the competition by 53%.
- Return on Sales: Companies with more women on their board saw a 42% higher return on sales
- Return on Invested Capital: Perhaps most tellingly of all, the companies with more women board directors turned invested capital into profit 66% more successfully.
In testing the performance of 2,360 companies globally over the last six years, our analysis shows that it would on average have been better to have invested in corporates with women on their management boards than in those without. We also find that companies with one or more women on the board have delivered higher average returns on equity, lower gearing, better average growth and higher price/book value multiples over the course of the last six years. (via Slate)Additionally, McKinsey research suggests that diverse businesses deliver 35% better results than non-diverse businesses. As far as benefits of diversity in the workplace go, it's pretty hard to argue with numbers like these.
The Benefits of Diversity in the Workplace
"Any time you bring together diverse perspectives, it just creates a bunch of potential that you weren’t really expecting.” — Jack Dorsey, CEO of TwitterWhen our workforce doesn’t reflect the melting-pot society we live, work, and do business in, it’s not just a morality issue — it’s a business issue. To be profitable in a diverse world, you need a diverse team to incorporate the insights, experiences, and worldviews of your customer base. Efforts to increase workplace diversity expand the increasingly shrinking talent pool and give your team the competitive edge you need to compete in a global market. In short — increasing workforce diversity isn’t just the right thing to do; it’s the smart thing to do.
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