Diversity means business

May 2017

Rainbow flagThe link between increased business performance and inclusivity is hard to deny. But to feel the benefits, organisations need to make diversity part of their DNA, writes Martin Cooper AMBCS.

The case for inclusivity - a policy to include people who may otherwise be marginalised - appears to be easy to make - it feels the right thing to do.

In the days of big data, continual improvement, relentless measurement and constant analysis, being the right thing to do does feel somehow inadequate. As part of BCS work to celebrate LGBT+ History Month, we set out to discover whether the case for encouraging and supporting diversity is more than an intuitive one.

And happily, we found many forward-thinking businesses and leaders are listening to an ever-growing body of evidence that supports the inclusivity agenda. The evidence, we found, backs diversity. Solidly.

The danger of similarity

The idea that mono-cultures are bad for business is nothing new. Work by Harvard researcher, John Kotter, in the early nineties, demonstrated that so-called adaptive cultures dramatically outperformed non-adaptive cultures across a variety of indicators.

Similarity’s dangers run deeper and darker too. Did Kodak go bankrupt because of what social scientists call group-think? It’s more than plausible that the company’s cancerous complacency, and the firm’s ultimate failure to continue innovating, can be traced back to its leaders listening increasingly to themselves.

Group-think most certainly had its hand in spreading the financial poison generated by the collapse of Lehman Brothers. The pinstriped majority clicked ‘buy’ when it should have clicked ‘sell’.

 A different way to performance

Theresa McHenry, HR Director, Microsoft, moves the debate about the need for difference to more solid and less dramatic territory when she says: ‘We know from experience that diverse and inclusive teams are ultimately the highest performing.’

Among many research bodies exploring diversity’s positives is McKinsey & Company. It explored what it called the diversity dividend. In its report, McKinsey states: ‘We know intuitively that diversity matters. It’s also increasingly clear that it makes sense in purely business terms.

Our latest research finds that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians.’

Moreover, companies in the bottom quartile are statistically likely to be laggards when it comes to achieving above average returns.

Putting figures to its findings, McKinsey claimed that gender-diverse companies are 15 per cent more likely to outperform the national industrial median. Ethnically diverse companies do even better. They are 35 per cent more likely to out-perform.

McKinsey does, of course, acknowledge that correlation does not equate to causation. If a company embraces diversity it won’t magically see its profit lines swell. The firm reckons, however, that ‘correlation does indicate that when companies commit themselves to diverse leadership, they are more successful.’

This success is founded on, among other things, an increased ability to win top talent and improve customer orientation. Boosts in employee satisfaction and decision making follow naturally too. All this, the American advisory firms believes, leads to a virtuous cycle of increasing returns.

Boosts in innovation

Innovation and disruption aren’t immune to diversity’s inherent advantages. Among inclusivity’s many facets, the Royal Academy of Engineering’s Diversity and inclusion in engineering survey report 2015 found working to stop marginalisation and exclusion helps organisations to be more creative.

The report states: ’…the top business imperatives driving diversity and inclusion work, cited by 83 per cent of organisations, are: enhancing capacity for innovation and creativity, (and) creating an inclusive culture where everyone can perform, and improving employee engagement and performance…’

RAEng’s report hints at a great deal of untapped potential too, with many organisations not yet fully realising diversity’s full benefits. While 60 per cent of organisations are considering diversity and inclusion in their employee engagement and cultural change programmes, only 28 per cent are considering it in their product and design work.

This, the report states, ‘is an area where they could expect to see the impact of diversity of perspectives and experience among their employees on innovation and creativity. As a result, some organisations have yet to see the improvements in performance that they are seeking.’

Happier customers

Along with increasing an organisation’s performance and aiding innovation, businesses that embrace inclusivity also have happier customers.

Louise Nuttall, Head of HR at BCS, believes organisations with a diverse workforce can gain a strategic advantage. ‘We need people on the inside that understand customers’ lives,’ she says. ‘And to really understand you need to walk a mile in somebody’s shoes.’

Market research and data can provide insights into customers’ behaviour but, a father struggling to bring up a child alone can understand more fully and immediately the concerns of a person in the same situation. These insights can help inform customer care and also product development. 

The report Business Case for Inclusion and Engagement by wetWare Inc. observed that ‘involvement in emerging-market communities, from supplier-diversity initiatives to philanthropic endeavors, sends a strong signal of support to potential customers and employees within these communities.’

Cumulative Gallup Workplace Studies also found companies that were successful in creating inclusion saw a 39 per cent increase in customer satisfaction over businesses who weren’t diverse.

The war on talent

The same report also found that companies that successfully embraced a culture of inclusivity had a 22 per cent lower staff turnover. Set this fact against the IT industry’s skills shortage and the business case for diversity and inclusivity makes itself.

‘In a constantly changing world, where we face key issues such as skills shortages and the next-generation workforce care more about a company’s reputation as an inclusive employer, businesses need to invest in D&I now, more than ever,’ said Elena Fatisi, Diversity & Inclusion Officer at RAEng.

McKinsey & Company warns that the most important corporate asset isn’t technology - it’s people. And today, so-called human capital is in short supply.

Blunt in its analysis, McKinsey’s report is called The War For Talent. And the paper claims: ‘The most important corporate resource over the next 20 years will be talent: smart, sophisticated business people who are technologically literate, globally astute, and operationally agile. And even as the demand for talent increases, the supply of it will decrease.’

Not just lip service

Deloitte’s paper Only Skin Deep postulates a simple formula - ‘Diversity + inclusion = improved business performance’. Diversity of thought is the end game, the report says, and demographic diversity is a visible lead indicator.

The paper’s title - and its central message - also serves as a warning to organisations and individuals who want to access diversity’s advantages for merely pecuniary reasons. To make diversity work, organisations can’t pay lip service to the idea.

The paper cites the work of Laura Liswood, who argues: ‘It is not enough to create a corporate version of Noah’s Ark bringing in “two of each kind.” Unless the zebras, giraffes and lions on Noah’s Ark fully engage with each other to understand and benefit from these perspectives then the opportunity has been lost.’

For diversity to work it can’t be a matter of mere compliance and audit. Nor can it be left to just PR, marketing or HR departments alone. All these corporate services play a part in communicating and supporting a programme but, for diversity and inclusiveness to really work, it has to become part of an organisation’s DNA.

‘What I’m advocating is real inclusion,’ says Stephen Frost, author of The Inclusion Imperative: How Real Inclusion Creates Better Business and Builds Better Societies (speaking in a KoganPage YouTube interview). Along with being an author on the subject, Frost is formerly Head of Diversity and Inclusion for the London Organising Committee of the Olympic Games and Paralympic Games.

Frost advocates a three-step model that encompasses: understanding, leadership and delivery. For real inclusion to work, he says, ‘every single person needs to be leading, not just the top people or those with authority.’

‘It comes down to the behaviours individuals show every day,’ says Microsoft’s McHenry. ‘Every single person matters. We all contribute to the creation of an inclusive culture.

‘Simply put, empowering others to be their authentic selves in spite of perceived differences - and giving them a voice and a place to flourish - enables us to deliver our best performances as individuals, as employees and as an organisation.’

Image: iStock.com/Connel_Design

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