The Business Case for Diversity and Inclusion

The World Economic Forum recently released the Global Competitiveness Report 2018. This year’s report includes the first methodology change in a decade. Diversity in the workforce, as measured by ethnicity, gender, sexual orientation and religion, has been included as a new indicator.

This is by no means an insignificant shift in focus for an organization that has over the years become synonymous with the drive towards increasing productivity and profitability in a globally competitive environment. The report goes on to state that organizations often reap multiple economic benefits from nurturing an inclusive and diverse workforce.

One would assume that the World Economic Forum was convinced by recent research findings to include diversity in their Global Competitiveness Report for the first time in 2018. In actual fact decades worth of research has consistently illustrated the economic benefit of diversity and inclusion. Awaken have compiled an excellent summary of the most significant research findings that illustrate the business case for diversity and inclusion dating back to as far as 1990.

Diversity and Inclusion Research

1990: Harvard Business Review published “From Affirmative Action to Affirming Diversity” in which it stated, “In business terms, a diverse work force is not something your company ought to have; it’s something your company does have, or soon will have. Learning to manage that diversity will make you more competitive.”

1991: The Academy of Management published “Managing Cultural Diversity: Implications for Organizational Competitiveness” and concluded managing diversity gives organizations a competitive advantage.

2009: American Sociological Association published “Diversity Linked To Increased Sales Revenue And Profits, More Customers” and shared their incredible finding that “companies reporting the highest levels of racial diversity brought in nearly 15 times more sales revenue on average than those with the lowest levels of racial diversity.”

2010: Kellogg School of Management published “Better Decisions through Diversity” in which it linked heterogeneity to innovative ideas and better team performance.

2013: Deloitte published “Waiter, is that inclusion in my soup?” in which they tied diversity and inclusion to better business performance (83%), responsiveness to customer needs (31%), and team collaboration (42%).

2013: Center for Talent Innovation published “Innovation, Diversity, and Market Growth” in which it found that publicly traded companies with 2D diversity (exhibiting both inherent and acquired diversity) were 70% more likely to capture a new market, 75% more likely to see ideas actually become productized, and 158% (no, that’s not a typo) more likely to understand their target end-users and innovate effectively if one or more members on the team represent the user’s demographic.

2014: Deloitte published “From diversity to inclusion” in which it stressed the importance of both diversity and inclusion in building high performing organizations and called diversity a business imperative: “And this means that diversity is no longer a “program” to be managed — it is a business imperative.”

2014: Stephen Frost, in his book, “The Inclusion Imperative” notes that “discriminating against women, homosexuals, and disabled people is costing $64 billion dollars a year in the U.S. alone.”

2015: McKinsey & Company publishes “Why Diversity Matters,” in which it notes that “Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians,”

2017: Deloitte’s Global Human Capital Trends report shows the rising priority level of D&I among executives compared to previous years. Over two-thirds of executive’s rate D&I as an important issue while 38% of executives report their CEOs (not HR) being the primary sponsor of D&I initiatives. The report also highlights the alarming reality gap which shows most companies’ D&I maturity levels being “very low.”

2017: Boston Consulting Group (BCG) revealed its research that shows companies’ “Total Societal Impact” has proven to be a statistically significant in creating a reliable growth path, a reduced risk of negative, even cataclysmic, events, and, most likely, increased longevity.

2017/2018: McKinsey & Company released another set of research findings that once again confirmed the statistical significance of having gender- and race-based diversity leading to better financial performance. It reminded the reader that “Creating an effective inclusion and diversity strategy is no small effort and requires strong, sustained, and inclusive leadership. But we, and many of the companies we studied, believe the potential benefits of stronger business performance are well worth it.”

The outside world

Diversity and inclusion do not only impact an organization internally, but also externally. Most organizations operate with a range of external stakeholders, including clients, partners, suppliers, regulators and shareholders, all of whom are themselves diverse. Organizations must reflect the diversity of the ecosystem within which they operate in order to remain relevant and maximize their relationship with every external stakeholder.

If they do not do this they run the risk of incurring some serious reputational damage, as a number of companies have recently found out:

H&M Hires Diversity Manager in Wake of Racist Hoodie Fiasco. Read more

Starbucks closes 8,000 stores to give staff diversity training amid race storm. Read more

Ashwin Willemse heading to Equality Court to take on SuperSport. Read more

Resistance to change

When faced with such an overwhelming body of research and serious reputational risks the question should not be if there is a business case for diversity and inclusion, but rather why this is still being debated in 2018. This resistance to change can be better understood by considering the following factors:

Diversity creates discomfort. The reality is that we would be much more comfortable in organizations without any kind of diversity. If everyone were the same in terms of race, gender, religion, language, sexual orientation, political views etc. there would be very little conflict in the workplace. If we all think, feel, believe and act the same the chances of arguments, confusion and misunderstandings are very low. These safe and harmonious workplaces would largely be shielded from the discomfort that diversity brings.

Diversity and Inclusion are emotional topics. It is in human nature to be resistant to change. Taking away the familiar and replacing it with the unfamiliar often creates uncertainty. While changes to strategies, processes and software creates uncertainty at an intellectual level, discussions about prejudice, discrimination, stereotypes and bias bring about strong emotional reactions. Employees and employers find it much more difficult to deal with this and usually rather choose to avoid it all together.

Creating an inclusive culture is Challenging. The journey towards a diverse and inclusive organization is long and challenging. It is also very difficult to measure progress. Sometimes it might feel like you are taking one step forward and two steps back. Organization have to develop a long-term strategy that is built on a real commitment to continue on what might feel like an endless journey. The world is constantly changing, and diversity and inclusion strategies have to change with it.

The South African context

South Africa is one of the most diverse countries in the world. One does not have to look much further than 11 official languages, various racial, religious and ethnic groups to see an illustration of this. People live very segregated and different lives due to the history of the country and challenges that still remain.

The workplace is one of the few places where people interact on a daily basis regardless of their differences. This transformation has to a large extent been brought about by affirmative action and equal opportunity measures over the last couple of decades.

The legislation has however failed to address social cohesion challenges. A number of organizations have struggled to deal with the conflict that has been brought about by the transformation of the workplace. Systems, structures and policies are being challenged as well as individual beliefs and assumptions.

Organizations should however not shy away from the discomfort that diversity creates. The benefits of diversity are created because of this discomfort, not despite of it. If people learn to deal with this discomfort and tension, they will ask the questions, make the suggestions and have the conversations that they were avoiding previously.

As individuals continue to struggle to learn, unlearn and make sense of a number of things it would be irresponsible of an organization to not actively manage the process. A diversity management plan would allow an organization to assist individuals through the transformation process while also reviewing structural challenges at an organizational level.

Conclusion

It is time to move the diversity and inclusion conversation to the next level. Organizations need to realize that diversity is about so much more than just the two most recognizable and legislated elements, namely gender and race. Although those are undoubtably important, they should not dominate the diversity conversation to such an extent that they are used as the only measures of success.

Whether organizations realize it or not, the reality is that all organizations are already diverse. People are diverse, unique and special in so many different ways. Organizations should not only accept these differences, but actively celebrate and encourage it by creating an inclusive culture where every individual is able to bring their authentic self to the workplace. The sooner organizations realize and embrace this the sooner they will be able to unlock the hidden potential of a diverse workforce.

Transformation in South Africa is undoubtably a complex subject. Every organization has to find its own reason to transform. Whether it’s because of any of the benefits listed above, because of legislation, or simply because it’s the right thing to do.

Contact Apex People Solutions to draw up a diversity management plan for your organization.

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