Workplace diversity is a competitive advantage
Multiple studies prove that increasing diversity and inclusion in your organization has a direct impact on revenue. The more racial, gender and age diversity you have, the higher your revenue. These studies got based on the actual experiences of organizations of every size, including some of the world’s largest corporations.
In 1995, IBM CEO, Sam Palisano, recognized that authentic diversity had to become part of the firm’s business strategy if the organization was going to compete effectively in the coming new millennium. He set about deliberately incorporating diversity across the enterprise saying, “We made diversity a market-based issue. It’s about understanding our markets, which are diverse and multicultural.”
The decision got reflected in IBM revenues. They rose from $10 million in 1998 to $300 million in 2001. As you’ll see, these results aren’t atypical for organizations that get serious about incorporating diversity and inclusion into their corporate culture.
Diversity is a Competitive Advantage
According to research published in the American Sociological Review in April 2009 , sociologist Cedric Herring cited data from his study that showed workplace diversity is among the most important predictors of your business’ sales revenue, customer numbers, and profitability. It outranks company size, age and number of employees with the most diverse companies generating 15 times more revenue than the least diverse.
Herring found that enterprises with higher racial and gender diversity saw revenues increase by 9% and 3% respectively for every percentage increase of either group in a business up to their actual percentage representation in the population.
In fact, the McKinsey study linked above found racially diverse companies outperform industry norms by 35%.
How does workplace diversity increase revenue?
There are many vital ways workplace diversity makes your organization more competitive, increasing revenue. But here are three of the top characteristics that drive revenue in enterprises with higher diversity and inclusion.
Diverse organizations are more innovative.
Businesses with more diverse and inclusive teams generate original product and service ideas than those with mostly homogeneous workplaces. Having teams comprised of people of different cultural backgrounds and unique experiences inspires creative thinking because there’s less groupthink on those teams.
In other words, heterogeneous groups are more likely to challenge the thinking of each member, cause professionals to question their thought process and raise the bar in their reasoning, considering facts over opinions .
But increasing diversity in the rank and file isn’t all that’s necessary to achieve these results. Leadership in your organization must reflect racial, cultural and age as well as sexual and gender identity diversity and inclusion, too.
Organizations with diverse leadership teams motivate more innovative thinking since people of different backgrounds experience the same problems differently, arriving at distinct, often market-winning solutions. Moreover, they support initiatives from your women, LGBT, and racially diverse more often than those with fewer diverse leaders .
Return on equity at companies in the top 25% of diversity in their upper ranks–in executives and on boards– was 53% higher than those in the bottom 25% of board-executive difference according to a 2012 McKinsey study.
Diverse enterprises more likely reflect the marketplace they serve.
Your clients want to see themselves reflected in your business. It’s offensive to many when they don’t see diversity and inclusion , and they think they’ll experience better treatment by other brands or feel safer where not only staff but management or top leadership looks like them.
That resentment leads to your brand being the topic of negative conversations and drives decisions about where clients will spend their money . Many B2B clients are demanding more diverse teams service their accounts .
Moreover, a team member who shares a client’s identity–race, ethnicity, culture, class background, gender or sexual identity–is exponentially more likely to win that client’s trust. For ethnicity, a 2013 study published in Harvard Business Review , it is 152% more likely.
A firm with sales teams, client support or other personnel that reflect the cultures or speaks the languages of the clients it’s targeting is more likely to understand the needs of those clients. In fact, a culturally diverse team is more likely to connect with and serve target clients better no matter who those clients are.
Not only are clients more likely to perceive your company more positively, but they’re also likely to make yours the go-to brand over a competitor’s. New markets equal new business; new business drives increased revenue.
That’s also true for prospective talent in those new markets, which studies show may see yours as the ideal workplace. A 2014 Glassdoor study bears that out , showing 67% of prospective employees rank employers with authentically diverse and inclusive cultures higher when considering competing job offers.
Diverse institutions achieve higher share prices.
In the world of investing, ESG reigns because funds undergirded by these principles, particularly ETFs, are sustainable and outperform more traditional ones .
More investors than ever are investing based on their values , focusing on a public company’s environmental, social and governance policies and how those are integrated authentically into daily operations. They care about the impact your company’s activities have on the markets where you do business and the world at large.
Higher share prices are tied directly to higher revenue, and you’ve seen a few ways diversity and inclusion influences revenue–often exponentially. Diversity is an ESG consideration and not just in the social arena , though it usually has marketplace effects in that area and often, they’re adverse.
A Credit Suisse Research Institute study found that companies with higher participation of women on boards and in executive leadership have higher returns, valuations, and payout ratios.
Racial diversity within brands decreases the likelihood of mistakes that have adverse effects on stock prices , too.
Diversity Is a Brand Communications Opportunity
As shown here, it’s imperative for your brand to be acutely aware of what it communicates to the marketplace with its workplace demographics. Increasingly, especially in the era of always-on digital connectivity where good news spreads fast but bad news travels at warp speed.
If your enterprise long ago committed to implementing genuine diversity and inclusion into its culture and has had more victories than defeats, you have a story to tell to external audiences that can inspire other organizations. For brands either considering embarking on the journey or in the midst of the challenging early phases of their cultural transformation, you may have internal audiences to reach.
Either way, view this process as a communications opportunity. Start by planning and executing a comprehensive change management communications strategy that meets the unique needs of the core audiences affected by this massive institutional transition.
Bring in professionals who specialize in diversity and inclusion messaging to help you reach your stakeholders effectively and efficiently while maintaining productivity and enhancing employee and client experience.