The concept of diversity in the workplace has had such considerable air time in the past several years that one can, at times, become desensitized to the idea and forget the immense value that lies behind what it represents.
Additionally, “diversity for diversity’s sake” is a phrase that gets parroted from time to time and can confuse and mislead organizations from the real, measurable benefits that manifest when a workplace is truly inclusive.
To clear up this misconception, we’ll shed some light on the latest professional insights and real statistics that, besides simply being the right thing to do, make a strong case for organizations across all industries to take diversity seriously for the health of their business.
Diversity and innovation
One of the more powerful correlations consistently revealed in diversity studies is the link between diversity and overall innovation.
A study from Boston Consulting Group in which 1,700 companies in eight countries across a variety of industries and company sizes were surveyed found a “strong and statistically significant correlation between the diversity of management teams and overall innovation.”
Companies that reported above-average diversity among their management teams reported innovation revenue 19% higher than companies with below-average diversity (45% of total revenue versus 26%). The study defines “innovation revenue” as revenue from products and services launched in the past three years.
This finding makes a strong case that diversity better situates companies to adapt quickly in response to ever-changing customer demands—and in today’s increasingly dynamic business environment, this quality matters more than ever before.
Diversity and performance
A study from McKinsey of companies across multiple industries and countries provides strong evidence that companies with diverse executive boards enjoy significantly higher earnings and returns on equity.
In findings that they describe as “startlingly consistent,” Mckinsey’s research showed that companies ranking in the top quartile of executive-board diversity had ROEs 53% higher (on average) than companies who placed in the bottom quartile. Their EBIT margins were also 14% higher.
While much of the evidence in favor of diversity’s benefits in past years has been anecdotal, studies like these help dispel any sort of snake oil associations and prove diversity’s value in purely business terms.
Diversity and profits
If, after reading about diversity’s close correlation to performance and innovation, you assumed diversity would also be correlated to profits, you’d be right.
Another report from McKinsey on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35% more likely to have financial returns above their industry mean.
This correlation extends beyond just ethnic and racial lines as well. The study also found that companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians.
This is just one example of many studies conducted in recent years that repeatedly reach similar conclusions.
Besides intuitively striving towards a more diverse and inclusive work environment, organizations are continually faced with more incentives as the professional body of literature supporting diversity’s contribution to a variety of key business metrics steadily grows year after year.
Concepts like innovation, engagement, and morale may seem amorphous and difficult to quantify, but the hard, measurable financial benefits attributed to healthier diversity throughout an organization’s management structure is plain and clear.
At Huffman Associates, we’ve specialized in helping great organizations across multiple industries find the great diversity candidates their business needs to thrive. Get in touch with us today to learn how we can do it for you.