Workplace diversity can help businesses grow, improve profits and outperform the less diverse and inclusive competition.
If you’re looking to open up business opportunities and increase your bottom line, you might consider being more diverse in your hiring practices.
A diverse workplace means one that employs people from a range of demographics, experiences, and more. This can include differences in race, ethnicity, gender, sexual orientation, age (yes! Diversity means hiring people over 35 for your workforce with an average age of 23!), socio-economic status, physical ability, religious beliefs and political belief. It’s constantly being said that workplace diversity is good business practice. Is there proof to back this up? Yes.
Diverse companies outperform less diverse ones
According to a new study by analysts at the Wall Street Journal that ranked companies on their workplace diversity and inclusivity, the most diverse companies have better-operating results, on average, and better performing shares than less diverse companies.
Why? There are probably several reasons, but one of the most important is that team members from diverse backgrounds offer a range of perspectives that lead to new ideas and greater innovation.
Diversity can help fuel innovation
High-scoring companies in the WSJ study reportedly said that having a well-rounded workforce has helped them create better products and be more innovative, leading to profit and sales growth. “Analysts agree that diversity can help fuel innovation, which is critical to success in a fast-changing world where technological disruption has become the norm.”
If everyone comes from the same socioeconomic and cultural background you’re all likely to have similar experiences that result in similar ideas and decisions. This is not ideal in any business situation (or any situation at all, really). Lottie Meggitt, a responsible-investment analyst at Newton Investment Management, a unit of Bank of New York Mellon told the WSJ, “Too often we have seen companies fail or make poor decisions where teams are populated with individuals who all think the same, or who are unwilling or unable to challenge the status quo.”
And Mary Barra, chairwoman and chief executive at General Motors Co., one of the top-ranking companies in the WSJ study, is quoted as saying, “A diverse workforce promotes fresh, innovative thinking that translates into a competitive advantage, which in turn translates into winning products for our customers.”
Diversity in leadership means a greater payoff
This isn’t the only research that demonstrates the benefits of diverse hiring.
Another study, released last year by Boston Consulting Group, found that increasing the diversity of leadership teams leads to more and better innovation and improved financial performance. In both developing and developed economies, the researchers found that companies with above-average diversity on their leadership teams report a greater payoff from innovation and higher EBIT (earnings before interest and taxes) margins. They also found that gains can be generated even with relatively small changes in the makeup of senior teams.
The BCG says, “Many organizations have long-established cultures with a homogenous leadership team – primarily older white men who have risen through the ranks at their own company,” and suggests that these companies need to be “proactive” about fostering diverse viewpoints and perspectives through organizational changes that include examining their hiring processes.
Workplace diversity is what people want
Workplace diversity has other benefits as well. Among these is that you will likely attract a wider pool of talented job candidates, since diversity is a high priority for job seekers, and a vast majority prefer to work with people of different backgrounds and cultures. A homogenous culture will attract more of the same, but a diverse one will draw more diverse talent.
Could your hiring process use a diversity overhaul? Take a look around you, and if everyone looks just like you, maybe the answer is yes.