Diversity will make your company more money
Let me start off by explaining that diversity is not simply about gender, ethnicity, or differing points of views and unique cultures; it’s about money. Plain and simple.
And the sooner a company embraces this fact, the quicker it will see its revenues go up.
“Any time you bring together diverse perspectives, it just creates a bunch of potential that you weren’t really expecting.” — Jack Dorsey, CEO of Twitter
Dorsey is not alone in his thinking; it’s always a little surprising how astounded so many individuals and companies are when it comes to recognizing the benefits of diversity in the workplace.
Shock and Awe – The Evidence
The fact is that if you want to build teams or organizations capable of innovating, you need diversity. Diversity enhances creativity. It encourages the search for novel information and perspectives, leading to better decision making and problem solving. Diversity can improve the bottom line and lead to unfettered discoveries and breakthrough innovations.
Even simply being exposed to diversity can change the way you think. This is not just wishful thinking: it is the conclusion many researchers have drawn from over decades of research from organizational scientists, psychologists, sociologists, economists and demographers.
Companies with more women in executive positions make more money – a lot more
Research on large, innovative organizations has shown repeatedly that this is the case. For example, business professors Cristian Deszö and David Ross studied the effect of gender diversity on the top firms in Standard & Poor's Composite 1500 list, a group designed to reflect the overall U.S. equity market.
First, they examined the size and gender composition of the firms' top management teams from 1992 through 2006. Then they looked at their financial performance.
In their words, they found that, on average, “female representation in top management leads to an increase of $42 million in firm value.”
They also measured the firms' “innovation intensity” through the ratio of research and development expenses to assets. They found that companies that prioritized innovation saw greater financial gains when women were part of the top leadership ranks.
Companies with more racial diversity in executive positions make more money – a lot more
Racial diversity can deliver the same kinds of benefits. In a study conducted in 2003, Orlando Richard, a professor of management, surveyed executives at 177 national banks in the U.S., then put together a database comparing financial performance, racial diversity and the emphasis that bank presidents put on innovation. For innovation-focused banks, increases in racial diversity were clearly related to enhanced financial performance.
It’s a global phenomenon
Evidence for the benefits of diversity can be found well beyond the U.S. In August of 2012, a team of researchers at the Credit Suisse Research Institute issued a report in which they examined 2,360 companies globally from 2005 to 2011, looking for a relationship between gender diversity on corporate management boards and financial performance. Sure enough, the researchers found that companies with one or more women on the board delivered higher average returns on equity, lower gearing (that is, net debt to equity) and better average growth.
And there’s more
Businesses see an increase in ROI when there's more diversity in the organization – 35% for ethnically diverse companies and 15% for gender-diverse companies. They say this is so because companies are better able to win top talent and increase employee satisfaction. – mckinsey.com
In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.
In the United Kingdom, greater gender diversity on the senior-executive team corresponds to the highest performance uplift: for every 10 percent increase in gender diversity, EBIT rose by 3.5 percent.
The sad truth.
In the overwhelming face of all this data, and while every company wants to see growth and improved revenues, the reality is that very few companies take diversity to heart.
Women only account for an average of just 16 percent of the members of executive teams in the United States, 12 percent in the United Kingdom, and 6 percent in Brazil— mostly remaining underrepresented at the top of corporations globally.
The tremendous opportunity to be first
While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile on both dimensions.
If revenues go up, when either gender or ethnic diversity is cultivated and empowered in all the studies of companies mentioned above, what could happen to a company who embraced both!
(All data, and some wording comes from an article in Scientific America)