We often hear talk of ‘making a business case’ for greater diversity in the workplace. And that’s a shame.
It would be great to think we’d reached a point in time when we no longer had to convince business leaders why an organisation should want to hire women, people of colour, older people, or those from different backgrounds or cultures.
Considering companies are selecting candidates from a global pool of (currently) around 7.6 billion people, surely the workforce should be more representative of the world around us.
But for now, at least, we’ll have to continue building business cases and using findings such as those from a recent study by the Boston Consulting Group (BCG).
According to the research, increasing the diversity of leadership teams leads to more and better innovation and improved financial performance.
Surveying 1,700 companies of varying sizes and industries across eight countries, the BCG report discovered that boosting diversity has a direct impact on a business’ bottom line. Companies that recruit more diverse management teams reported their innovation revenue was up to 45% of total revenue; this compares to just 26% among companies that lack a diverse leadership team. That’s an increase of 19% higher innovation revenue thanks to greater diversity.
According to the study, EBIT margins at companies with diverse leadership were 9 percentage points higher than those at companies with below-average diversity on their management teams.
The research also revealed that making small changes towards greater management diversity can help boost the bottom line. For example, hiring women to the management team so they make up 2.5% of the team can improve a company’s innovation revenue by a whole percentage point. The same can be said if a company hired 1.5% of management from a different country, or 2% from a different industry.
The message here is that just a few relatively small changes can have a big impact on a business in terms of profitability and innovation.
These findings are particularly significant for tech companies, start-ups or indeed any company which places innovation at its heart. For an industry that has struggled getting to grips with diversity, they show it’s time to remove unconscious bias from the hiring process.
The findings also prove that greater diversity isn’t something that needs to be proved before it is adopted. The evidence is already there: if you want a successful revenue-generating business, diversity needs to be an integral part of that business from the word ‘go.’
After all, the greater the diversity among employees, the greater the diversity of thinking, ideas and attitudes. This takes something like problem-solving to a whole new level, as teams are better placed to find solutions based on multiple approaches and angles. As a result, these solutions are stronger, smarter and more comprehensive.
In order to get the greatest value, companies need to focus on creating teams that have multiple areas of diversity.
In the words of the report: ‘Companies need to approach diversity as they would any other business imperative. The CEO must own this agenda and visibly lead it.’
It’s about changing company culture from the top down – something that requires time and effort and goes far beyond recruitment processes alone.
The combination of a CEO’s vision, policies such as equal pay, and a culture of openness is the key to success.
If you would like advice on how to inject diversity into your recruitment processes and find quality candidates, get in touch with the team at Talent International today.