Diversity and Inclusion by Design
Organizations all around the world, large and small, now conduct business with customers and hire employees with different backgrounds, languages, and customs.
There are distinct regional patterns to Diversity and Inclusion (‘D&I’) efforts. North American companies are likelier to take a hands-on approach, set quantitative goals for Diversity and use management incentives to reach their goals. European firms are more likely to rely on internal persuasion and lobbying, and Asian companies take an even more laissez-faire approach, with many believing that Diversity is a process that evolves naturally.
Regional and national differences in data availability on employee demographics compound the difficulty of managing Diversity programs internationally. Despite the paucity of data about these differences, there is sufficient evidence that a lack of diversity and inclusivity harms organizations, individuals and society, affecting productivity, economic performance, and people’s lives. When diversity issues are addressed, employees can become more productive and effective, thereby increasing the financial performance of the company. By learning how to work more effectively together within our teams and organizations, we can ensure success in the global marketplace.
Diversity and High-Performance Teams
Hiding our true identities dramatically declines professional performance and bias (conscious and unconscious) may impact decision making, talent decisions, and business outcomes.
When employees think their organization is committed to, and supportive of diversity and they feel included, employees report better business performance in terms of ability to innovate, (+83%) responsiveness to changing customer needs (+31%) and team collaboration (+42%). When comparing high-performing teams against lower-performing teams, there are strong indications that people must feel included in order to speak up and fully contribute.
Decisions made and executed by diverse teams delivered 60% better results. Teams that follow an inclusive process make decisions twice as fast with half the meetings. Compared to individual decision makers, all-male teams make better business decisions 58% of the time, while gender diverse teams do so 73% of the time. Teams that also include a wide range of ages and different geographic locations make better business decisions 87% of the time.
However, and curiously, although more diverse teams make better decisions, they struggle to put them into action. The worst situation is to have an all-male team make a decision that is executed by a gender-diverse group. This worst-of-both-worlds combination underperforms by 15%. It seems that for the purposes of task execution, where creativity is less desirable, a team with lower diversity should be considered.
Overall, diverse and inclusive teams are more innovative, engaged, and creative in their work.
Does this matter to the bottom line?
Organizations on track with their D&I goals are five times more likely to have a clear link between goals and planned actions and eight times more likely to take action when goals are not met. Return on Equity (ROE) is a measure of the profitability of a business in relation to the equity invested. ROE is a measure of how well a company uses investments to generate earnings growth.
- Companies ranking in the top quartile for Executive-board diversity in the USA, France, Germany and the UK correlated with ROEs that are 53% higher, on average, than those for the least diverse companies, according to McKinsey & Co.
- Inclusive decision making improves business performance. Decision making effectiveness is 95% correlated with financial performance.
- Companies ranking in the top quartile of executive-board diversity were 35% likelier to financially outperform the industry medians.
- They also generate up to 30% higher revenue per employee and greater profitability than their competitors.
- Following the findings, it would appear that shifting from an all-male or all-female office to one split evenly along gender lines could increase revenue by roughly 41%.
- Over a 10-year period, Diversity Inc.’s Top 50 Companies outperformed the Dow Jones Industrial Average by 22%, according to Catalyst (2004, 2008).
Solely emphasizing business case arguments for supporting the implementation of diversity management may be risky, and the counterarguments may be less visible. The Global Diversity and Inclusion (Society for Human Resource Management) publication reports that most companies, regardless of where they are located, have difficulty documenting the link between greater diversity and an improved bottom line.
Building a Conscious Brand
Diversity and Inclusion now impacts brand, corporate purpose, and performance. It defines how the company listens to employees at work, millennials in particular are clued into this, and is important for talent acquisition and, ultimately, a company’s employment brand. Even the perception of assembling diverse teams, connecting team members so that everyone is heard and respected, matters.
It is important to tailor global Diversity and Inclusion strategies and programs to local needs; embed practices throughout the organization; multiply impact through external partnerships and leverage this as a source of innovation.
Designing for diversity is essential because each of us looks at the world through filters that are developed based on our own unique experiences. Consciously designing against exclusion helps us learn about those filters and how they impact business decisions, work styles and personal relationships that ultimately affect the success of an organization.
- M. Christie Smith and Stephanie Turner, The radical transformation of diversity and inclusion: The Millennial influence, Deloitte, 2015
- Juliet Bourke, Which Two Heads Are Better than One? How Diverse Teams Create Breakthrough Ideas and Make Smarter Decisions (Australian Institute of Company Directors, 2016)
- David Rock and Heidi Grant, “Why diverse teams are smarter,” Harvard Business Review, November 4, 2015, https://hbr.org/2016/11/why-diverse-teams-are-smarter
- Stacia Sherman Garr, Candace Atamanik, and David Mallon, High-impact talent management: The new talent management maturity model, Bersin by Deloitte, 2015, http://marketing.bersin.com/high-impact-talent-management.html
- Bernadette Dillon and Juliet Bourke, Waiter, is that inclusion in my soup? A new recipe to improve business performance, Deloitte, May 2013, https://www2.deloitte.com/content/dam/Deloitte/au/Documents/human-capital/deloitte-au-hc-diversity-inclusion-soup-0513.pdf
- Natasha Doherty and Juliet Bourke, Toward gender parity: Women on Boards Initiative, Deloitte Access Economics, 2016, https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-toward-gender-parity-women-on-boards-initiative-041016.pdf
- Jane Porter, “You’re more biased than you think,” Fast Company, October 6, 2014, https://www.fastcompany.com/3036627/strong-female-lead/youre-more-biased-than-you-think
- Bourke, Which Two Heads Are Better than One?
- Garr, Atamanik, and Mallon, High-impact talent management
- Catalyst, 2007, The Bottom Line: Corporate Performance and Women’s Representation on Boards, Catalyst Information Centre, Retrieved 20th July 2016 from http://www.catalyst.org/knowledge/bottom-line-corporateperformance-and-womens-representation-Boards
- Credit Suisse Research Institute, 2012, Gender Diversity and Corporate Performance, Zurich, Retrieved 27th July 2016, from https://www.creditsuisse.com/newsletter/doc/gender_diversity.pdf
- Post C. and K. Byron, 2015, ‘Women on Boards and Firm Financial Performance: A Meta-Analysis’, Academy of Management Journal 58, no. 5: 1546–1571.
- Vafaei A., Ahmed K. and P. Mather, 2015, ‘Board Diversity and Financial Performance in the Top 500 Australian Firms’, Australian Accounting Review 75, no. 25: 413–427.
- Ward A. M. and J. Forker, 2015, ‘Financial Management Effectiveness and Board Gender Diversity in Member-Governed, Community Financial Institutions’, Journal of Business Ethics, Published online: 30 May 2015.
- Hartarska V. and D. Nadolnyak, 2012, ‘Board size and diversity as governance mechanisms in community development loan funds in the USA’, Applied Economics 44, 4313–4329.
- Harris E., 2014, ‘The Impact of Board Diversity and Expertise on Nonprofit Performance’, Non-Profit Management and Leadership 25, 2: 113–130