It is no longer enough for your company to merely signal its openness to diversity via glossy marketing photos and tacit platitudes housed in corporate responsibility statements. A growing body of research suggests that if your company isn’t thinking deeply and strategically about cultivating a diverse workforce it could be paying a price not only culturally but also in its bottom line.
In a new article entitled “The Other Diversity Dividend,” which appeared in the July/August 2018 issue of the Harvard Business Review, Harvard Business School Professor Paul Gompers and Researcher Silpa Kovvali validated the link between business team diversity and increased profitability. Specifically, they created and combed through a multiyear dataset from the venture capital industry spanning thousands of venture capitalists and tens of thousands of investment decisions. They found that investment decisions made by partners of different ethnicities were ultimately 26% to 32% more successful on average than those made by partners of shared ethnicity. Investment decisions made by partners hailing from different business schools were nearly 12% more successful on average than those made by partners hailing from the same school.
Yet, the positive impact of diversity on company bottom lines shown in the research above shouldn’t be dismissed as narrow and/or exclusive to the venture capital industry. The impact holds across companies and industries. A 2017 report from the global management-consulting firm McKinsey & Company entitled “Delivering Through Diversity” showed that companies whose executive teams ranked in the top 25% for racial and ethnic diversity were 33% more likely than their less diverse competitors to beat national median financial returns for their respective industries.
Similarly, looking beyond diverse executive teams, a 2017 article on diversity and inclusion from global accounting giant Deloitte found that companies with inclusive hiring and talent development programs in place generated higher profits as well as revenue per employee that was up to 30% higher than competitors lacking such programs. Finally, as if the three preceding pieces of positive evidence weren’t enough, DiversityInc magazine has been publishing an annual data-driven rankings list of the world’s top 50 most diverse companies since 2001. Fortune magazine reported in 2017 that CNBC had indexed and tracked the three to five-year stock performance of this group only to find that it collectively outperformed the overall market.
By now, you may be thinking, “Ok, I get it. Diversity isn’t just a social good in business; it’s good for business. But how do I get there in my company?” The exact path forward from this question isn’t uniform and will look different for every organization. That said, here are some practical tips for planting seeds of organic diversity within your company’s culture, hiring, and employee retention practices.
4 Best Practices to Building a Diverse Workforce:
- Look for backgrounds, schools, populations, etc. that might be overrepresented on your staff, and see if you can determine why. Perhaps some instances of overrepresentation or self-selection among certain employee groups will prove natural and unavoidable. Other instances might prove to be the unintended consequences of job posting wording and/or inherent positive or negative resume flags disproportionately excluding or attracting certain types of employees. Some companies are even turning to various software programs designed to facilitate blind resume reviews by stripping resumes of potential bias-carrying indicators like candidate names, other age, gender, and race indicators, schools, and geographies.
- Solicit feedback—either anonymously or otherwise—from current employees concerning how your company’s policies and facilities might better accommodate them as expectant and nursing parents, people with disabilities, and/or LGBT community members—to name a few. Beyond and/or absent current employee feedback, network with relevant community groups serving these populations for advice.
- As part of any networking with community groups mentioned above, aim to build long-term relationships or partnerships. These have the potential to provide a trifecta of assistance supporting current employees, attracting future ones, and maybe even opening your business to new customer segments. Reaching out to local college and university minority groups can also be helpful in this regard—especially in recruiting!
- Over the longer-term, build programs to identify and develop diverse talent for leadership opportunities within your organization. Furthermore, involve these individuals in interviewing and mentoring new talent. Nothing showcases your company’s commitment to diversity like seeing it represented at the top.
Are you concerned with your internal hiring practices? You may consider engaging with an executive search firm for your hiring needs. If so, here are a few things you should consider when partnering with a recruiting agency.
Overall, and perhaps most importantly, remember that true, sustainable progress won’t and shouldn’t happen overnight. Simply making a mad dash to recruit and hire individuals from diverse backgrounds without mechanisms to support them once inside your company could trigger unwanted buyer’s remorse from these new employees, resulting in costly turnover and leaving your company culture in worse shape than when you started. Diversifying your workforce and company culture will take time, but genuine efforts to do so will compound in positive ways for your bottom line and beyond.
Are you worried that your culture may be toxic? Here are 6 ways to overcome a toxic environment that can lead to poor performance.
We would like to express our gratitude to our friend, Patrick Parkes for writing this article for us. For more information, please visit his website.