Research by Catalyst found that Fortune 500 organizations with the highest representation of senior women performed better on average across a range of financial indicators on average (in terms of return on sales, return on invested capital and return on equity) than those with the lowest representation of women. Similar findings come from the McKinsey & Company Women Matter report series, which considered the performance of companies from Europe, Brazil, Russia, India and China. And Professor Herring’s research showed that organizations with greater racial and gender diversity performed better in terms of sales revenues, number of customers and market share.
But how should these studies be interpreted? As we have argued, we view visible diversity as a lead indicator of a healthy orgaization rather than an end in themselves. As such, these data points indicate that an organization is ‘fishing from a bigger pool of talent’ and accessing a deeper knowledge bank.
Responding to the talent shortage
Tapping into non-traditional labour segments offers one solution for organizations feeling the pressure of the labour/skills shortage. Women, for example, represent a highly educated source of labour yet have a rate of labour force participation significantly lower than that of men in many OECD countries. But more than just women, there are other groups that stand out as currently unemployed, underemployed or working below skill level in, namely the mature age, people with a disability, skilled migrants, and in some countries, the Indigenous communities. Yet despite potential in these labour pools, many businesses struggle to identify them as talent, or to adapt workplace practices and individual behaviours which marginalize these groups.
Enhanced innovation, problem solving and risk via diverse teams
Interest in the connection between diversity of thought, innovation and creativity has been growing for some years. We recently reviewed the literature and latest research in ‘Working in an ideological echo chamber? Diversity of thought as a break through strategy’ and found strong evidence for this connection, as well as a link to risk predication and management. At the forefront of this research is Professor Page, who measured the increased problem-solving capacity of teams comprizing people with diverse perspectives compared with homogenous teams who were selected for their intellectual ability. Moreover, a review of twenty years of research on team diversity identified a positive link between groups that are diverse in terms of education, experience and identity and team performance.
But let’s not be naive – team diversity can be a ‘double-edged sword’. Greater diversity introduces greater complexity and calls for inclusive leaders to ensure the potential benefits of multiple perspectives are achieved and the potential risks of conflict are reduced.
Enhanced productivity via workplace flexibility
Despite some perceptions, research has shown workplace flexibility can be a win/win for both employees and employers. For example, in a 2009 study of 25,000 IBM employees in 75 countries, employees given the option of working flexibility (ie telecommuting and flexible hours) experienced less work-life conflict and were able to work longer hours – from half a day to two days – before experiencing work-life difficulty compared with those with traditional arrangements. Moreover, employees with flexibility and control report lower levels of stress, cholesterol and obesitywith a direct benefit for employers in terms of reduced absenteeism. turnover and sick leave usage, as well as increased energy.
The research also shows that the bottom line value of flexibility will only be realized if managers have the capability to transform a state-of-the-art flexibility policy into day-to-day changes to work practices, and if flexibility comes without strings.
Bringing it all to life: it all hinges on inclusion
A diverse workforce can be a strategic choice or an inevitable reality (eg global operations). Either way, a word of caution is warranted. Simply ‘having diversity’ will not necessarily deliver positive outcomes. The key ingredient which transforms the theoretical business case for diversity into bottom line results is inclusion – the extent to which individuals feel authentic and valued, and able to bring the full spectrum of their capabilities and energy to the table. Put simply: diversity + inclusion = improved business outcomes.
So what does this mean for organizations? It calls for ‘inclusive leaders’ capable of ensuring that all employees have the opportunity to fulfil their potential, that the benefits of multiple perspectives are achieved and the risks of conflict in diverse teams are reduced. It will require organizations to adapt to the needs of individuals rather than persisting with a one-size fits all approach and will require a greater level of cultural competency amongst all employees. But ultimately, inclusion means change, not assimilation and toleration and will require a shift in workplace culture. And this goes to the heart of the challenge for organizations.