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Diversity in the workplace is often framed as a social justice issue, but it’s much more than that.
The evidence is mounting: there’s a clear correlation between greater diversity and higher levels of innovation, creativity and, most importantly, revenue.
Because when you have a diverse workforce, you also have a pool of diverse opinions, experiences, perspectives and skills to draw from. And this translates into tangible benefits for businesses.
Top of the list, the bottom line: more diverse companies make more money.
Essentially, the specific benefits we talk about below all contribute to making a business more innovative, more adaptable and more successful. And ultimately, that makes it more profitable.
A McKinsey study of 160 publicly traded companies in France, Germany, the UK and the US found a ‘startlingly consistent’ correlation between diversity and financial performance. The study found that companies with higher diversity among the executive board enjoyed ‘significantly higher’ returns.
In an analysis of venture capitalists and their investments, Paul Gompers of Harvard Business School found that ‘Diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns.’
And a historical analysis by the US National Bureau of Economic Research (NBER) shows a positive relationship between diversity and GDP growth.
So why does diversity translate to higher profits? Because having a range of perspectives gives you multiple advantages...
Some studies, including this one by the Harvard Business Review, have found that cognitively diverse teams are both better and faster at solving problems.
This is unsurprising, as problems often require a combination of specialised knowledge, discovery, and big-picture thinking. A team that can approach a problem from multiple angles clearly has an advantage.
Similarly, this diversity of perspectives leads to better decisions. A study of 600 business decisions across a variety of companies found that teams made better decisions than individuals, and that the more diverse the teams were, the better they would perform.
Once again, a range of perspectives allows a team identify obstacles and opportunities that might not be visible to everyone.
Diversity has also been linked to creativity and innovation, traits that can help to boost a business’s resilience and profitability.
The theory goes that diverse teams are better at exploring novel ideas or combining knowledge in new and innovative ways. And there are plenty of real-life examples to back up this assertion.
Finally, having an inclusive company culture that celebrates diversity can foster a sense of belonging among your workforce, helping you to attract and retain skilled staff.
Employees who feel accepted and valued will be more content with their role. As a result, they’re less likely to shop around for other jobs and they’ll be willing to work harder to support the company that supports them.
Becoming a more diverse business is a long-term commitment and requires firms to take proactive steps towards becoming more inclusive, but there are clear incentives for achieving this and can true transform your business for the better.
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