3 Ways It Pays to Create a Diverse Workplace If you want to do well, start by doing good.
By Chirag Kulkarni •
Opinions expressed by Entrepreneur contributors are their own.
Promoting diversity in the workplace isn't just the right thing to do -- it's actually good for business. When employees have not only diverse skillsets but diverse backgrounds as well, the team is more engaged, and everyone performs at a higher level. Sound too good to be true? According to McKinsey's 2017 Delivering Through Diversity report, companies whose executive teams rank in the top 25 percent for racial and ethnic diversity are 33 percent more likely to reap financial returns above the national median for their industry.
The CEO Action for Diversity and Inclusion campaign, which launched in June 2017, brings CEOs from around the country together to focus on reducing inequality in the workplace. Leaders of organizations from Ally to Northrup Grumman to PwC have taken the pledge to promote diversity by having tough conversations about diversity and inclusion, expanding education about unconscious bias and sharing both best practices and the unsuccessful ones.
Christine Alemany, chief growth advisor at Trailblaze Growth Advisors, explains, "It's not just about race and gender. It's about background. While it may be more comfortable to be around people who are just like you, you are selling yourself short by doing so." Alemany also points out that a lack of diversity can negatively affect a business' success.
Especially in the technology industry, negative workplace culture drives significant turnover, costing the industry upwards of $16 billion each year, according to the Kapor Center for Social Impact. The prevalence of unfairness, which includes harassment, bullying or stereotyping, turns out to be an excellent predictor of employee turnover, with almost 40 percent of employees citing it as a major reason they chose to leave their place of employment. And the effect isn't on a single race or ethnic group -- 78 percent of all employees claimed to have experienced some sort of unfair treatment, although in tech companies, women experienced significantly more of it than men.
Employers who focus on inclusion have a better shot at recruiting and retaining a diverse employee base. Reaching gender parity, for example, is not done without intentional effort. But, that effort will pay off. Consider these three reasons why you'll want to make diversity and inclusion a focus in your company culture.
1. Diverse teams are more innovative.
When a company's employees come from varying ethnic groups and backgrounds, they have a variety of life experiences to call on to solve problems and inform decision-making. Diversity helps employees approach things creatively and from many different perspectives.
A Harvard Business Review article found that companies with "two-dimensional diversity" -- whose leaders had three or more inherent diversity traits and at least three acquired from experience -- performed better than their competitors.
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2. An inclusive work environment improves employee retention.
A homogeneous work environment chases employees and prospects away -- even when it's created unconsciously. By contrast, a diverse and inclusive work culture attracts a diverse applicant pool and creates a stimulating work experience that raises both morale and retention rates.
A 2014 survey conducted by Glassdoor found that two-thirds of job applicants surveyed consider diversity to be an important part of deciding where they want to work. Women, minorities and veterans all reported a desire to be a part of a diverse workforce, suggesting that companies that provide one will become more attractive to top talent.
Company leaders, however, shouldn't make the mistake of hiring for diversity without addressing company culture. If employees don't feel welcome for whatever reason, they're unlikely to stay for long. For example, do all of your marketing materials feature middle-aged white men? Make sure your company's messaging aligns with your hiring process and cultivate an inclusive culture from the top down. Hiring for diversity is great, but retention is equally important. Replacing employees who leave is time-consuming and expensive.
Related: Why Office Perks Are Traps, Not Benefits
3. Diverse companies have higher profits.
A workforce that hails from different backgrounds allows your company to connect better with a wide range of consumers. A diverse marketing team will more effectively reach a variety of customers, and those customers will trust your company more when they feel represented by your employees. DiversityInc's "Top 50 Companies for Diversity" last year outperformed the overall market. In many cases, a more diverse workplace will help your company capture a bigger market share.
Diversity really does improve workplace performance -- it's a competitive advantage. The same McKinsey study cited above found that companies in the bottom 25 percent of the pack in terms of gender, race and ethnic diversity were less likely to net above-average financial returns than companies with average diversity. In other words, the homogeneous nature of their workforce is actively holding them back. The message couldn't be clearer -- what's right is also good for your bottom line.
