Once upon a time, multifariousness within teams was a nice-to-have accolade for fairness purposes. Now, a growing amount of research has proved an undeniable link between a business’ financial performance and ethnic, social, and gender diversity that businesses can’t overlook it any longer.
To make the most productive and innovative teams, businesses need to make diversity a topmost priority during the hiring and promotion process. But, you don’t have to just take my word for it—see the data-backed case for yourself.
Why diversity matters
Last year, the Boston Consulting Group (BCG) led a study to ascertain if diversity at the company management level had a meaningful impact on the bottom line. The insights they got were surprising! They found companies with more diverse units have 19% higher revenue. That is not a trivial change.
“There is a business case for diversity,” says Richard Warr, a professor of finance at North Carolina State University. “It’s not just about trying to be nice. It’s good for business. It not only helps in terms of perception. It actually produces better outcomes.”
Warr’s co-authored study—”Do Pro-Diversity Policies Improve Corporate Innovation?” written in the journal Financial Management—analyzed the performance of 3,000 publicly sold companies between 2001 and 2014, looking exactly at nine measures of diversity. Companies that checked off all nine boxes managed to have an average of two extra product releases yearly (twice the average of companies that failed to check the diversity boxes). Not only did these diverse organizations excel during good times, but the same groups were found to be more innovative during the 2008 financial crisis.
You can’t bicker against hard numbers. Certainly, diversity drives business growth. Yet, it’s not so clear specifically how diversity achieves this feat—that’s why we took a deep jump into the research to discover the answers. Fortified with this knowledge, you’ll have the know-how to create diverse teams that support the bottom line, not just effective employee demographics to post on your company’s career page.
More diversity dimensions spur more innovation
Creating a diverse team goes beyond just taking together a bunch of people who differ from one another. For instance, you could bring together a group of millennials from five various continents who have all given similar levels of education before entering the same industry. Yes, they’d look distinctive, but you wouldn’t have a very diverse team.
The Boston Consulting Group used six different dimensions of diversity (migration, industry, career path, gender, education, and age) to discover the impact each could have on the bottom line. Each dimension represents an important part, but the more dimensions you add, the greater the change you’ll feel.
Based on the BCG data, researchers determined that innovation revenue could grow further by including each dimension of diversity: 1.5% increase with respect to the national origin, 2% according to industry origin, 2.5% with respect to gender, and 3% with respect to administrators with diverse career paths. Now, envision a management team that had diverse members meeting all the dimensions—the consolidated increase would be undeniably powerful. By including all dimensions of multifariousness (and even more beyond the six in this study), teams can impel innovation considerably.
It’s essential to know that it’s almost impossible to inveigle a majority of these dimensions by chance. Diversity will only be an asset to your company when building toward it becomes meditated. This shift involves taking all of these factors into the reckoning when hiring for new positions. When you need to fill an opening, look at your field of candidates and watch for what new thing they can bring on the table. Did they come from a diverse background? Does their gender give a unique perspective to the team? Do they have experience in a diverse industry?
There are a few ways to enrich teams using multiple elements of diversity:
- Assess your hiring process to ensure unconscious bias isn’t dropping diverse candidates.
- Find diverse decision-makers to help with the hiring process.
- Double-check your payroll to ensure equal pay.
- Make it clear diversity is a priority by developing and promoting your diverse team members.
Diverse companies draw and retain diverse talent
Diversity is not a one-and-done campaign. It’s a culture and commitment to growing a team that is measured beyond the sum of the parts. Diverse talent wants to work in an environment that embraces a wide assortment of humans. By creating a culture of diversity, you’re sending a signal to top recruits that diversity is appreciated, supported, and vital to your business. And those who’ve already found their way into your workforce will be more likely to stay if they know diversity is a top priority to management.
Not only do diverse companies attract and retain diverse candidates, but they also entice the top overall talent, too. Warr explains this tendency is the “halo effect.” Diverse companies are more attractive not only to women and minorities, but they’re also appealing to others who want to work for more enlightened organizations.
Before setting off to build the most diverse teams, it’s not only critical to understand what a diverse team is, but it’s critical to understand what it is not. We tend to immediately jump to the assumption that hiring minority workers adds levels of diversity, but minority and diversity are not the same.
Diversity is right and fair, and it’s also a proven financial driver. Only by making diversity a priority will you be able to build the most productive and innovative teams. You can’t make the change overnight—it’ll take months and years, but it’s well worth the investment.