The Diversity Business Case
The business case for diversity is done.
Meaning we now have the data needed to substantiate why organizations need to be more diverse and inclusive. However, it can't be taken for granted that most leaders still need to be convinced. Having a solid understanding and belief in the business benefits of a more diverse and inclusive workplace is therefore paramount to beginning and sustaining the journey towards "inclusion excellence" and greater levels of diversity throughout an organization.
The diversity business case is like any business case. It generally includes things that result in what is often called "pleasure enhancement" (the things that create an obvious benefit, like increased competitiveness), and "pain avoidance", (the factors that eliminate or reduce present or future pain for the organization, such as reduced turnover). A solid business case will have both.
Pleasure Enhancement + Pain Avoidance = Business Case
The following are five commonly highlighted business benefits for greater D&I in general, substantiated by the most convincing data available to the public in the past ten years. It is possible that not all five directly apply to your organization; however, they still provide a strong argument for the business imperative of greater diversity and inclusion (D&I). This is followed by a list of five prominent examples of organizational pain that D&I helps to avoid.
Diversity Is a Key Driver of Innovation
According to Forbes Insights, "For global companies, diversity is no longer simply a matter of creating a heterogeneous workforce, but using that workforce to innovate and give it a competitive advantage in the marketplace." In 2011, Forbes published Fostering Innovation Through a Diverse Workforce, a report based on an exclusive survey of 321 executives at large global enterprises ($500 million-plus in annual revenues). All respondents had direct responsibility or oversight for their companies’ diversity and inclusion programs. The study found that 85% of the respondents agreed that a diverse and inclusive workplace was essential for the diversity of thought needed to drive innovation.
Diversity Leads to Innovation, which Leads to Better Performance
In 2013, the Harvard Business Review published research conducted by Sylvia Ann Hewlett, Melinda Marshall and Laura Sherbin that involved "a nationally representative survey of 1,800 professionals, 40 case studies, and numerous focus groups and interviews" to analyze the business impact of diversity that is either inherent to or acquired by employees (what the authors called "2-D diversity").
The study found that "Employees of firms with 2-D diversity are 45% likelier to report a growth in market share over the previous year and 70% likelier to report that the firm captured a new market."
Gender Diversity in Leadership is Tied to Higher Returns
According to a 2014 report by the Credit Suisse Research Institute, "Companies with higher female participation at Board level or in top management exhibit higher returns, higher valuations and higher payout ratios." This study examined 3,000 companies across 40 countries and all major sectors, from 2006 to 2014.
Diversity Makes Teams Smarter, More Creative, More Diligent and Harder Working
A 2014 article in Scientific American brought together "decades of research" showing that socially diverse groups are more creative, more thought provoking, and strive harder than homogenous groups. The article goes on to explain how the dynamics of diversity produce these advantages results.
Diversity Attracts Top Talent
According to the Forbes report on diversity and inclusion, Fostering Innovation Through a Diverse Workforce, "A diverse and inclusive workforce is crucial for companies that want to attract and retain top talent." Top talent are drawn to organizations that have a diverse leadership and workforce, and more likely to stay. As the competition for top talent grows increasingly fierce, companies have become even more intentional in their efforts to recruit, retain and advance diverse talent.
Pain Avoidance
The following are the most common examples of pain that organizations aim to avoid through being a more inclusive workplace, and ultimately, a more diverse workforce:
Irrelevance. Often companies and organizations will site the changing demographics of a market or talent pool they need to reflect, relate to or connect with. Failure to do so ultimately leads to irrelevance and becoming a proverbial dinosaur in a highly volatile market. If there is a significant gap between the make-up of your workforce and the stakeholder groups who keep your organization afloat, you are at risk of being or becoming irrelevant.
Turnover. Organizations that do not have an inclusive culture are not able to maintain a diverse workforce, even if they are moderately affective in recruitment. The employees who represent either the social diversity or thought diversity often experience micro-aggression, discrimination, are not fully utilized and generally overlooked for promotion, and are therefore most likely to leave. The average cost of replacing employees is 1.5 times their salary.
Cost of Recruitment:
+ Training new employee
+ Interim loss of productivity (of team or unit affected)
+ Reduced productivity of management
+ Six months to optimum performance of new employee
= On average, 1.5 x Salary
If your company or organization cannot retain diversity, the efforts to recruit diversity are lost, costing organizations large amounts of money.
Negative brand. In not demonstrating success in diversity and/or inclusion, organizations are at risk of being perceived as being "behind-the-times" and not espousing present-day values of equity and inclusion. This hurts the brand, recruitment, morale and performance. This is especially critical for organizations that depend on public support.
Limited access to talent. In not being an inclusive organization, many workplaces are not able to tap into the entire available talent pool and are limited in who they can attract and therefore not necessarily attracting the best talent.
Lawsuits. A non-inclusive work environment allows all sorts for discrimination to thrive and grow. As non-inclusive behaviour is normalized, it is just a matter of time for this behaviour to breach Human Rights Code, either provincially or federally. This puts organizations at risk to formal complaints and lawsuits that not only affect the organizations performance and reputation, but if successful, can potentially cost the organization large amounts of money.
There's more. In fact, the Business Case for hiring people with disabilities and Indigenous Peoples is also solid. These are just more general points.
More D&I Business Case Benefits
There is an ethical imperative for a more diverse and inclusive workplace/society.
We need to reflect the demographics of our community/society
The workplace is changing.
Diversity is a driver of innovation.
Diversity leads to better decisions.
D&I attracts top talent.
Keeping top talent (Retention reduces cost of turnover).
Diversity makes teams smarter. Diverse teams are smarter.
A healthier workplace: discrimination and/or exclusion negatively impacts the physical and mental well-being in the workplace.
Inclusion is integral to the psychological health and safety of a workplace.
Social license: The public demands top performing universities to be diverse, inclusive, equitable, and a positive place to work.
More Resources
“We’re Sick of Racism, Literally” by D. Jacobs in NYT
“Stockwell Day resigns from Telus board after racism comments” in BNN Bloomberg
So What? Now What?
Building a solid business case for diversity and inclusion is just the beginning. Diversity and inclusion is a means to enhancing the performance and value of any organization, but needs to speak to the existing culture of that organization.
The diversity business case now needs to be adapted to meet the core business needs of your organization, and ideally, be integrated into the strategic plan. Most importantly, the business case (the why) needs to be delivered using the language that has the most resonance to various groups within your organization. Different levels of an organization may connect more with some points. Many of the above business case points speak to senior leadership, for example, and may not be as meaningful when communicating to the whole organization. Work with your leadership to determine which business case points are most relevant to them, and which ones are most likely to win-over other stakeholder groups throughout the organization.