The Power of Diversity


It’s been several weeks since the shooting in Orlando at The Pulse nightclub and I am still trying to come to grips with the violence that has taken so many lives. The fact that the killer specifically targeted a gay nightclub made me reflect on the state of diversity in companies. To what extent are organizations creating environments that value and respect the contributions and potential of every employee? What I found is that while progress has been made there is still a long way to go before we truly embrace and leverage diversity to improve the outcomes in our workplaces and lives.

What do we mean by diversity?

Most often we think about diversity in terms of demographic characteristics: gender, race, sexual orientation, age, ability. The Center for Talent Innovation (CTI) refers to this demographic diversity as “inherent diversity”[1].

Efforts are being made to attract and retain a more diverse workforce and companies are realizing the opportunities it creates to better understand their different customers. The CTI found that when teams have one or more members with the same traits as the target client (gender, culture, ethnicity, age, sexual orientation), the entire team is 158% more likely to understand that target user.[2] Employee resource groups provide support for their community, but they can also support business goals by providing valuable input into product and marketing campaigns directed at similar client groups.

In another positive move, companies are starting to speak out publicly to demonstrate their support for different groups, as they did in response to draft legislation promoting discrimination in Indiana and North Carolina.

While there are signs of progress, there is still work to be done, especially in sectors like tech, to address the conscious and unconscious bias that exists in many organizations. At the recent Alphabet annual meeting an investor addressed a question to “the lady CFO”. Ruth Porat, Alphabet’s CFO, is a respected executive and is well-known to Wall Street, so why would an investor reference her by gender rather than by her title, or name? Google employees created “Lady Day” to show support for their female colleagues and over 800 men and women in the company changed their job titles to include “Lady”[3].

A Broader View of Diversity

Inherent diversity, or ensuring representation of different demographics is important, but is just one part of the equation. The CTI identified a second dimension of diversity that is critical to innovation and performance, and can be developed through experience. This “acquired diversity includes: “cultural fluency generational savvy, gender smarts, social media skills, cross functional knowledge, global mindset, military experience, language skills.”[4] Through living, traveling, studying, and working with different groups across organizations and geographies, individuals can develop an appreciation and respect for others and their ideas. This has certainly been true in my own experience.

According to the CTI, the true power is diversity is unleashed when you leverage both inherent and acquired diversity to create “two-dimensional (2D) diversity.”[5] Leaders in organizations that embrace 2D diversity are more likely to create an inclusive culture and environment that encourages people to speak up and challenge the status quo. By listening to, and valuing the contributions of everyone, these leaders gain access to a larger pool of ideas and uncover more market opportunities. In fact, employees in organizations with 2D diversity are 75% more likely to see their ideas deployed into the market.[6]

The CTI research found that only 22% of companies had leadership that demonstrated 2D diversity,[7] highlighting that there is still a lot of opportunity for change.

Diversity Is Important to Growth

The proof is in that diversity drives innovation and impacts the bottom line:

  • Morgan Stanley research has shown that a better balance of men and women in the workplace can deliver returns with less volatility.[8]
  • Corporate Executive Board (CEB) research finds that in a diverse workforce where the perspectives of diverse and non-diverse employees are valued, performance improves by 12% and intent to stay by 20%.
  • McKinsey research found that[9]
    • Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
    • Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.
    • In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.
  • Research by the Center for Talent Innovation found that publicly traded companies with leadership that demonstrated 2D diversity were:
    • 70% more likely to report that their company captured a new market (46% vs 27%) and,
    • 45% more likely to report that their company improved market share (48% vs 33%)[10]

Are You Harnessing the Power of Diversity?

Are you and your organization leveraging the power of diversity to its fullest? Three things to consider as you approach diversity in your organization:

  1. Communicate the business benefits of diversity. Make sure that leaders at all levels understand that a more diverse workforce and inclusive culture will have a positive impact on the employee experience and the bottom line.
  1. Continue to build a diverse workforce. Focus on diversity at every stage of the talent management cycle, from recruiting, to development to succession planning. Beware of unconscious bias and work to minimize its impacts on decision making.
  1. Cultivate 2D diversity Look for candidates that demonstrate acquired diversity. Create opportunities and experiences for your leaders to develop an appreciation of the value of differences and learn the behaviors that support inclusive environments and promote innovation and growth.

The benefits of diversity are clear. Imagine the impact on our organizations and our communities if we were able to fully leverage the power of diversity to solve our most difficult challenges. The possibilities are great and that is a vision to work towards.

[1] Hewlett, Sylvia Ann, Marshall, Melinda & Sherbin, Laura, “Innovation, Diversity and Market Growth – Executive Summary”, Center for Talent Innovation, 2013
[2] ibid
[4] Ibid Hewlett, Sylvia Ann, Marshall, Melinda & Sherbin, Laura, “Innovation, Diversity and Market Growth – Executive Summary”, Center for Talent Innovation, 2013
[5] ibid
[6] ibid
[7] ibid
[10] Hewlett, Sylvia Ann, Marshall, Melinda & Sherbin, Laura, “Innovation, Diversity and Market Growth – Executive Summary”, Center for Talent Innovation, 2013

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