Run It By Us First: Inclusion and Diversity as Strategic Advantages

While being more human is more than enough reason for many organizations to diversify their staff, it's the strategic business advantages that make Inclusion and Diversity so attractive.
9 min read | by Kaleem Clarkson 
Dartboard with red dart

In the first article of our series #RunItByUsFirst: How Diversity Can Help Companies Avoid Major Blunders, we talked about #RunItByUsFirst’s origin story and the embarrassing blunders companies made that could have been avoided if they had a diverse team review their content first. In this article, we will discuss the strategic advantages of Inclusion and Diversity.

All-remote and/or distributed organizations maintain a significant advantage over their brick-and-mortar counterparts in that, oftentimes, location plays a significant role in the accessibility of qualified, diverse candidates. When your workforce is distributed, a culture of inclusion becomes even more important to ensure the psychological safety of your employees. 

During times of adversity, engaged employees will make it so that your company is better prepared to respond to social issues with empathy and transparency. While being more human is more than enough reason for many organizations to diversify their staff, there are plenty of business purposes that make inclusion and diversity a strategic advantage for companies. Here are a few: 

Greater Profitability 

To quote the great Wu-Tang Clan, “Cash Rules Everything Around Me, C.R.E.A.M. get the money, not a dollar bill y’all.” Let's face it, while there are numerous strategic advantages for more diverse teams, when it comes down to it, profitability is and always will be a major determining factor in how we rate the success of an organization.

According to Catalyst, a global nonprofit that conducts research to help advance women into leadership roles, a plethora of research studies have demonstrated inclusion and diversity have direct positive financial impacts ranging from cash return on investment, gross and net margins to investment performance, market value and return on sales. 

Leading consulting firm McKinsey & Company produced a significant study in 2015 titled, Why Diversity Matters, in which they found organizations usually viewed inclusion as a source for competitive advantage, social justice, corporate social responsibility, or even regulatory compliance. 

Organizations with more ethnic/cultural diversity are 33% more likely to outperform on profitability. 

Specifically, they discovered companies that had more gender diversity in their executive teams were 15% more likely to experience above-average profitability. In 2017, they decided to expand on their previous research to improve the correlation between diversity and company financial performance and published a new report titled Delivering Through Diversity. In the updated report just a few years later, they found teams with more gender diversity were 21% more likely to experience above-average profitability, a 5% increase. And organizations that had more ethnic/cultural diversity were 33% more likely to outperform on profitability. 

IBM is a company that has long recognized that there is strength in its differences and that those differences should be celebrated rather than ignored. Back in the 1990s, leaders established eight executive-led task forces to represent different constituencies within the company based on race, gender, ethnicity, and sexual identity. 

Focusing on these unique segments and their needs not only increased the diversity of the executive leadership team, but it also helped the bottom line and continues to do so today. It raised awareness of new opportunities within the market, opening up new revenue streams. Increasing support to small and midsize businesses, often owned by women and minorities, created $10 million in revenue in 1998 that grew to $300 million in just three years. An initiative recommended by the task force for people with disabilities is expected to generate more than a billion dollars for IBM in the next five to ten years.

Increased Innovation

Innovation. Talk about a buzzword. How many times have we all heard the word innovation? You can almost guarantee to hear that word on every episode of Shark Tank or at your next venture capital sponsored pitch night. We, as humans, can’t help but create new things. In fact, it's probably why we are still on top of the food chain. We thrive on innovation.  

Today is no different. We are now looking at self-driving cars, 5G internet delivered through the sky, and the most recent shift of removing the traditional brick-and-mortar office space for newly designed home offices and shared coworking space. It's a race to see who is the most innovative. And inclusion and diversity are proven strategies that can help your company be more innovative. 

Organizations with above-average diversity attributed 19% more revenue to innovation.

In 2017, the Boston Consulting Group (BCG) surveyed more than 1,700 companies from eight different countries and what they reported was shocking. They found a significant correlation between the diversity of management and their teams’ overall innovation revenue. Organizations with above-average diversity found that 45% of their revenue was attributed to innovation, while organizations with below-average diversity only attributed 26% of their revenue to innovations. That is a whopping 19% difference, all because of the makeup of your leadership team. 

One of the world’s leading pharmaceutical companies, Johnson & Johnson, has understood the strategic advantages of inclusion and diversity. As an organization that is dedicated to providing medicines to cure diseases all around the globe, it only makes sense to employ a workforce that better reflects the diverse populations they serve. So much sense that they have incorporated diversity and inclusion into their company credo: “We must provide an inclusive work environment where each person must be considered as an individual. We must respect their diversity and dignity and recognize their merit. They must have a sense of security, fulfillment, and purpose in their jobs.”  

To demonstrate the impact of their diversity innovation strategy, in October of 2019, Johnson & Johnson released a report titled “You Belong: Diversity & Inclusion Impact Review,” which included some powerful marketing analysis statistics that should make any leader think twice about their inclusion and diversity strategies, such as:

  • $3.2 trillion is the spending power of multicultural consumers in just the U.S. 
  • 1 billion people, or 15% of the world’s population, are living with disabilities
  • $3.6 trillion is the purchasing power of the LGBTQ+ community
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Startup Team Working Together
More diverse teams produce higher innovation and financial returns.

Smarter Teams

One of my favorite superhero quotes comes from Spiderman’s Uncle Ben, and it has even been quoted in the Supreme Court: “With great power comes great responsibility.” As a business, your superpower is a product or service that is going to change customers' way of life, and when it comes to communicating this message, there must be a great sense of responsibility to which smarter teams with broad perspectives can help achieve this goal. 

Trying to gauge one's intelligence is something that I have always felt was very subjective and difficult to do during the hiring process. This has resulted in all different types of interview personality tests, whiteboard scenarios, or outlandish questions such as, “If you were a tree, what type of tree would you be?” What employers are mostly looking for from these types of interviews is one's ability to solve complex problems by processing a wide range of information that results in the correct answer.

In the April 2005 edition of the Journal of Personality and Social Psychology, a study published by Dr. Samuel Sommers of Tufts University examined the racial effects of group diversity on decision making. A total of 200 participants were selected to be a part of a mock trial of a sexual assault case. Of the 200 participants, 170 (85%) were white, and 30 (15%) were black. Participants were asked to provide a verdict individually and then seated together in groups with varying degrees of racial composition for 60 minutes to discuss the case.

Table 1 

Group-Level Analyses of Deliberation Content

Measure

Diverse Group

All-White Group

Deliberation in Length, in minutes

50.67

38.49

Number of case facts discussed

30.48

25.93

Number of factual inaccuracies

4.14

7.28

Number of uncorrected inaccurate statements

1.36

2.49

Amount of “missing” evidence cited

1.87

1.07

 

While the statistics of guilty verdicts showed the impact of groupthink, the most relevant statistics in regards to smarter teams came out of a more thorough analysis of the deliberation content as shown in Table One. The more diverse groups took nearly 12 more minutes to discuss the case, meaning that there were more perspectives that challenged participants' previous views, leading to deeper conversations.

These thoughtful conversations resulted in 5 more facts being discussed but most notably roughly 3 fewer errors, 1.5 fewer mistakes found in the trial, all supporting the theory that teams that are less homogeneous are indeed more accurate and fact-based. 

With the dramatic increase in telework and the number of location-independent professionals working from wherever they feel the most comfortable and productive, the increased risk for cyber-attacks are a concern for all organizations around the world at which smarter teams are required to combat these threats.

In a recent Forbes article, Frances Dewing, the CEO of Rubica, a cybersecurity company, looks at inclusion and diversity as a necessity for their success and has incorporated it into their strategic plan. In her article she provides a vivid example of why:

“Let me give an example: Our security operations center (SOC) is staffed with proactive threat hunters. They look for connections between data points that software alone cannot make. A SOC analyst with a broad understanding of geopolitics and global economic trends — plus their technical skillset — makes for a threat hunter who understands how current events affect the threat landscape. Having well-rounded staff from diverse backgrounds means our employees have broad global perspectives — and these perspectives show up in a stronger product.”  

Organizations that are intentional in constructing more diverse teams including, but not limited to, race, gender, age, sexual orientation, disabilities, and socioeconomic backgrounds will benefit from individuals’ broader perspectives, resulting in smarter teams. Stay tuned for the next two articles to understand how #RunItByUsFirst can make a significant impact on your internal stakeholders by listening with empathy and then by taking action with employee resource groups. 

 

Originally Published by Kaleem Clarkson on Monday, December 7, 2020 - 10:00 | Updated On Monday, December 7, 2020 - 10:06

Tags:
Diversity
, Inclusion
, Human Resources Today
, Strategy
, Business Management
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