The Overwhelming Case for Inclusion & Diversity in the Workplace

In the wake of social and political turmoil in 2020 - beyond Covid-19 - the collective global awareness for inclusion and diversity (I&D), and embedding tolerance into the company culture, has taken on renewed urgency. Diversity is not just a nice-to-have. Business leaders are being confronted with strong empirical evidence that a diverse workforce directly impacts their bottom-line. Companies that struggle with diversity, or give it only lip service, are being penalized with less-than-optimal performance.

And yet, organizations are not embracing I&D with gusto. For example, despite years of diversity programs, black representation as measured through CEOs in Fortune 500 companies in the USA, has decreased from 2012 to 2020, and remains at an anemic 1%, even though the black population is 13.4%.

Moving the needle on diversity remains a big challenge and much more work needs to be done.

Why Inclusion & Diversity matters?

Better financial results

A Boston Consulting Group (BCG) study, which studied 1,700 companies in eight countries, found that diverse leadership teams result in better innovation and improved financial performance. Specifically, companies that reported above-average diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity. (See Exhibit 1)

In another large study (2014-2019), McKinsey followed 1039 companies encompassing 15 countries (Australia, Brazil, France, Germany, Norway, Denmark, India, Japan, Mexico, Nigeria, Singapore, South Africa, Sweden, the United Kingdom, and the United States) and determined that the business case for I&D is stronger than ever. They concluded that a diverse and inclusive employee base is a significant asset in a fast-moving global economy. In their study, companies that are “diversity winners” are pulling ahead of those that are laggards.

Their data (see figures below) shows that “companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile — up from 21 percent in 2017 and 15 percent in 2014.” Cultural diversity in leadership roles resulted in top-quartile companies outperforming peers by 36% in profitability. Companies in the top quartile for both gender and ethnic diversity are 12 percent more likely to outperform all other companies in the data set.

Better teams

There is strong evidence that teams with a diverse background and random member selection, are likely to be more successful and have better performance. They do this by being more likely to innovate, be more agile, and anticipate shifts in consumer needs — helping their companies to gain a competitive edge.

“It’s proven that more diverse companies are often more innovative and creative,” explains Duke Energy Chief Diversity and Inclusion Officer Joni Davis. The main reasons for more productivity and creativity are that you are bringing together individuals from varied backgrounds and experiences, and each will have unique ways to improve your products and services.

Adding the secret sauce of teamwork and collaboration platforms like Xoxoday Empuls allows multi-functional culturally diverse dispersed teams to connect seamlessly, support each other socially, and succeed even in uncertain times.

The current state of inclusion and diversity in the workplace

Unfortunately, progress for more I&D in the workplace remains indifferent. Many programs for more I&D have failed, and this is reflected in trailing financial performance.

BCG’s research on gender diversity shows that 91% of companies have a program in place, yet only 27% of women say they have benefited from it.

McKinsey notes that a third of the firms they have tracked over the past five years have improved both gender and ethnic diversity on their executive teams, while the majority have stalled or gone backward. The laggards in their data were organizations that had an average of 8% female representation on their executive teams—and no ethnic-minority representation at all.

McKinsey predicts that companies who saw I&D as a strength before the pandemic, are likely to leverage it to bounce back quicker. For companies that deprioritized I&D during the crisis, the impact will be felt not just on their bottom line, but in the lives and happiness of their employees.

The shift to remote and hybrid working driven by the pandemic presents an opportunity for companies to accelerate building inclusive cultures. With its benefits of increased flexibility, remote working can facilitate retention of women and minorities, who are disproportionately burdened with managing family work. It thus widens access to a pool of diverse talent that may not have been available to these companies.

How Implicit Bias operates?

In a 2020 survey, scientists interviewed men and women from 78 countries to understand their posture towards bias. The results were that men were associated with being more brilliant when compared to women. When confronted with the bias, respondents adamantly denied having such an opinion. People are often reluctant to admit they have stereotypes.

All evidence points to the fact that men and women are equally bright, and yet there are entire industries where such implicit bias is widespread.

But there is hope. According to one paper from Harvard, there has been a remarkable change in the past 50 years in our beliefs about race, sexual orientation, or gender. More organizations recognize that they have a problem with inclusion and are committing to making changes than they were 20 years ago.

How can organizations move towards an Inclusive and Diverse workforce?

There is no silver bullet or a single solution to increasing I&D. Deliberately setting, and then collecting relevant metrics, allows companies to develop diversity goals and create timelines for reaching them.

Besides an internal desire to expand diversity, many civic organizations are putting external pressure on companies to diversify. As one example, the #Metoo movement has brought the destructive impact of sexual harassment to the fore.

Culture

“We often forget the ‘I’ in the I&D conversation,” says Johnny C. Taylor, Jr., President and CEO of the Society for Human Resource Management (SHRM). “The challenge is in having a culture where all employees feel included. It’s a major investment to bring talent into your organization, so why bring them in if they’re not happy when they get here? You’ve got to get the inclusion part right.”

Global investment banking company Citigroup is powering ahead with a no-nonsense I&D agenda and placing equality, accountability, and transparency at the center of everything that it does. Creating a culture where minorities thrive requires a sustained and deliberate effort. According to Dr. Melissa Thomas-Hunt, Airbnb’s head of global diversity, “If the majority of your leadership roles are occupied by white workers, you are sending the message that this group has the most potential to contribute at high levels.” To counteract this, companies need to be welcoming and attract minority candidates for key roles. Culture change has to be driven from the top down and management has to lead in communicating and promoting openness in discussions of diversity and inclusion and include them as an organizational strategic priority.

Recruitment

Bias is most widespread during the recruitment process. Recruitment is also the point at which companies can positively impact the I&D characteristics that create such an unconscious bias.

Acknowledging that such bias exists is a good first step in combatting it. The Implicit Association Test (IAT), developed at Harvard, is a useful tool to measure such attitudes and beliefs. According to Tracie Stewart, professor of Psychology at Kennesaw State University, “Implicit, or unconscious, biases are stereotypes and prejudices that are activated automatically, unintentionally, and outside of our awareness,” Stewart said. “They are biases that we have but don’t realize we have, and they can be based on a person’s race, gender, age, religion and/or sexual orientation.” 

I&D is more important to the newer generations of workers who will soon become the majority in the workplace. Companies would do well to focus on their preferences and desires. 

Here are some ways to address recruitment bias:

·        Obfuscate the identifying information of candidates, or blind hiring, in the application and initial vetting process encourages recruiters to look at only the qualifying characteristics of the applicant.

·        Staff training to understand bias and ways to work with awareness to address it.

·        Prioritize broad representation and equality of opportunity throughout the organization.

·        Offer HR policies emphasizing flexibility to allow a wider net to be cast for prospects with diverse backgrounds.

·        Strengthen accountability for delivering on I&D metrics and goals.

Compensation

Today, many companies are hiring Chief Diversity Officers (CDO) whose role is to make sure that the company meets its diversity goals and provides compensation and benefits schemas to promote inclusion. 

Expanding the employee rewards to include novel mechanisms and platforms – for example, Xoxoday’s Empuls - for delivering benefits on a variety of perks - should be a serious consideration. Such innovations create a more engaged workforce, attract employees from a wider pool, and creates a winning culture.

Collect, compare, and analyze metrics!

Tools and templates to assess the state of I&D in an organization are readily available from multiple sources. The results from such surveys help to create a viable roadmap for addressing areas of concern. For example, PwC has a survey that provides a good template for understanding the facts and maturity of I&D within a company and providing actionable intelligence to management. It is important to understand that good survey data is inversely proportional to confidentiality of responses.  PwC reports that data aggregated from over 3,000 survey respondents from 40 countries shows a disconnect between I&D priority and perception. A key reason for such dissonance is lack of empowerment and accountability for I&D within leadership.

Once firms have their diversity data, they need to examine it continuously and identify and address problem areas to meet internal diversity goals. Collecting diversity data, but not analyzing it, leaves organizations without valid insights, and thus the inability to fix I&D problems. 

Discrimination complaints

An important tool in the diversity enablement process is how companies respond to discrimination complaints. Making sure that complaints are handled fairly and equitably represents a commitment to equal opportunities and helps reduce legal costs.

Data shows that almost half of discrimination complaints lead to some form of retaliation, or worse yet, harassment of the employee. Some sociologists are recommending that companies experiment with new ways to deal with discrimination including creating ombudsmen and Employee Assistance Plans (EAPs) which are run by third parties and who provide unbiased advice for discriminated employees.

Technology

Technology is the lifeblood of the workplace. It is important to make sure that technology does not exacerbate biases. Sometimes this can be in the form of technology complexity which in turn precludes the success of certain individuals who may have more difficulty with newer technology, but nonetheless can bring tremendous value to the company in other areas.

In the end, inclusion and diversity cannot just be a catchphrase or be about checking a box. The data makes it clear that greater diversity – both gender and ethnic – is a gauge of significantly better performance. For leaders in the corporate world, there are few obvious methods to improve profitability. Investing heavily in I&D is one of them.