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New research reinforces the business case for diversity. How can organizations implement diversity initiatives that make a long-term impact?
If companies want to prosper and retain their business advantage, they would benefit from having a diverse workforce, new McKinsey research finds. Of 366 public companies analyzed, those in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above national industry medians.
Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their national industry peers.
While correlation does not equal causation – greater diversity doesn’t automatically mean more profit – the link indicates that companies committed to diverse leadership are more successful.
“More diverse companies, we believe, are better able to win top talent and improve their customer orientation, employee satisfaction, and decision making, and all that leads to a virtuous cycle of increasing return,” states the report.
The research also suggests that other types of diversity such as age, sexual orientation and global mindsets, are also likely to bring some level of competitive advantage for companies that are able to attract and retain diverse talent. Currently 97% of U.S. companies fail to have senior leadership teams that reflect the country’s ethnic labor force.
Diversity is a catchphrase that is, sometimes, more trendy than it is helpful. I’ve attended countless meetings, seminars, networking events all waxing lyrical about the importance of it. The world’s most innovative companies –
But fostering a culture of inclusiveness starts at the top, says Shellye Archambeau, CEO of MetricStream. The Silicon Valley-based governance, risk and compliance firm raised $60 million from investors last fall, and a total of $125 million since its inception in 1999.
Archambeau, who sits on Verizon's Board of Directors, is also the first African American female CEO of a Kleiner Perkins venture-backed company.
MetricStream's chairman Gunjan Sinha is of Indian descent, and the company's U.S. workforce is now over 56% non-white. But diversity at the company has been a long and focused effort. Archambeau advises companies against investing in blanket diversity initiatives that end up being more like bandaids than fostering a cultural change. Here are three that impacted representation at MetricStream.
Set Targets not Quotas
For diversity to make a business impact, representation must show at the top, says Archambeau.
Archambeau says more companies should be aware of the types of candidates they hire at every level, but especially for leadership roles. “It’s worth asking 'are we looking at women candidates when screening for the top positions. Are we looking at racially diverse candidates?'"
Organizations often don't reflect on where their talent pool is being drawn from. "Even asking these questions tend to drive our overall behavior,” she says.
Instead of quotas, she suggests setting targets. “I really don’t like quotas. Targets at every level ensure you have focused activities to execute on an overall objective,” she says. Forcing a quota on an organization doesn’t always ensure you have the best person for every role.
Reach Beyond Traditional Networks
Most people are likely to have people who look like them, in their immediate networks. Archambeau says modern workplaces must encourage hiring managers and HR support functions to start looking beyond their traditional networks when creating the talent pipeline. “Recognize and reward managers that are creating diverse teams,” she adds.
It’s a missed business opportunity if your clients and consumers are of different backgrounds and genders, but your team is homogenous. "Diversity really helps teams thrive. Even an all-female team of the same ethnicity is not as successful as a mixed team."
Start Now and Don't Give Up
It's daunting to change numbers at larger organizations that have a certain demographic entrenched within their organization. But even if it takes time to make a change, the business case for diversity is too strong to ignore.
"Even if you start today, it really takes a while for numbers to come through." Don't let that deter you. "Diversity is not just a short-term, one-act solution," says Archambeau. It takes longer commitment and an ability to quickly pivot if certain initiatives are not changing the ratio.
"What you're really doing is changing behavior in the talent pool and organization structure, and to make a dent in that number, it takes time," she concludes.
