Companies that do not view diversity as being important will be at a disadvantage in the future – although things are still moving slowly. Read on to learn why you should also be promoting diversity in your company and how this could benefit you.
Diversity is now defined as the difference between and, most importantly, recognition of groups and individual characteristics. These include ethnic and social background, nationality, gender and gender identity, physical and mental abilities, religion and ideology, sexual orientation, identity and age. However, unfortunately, there often continues to be discrimination in both society as a whole and in a corporate environment if people have different characteristics to the majority of society and this discrimination is to the detriment of all concerned.
This has also been demonstrated by connected studies conducted by McKinsey in 2015, 2018 and 2020, examining how diversity affects corporate success. They all present a unified picture and show that diversified companies are increasingly leaving their ‘naive’ competitors in their wake. Companies that promote diversity not only contribute to social justice but also give themselves a competitive advantage.
None of this has changed in the latest study. The relationship between diversity in the boardroom and above-average profitability has been consolidated even further – in terms of both gender and ethnic diversity. These differences can also be expressed in figures, showing that the most diverse companies are now nearly 50% better positioned than the most ‘naive’.
Gender diversity in management teams has a positive correlation with both profitability and added value. These companies outperform their competitors by 21% in terms of EBIT margin and 27% in terms of longer-term added value. And the more even the gender balance, the more this effect increases.
Ethnic diversity also has a positive impact on profitability – the most diverse companies outperform their competitors by as much as 33%. And the greater the number of different ethnicities and cultures represented, the greater this effect becomes.
However, the benefits go far beyond just profitability: companies that actively ensure a diverse workforce attract more talent, increase customer satisfaction, have happier employees, and make better decisions.
To achieve this goal, these companies have developed what are known as inclusion and diversity (I&D) strategies. They have determined that change needs to come from the top, and be transferred down to middle management and on to all members of staff. They promote individual responsibility in their departments, encourage exemplary behaviour, hold their executives and managers accountable, and ensure that efforts are supported and provided with sufficient resources.
These strategies may vary by company, but a few best practices have emerged:
However, even if every step towards achieving a diverse workforce is followed, it generally takes a few years for the measures to have an impact and for ways of thinking within a company to change.
Of course, diversity goes far beyond just gender and ethnicity, but the data in this area is relatively sparse, which is why this blog is focusing on the benefits of these two areas. However, the opportunities offered by greater diversity in your own company can be transferred across to all groups. And if promoting just two characteristics results in benefits this significant, imagine how successful a company can be if it truly promotes and ensures equal opportunities for all.
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