Why Every Company Needs A Diversity & Inclusion Strategy Now
A large number of studies conducted by leading international companies have revealed that Diversity & Inclusion not only has a significant impact on employee management and engagement, but is also a key factor for economic growth and financial outperformance. The direct link between diversity management and economic performance highlights how every company should stop procrastinating on the decision to implement a Diversity & Inclusion strategy and start acting now.
D&I Strategies increase financial outperformance
In 2015, McKinsey published the report “Why Diversity Matters” that specifically analyzed the correlation between the level of Diversity and financial outperformance in a group of selected companies in the U.S., UK, Canada and Latin America. Through the application of the Herfindhal-Hirschman Index (HHI), the
research revealed that “The analysis found a statistically significant relationship between a more diverse leadership team and better financial performance. The companies in the top quartile of gender diversity were 15 percent more likely to have financial returns that were above their national industry median. Companies in the top quartile of racial/ethnic diversity were 35 percent more likely to have financial returns above their national industry median. Companies in the bottom quartile for both gender and ethnicity/race were statistically less likely to achieve above-average financial returns than the average companies in the dataset (that is, they were not just not leading, they were lagging)”. (McKinsey, “Why Diversity Matter”, 2015. P. 5).
A significant increase in this percentage was observed in the study published in 2018, “Delivering through Diversity”, in which McKinsey reports that the percentage of financial returns in companies with more diverse leadership has gone from 15% to 21% in the case of gender diversity (EBIT Margin).
An important aspect of these findings can be found in the fact that the relationship between more diverse companies and financial outperformance is not causal. In fact, the study emphasizes that Diversity & Inclusion strategies allow companies to attract top talent, increase employee engagement and facilitate the decision making process — factors that result in a better financial return.
Customers would rather buy from Businesses with Social Impact
Companies that implement Diversity & Inclusion strategies not only have a positive impact on revenue, but also meet customer expectations and increase the chances of customers identifying with their product and buying it.
Salesforce published a study in 2017 on the impact of Diversity, “The Impact of Equality and Values Driven Business”, showing that 51% of consumers consider that the social responsibility of a business and its commitment to giving back to the community is a key factor in their choice to remain loyal to that brand.
In particular, the Millennial generation, which are reported to be highly influential in the target of consumers, is more likely to remain loyal to a business or a brand if they recognize in it a social commitment and a mission of giving back to the community.
Salesforce emphasizes a shifting role among leaders. In fact, the study argues that “Business leaders are becoming societal leaders”. Not only consumers, but also major CEOs and business leaders recognize, at the international level, the need not only for drive impact in the traditional economic mission, but also in terms of social impact.
Companies with D&I Strategies attract top talent
The D&I Momentum is not just a discursive and ethical reality. McKinsey shows how recognizing the need to make a company more diverse is directly related to its ability to attract top talent.
The hiring struggle is real, mainly as candidates become increasingly demanding.
Traditional power relations between companies and candidates are changing, placing candidates at the centre of the chessboard.
Candidates are no longer just looking for a well-paid job with a guarantee of a long-term contract, but also for a positive and healthy environment where they can safely express their identity. The motto “come as you are” takes hold and becomes a fundamental prerequisite for making the workplace attractive from a human and personal point of view.
In fact, one of the most competitive skills within a company is certainly to strengthen human capital and use it in the strategy for growth and revenue increase. It is impossible to think of this priority without including D&I’s strategy.
Aspects such as globalization, the digitalization of the world of work and the drive for innovation represent for employers an opportunity to extend the talent pool on a global and widely diversified level.
In this case, D&I can be understood as an outreach strategy, i.e. the search for talent on a global scale, with hiring strategies that are diversity conscious, but also as an internal employee management strategy, i.e. the need to make their workplace safe and attentive to the challenges that an international and diverse team presents.
D&I is the key-factor for employees’ engagement and retention
Employees’ engagement and retention is a top priority for most companies.
Working with a happy and motivated team is the main goal of every business and also a key factor in terms of productivity, financial returns and cost management. It is well known that frequent turnover, demotivation and low sense of belonging to both the company and the product cost companies both in terms of time and money.
In this context, the Salesforce report shows a direct link between employee pride in working for their company and the company’s commitment to work toward equality: 75% of employees surveyed say they are proud to work for their company, as the company is involved in working toward Equality (e.g. achieving equal pay), while only 34% say they are proud to work for their companies, whereas they are not involved in initiatives to achieve Equality.
In “Diversity and Inclusion Management: A Focus on Employee Engagement” by Urmila Ita and Bagali M. M. (2019), the authors state: “There is no doubt that many studies have proven that there is a significant positive relationship between highly engaged workforce and organizational performance (Deloitte 2015; Fernando, Pedro, & Gonzalo 2013; Avigdor et al., 2007). According to a survey result, 96 percent of top executives’ stress that having diversity and inclusive talents at workplace increase the engagement scores as well as organizational performance (Ferry, 2013). In contrast, companies who disrespect the idea of diversity and inclusion in their business strategy have seen highly disengaged workforces (Riffkin & Harter, 2016).”
“Inclusion boosts employees’ productivity” is one of the major findings of the Salesforce report: “When employees feel accepted and comfortable at work, they also feel empowered to perform better”.
The sense of belonging, the ability to play a central role in the decision-making process, the feeling of being heard and having an effective impact on the overall performance of the company are key factors for retention. 73% of respondents say that under these conditions, they are more encouraged to do their job well.
The risk of not embracing a Diversity and Inclusion policy in the workplace is vertical: a company that does not care about Diversity Management loses in economic terms, in terms of human capital and in terms of customers. It limits the possibility of its product reaching all consumers, freezes the loyalty process, drives away employees and candidates and slows down productivity.
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