It has become increasingly clear that companies that foster diversity in their working teams experience—at the bottom line—better financial performance.
By now, top executives and team builders should know that diversity is important, if not for the moral standpoint that all humans should have equal opportunities, for the fact that companies with diverse teams enjoy higher profitability.
“I don’t buy it” told me once the VP of operations at a midsized software development firm in Silicon Valley, who we will call John Doe. Why is it so hard for John to believe that having teams with varied cultural backgrounds and a healthy gender balance is helping business?
For starters, John doesn’t think there is enough diverse talent out there.
According to the US Census Bureau in 2019, an approximate of 63.4 percent of the population in the United States are non-Hispanic white, which means almost 40 percent of people belonging to Hispanic and Latino, Black, Asian, and other races are out here making a living. According to the US Bureau of Labor Statistics, almost 47 percent of our workforce are women. John’s misconception that coming across diverse talent is hard is based on dated assumptions.
John also believes a diverse team is much more unlikely to synergize well.
People from diverse backgrounds are more likely to alter the behavior of teams in ways that maximize critical thinking. Harvard Business Review’s “Why Diverse Teams Are Smarter” mentions a case study by the Journal of Personality and Social Psychology where scientists had people six-person-mock a jury panel whose members were either all white or included four white and two black individuals. Participants were shown a video of a trial of a black defendant and white victims, then decide whether the defendant was guilty. Diverse panels raised more facts related to the case than homogenous panels and made fewer factual errors while discussing available evidence, and other studies have shown similar results, which leads us to realize diverse teams are more likely to remain objective during decision-making situations.
Other studies have shown diverse teams process information more carefully and are also more innovative, due to the variety in their personal perspectives.
But John, understandably, is a man of facts and numbers, so let’s look at what we know. A study by McKinsey & Company back in 2015 showed that companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their national industry medians, and companies in the top quartile for gender diversity are 15 percent more likely to have above average financial returns. This comes not only from the improved collaboration brought from an expanded set of perspectives and smarter teamwork as mentioned above, but also from indirect factors that come as a result of that investment in diversity and inclusion, such as these companies being able to win over and retain top talent more easily, improve their customer orientation, employee satisfaction, and decision making, as well as bringing a competitive advantage in social and community engagement.
So, how can a company look at creating diverse teams more effectively?
We could—and I will—talk about this as an entirely different subject, but companies looking to diversity their teams may want to start by reviewing their talent acquisition channels for potential issues in their pre-screening policies that may create barriers for people from diverse backgrounds, as well as work on their organizational culture to ensure such diverse talent is also welcome within their teams and can be brought up to their highest potential.
Events, internal communities, and campaigns are also effective ways to attract and retain diverse talent within the organization.
And for companies looking to internationalize (or already doing so) either through an expansion of their operation to other countries or by outsourcing talent for staff augmentation, the diversity factor quickly becomes ingrained in their corporate DNA, as their teams quickly adapt and find appreciation for their peers across locations.
