Reassessing ‘The Business Case for D&I’
In part 2 of my blog series, I unpacked the role unconscious biases play in how they could derail diversity and inclusion goals, if left unmanaged. In this month’s blog (part 3), I discuss ‘The Business Case for D&I in Organizations’, more specifically, I reassess the ‘case’ for the ‘business case for D&I’.
Almost everything available on this topic indicates that D&I is good for business. A study by Mckinsey (2019) based on 15 countries and more than 1,000 large companies find that executive teams with higher gender and ethnic diversity are 25 to 35% more likely to have above-average profitability than companies with less diversity. Moreover, the study finds that the greater the representation, the higher the likelihood of outperformance. It appears that building a diverse workforce isn’t just beneficial; it’s integral to success in the modern business landscape. Let’s explore why:
Diverse competencies and perspectives
If each employee brings a set of skills to the organization, by its very nature, a diverse workforce provides a diverse set of competencies and perspectives.
What makes that so valuable?
A homogeneous workforce often suffers from a narrow or blinkered skill set. While narrow skill sets/competencies/perspectives may be perfectly suited to the current goals of the organization, it’s not going to remain that way in the future. Many homogeneous teams are already missing out on a huge window for growth by failing to recognize opportunities for innovation that could drive their organization forward. The broader the set of skills and perspectives, the greater the chance at achieving breakthrough products and services and new markets.
Many of the world’s most successful organizations are already aware of this. Research conducted by Forbes Insights’ on Global Diversity and Inclusion: Fostering Innovation Through a Diverse Workforce found that 85% of surveyed companies with over $500 million in revenue either agreed or strongly agreed that ‘a diverse and inclusive workforce is crucial to encouraging different perspectives and ideas that drive innovation’.
Diverse candidate pool
This is a significant benefit in the workplace. By hiring diverse candidates, an organization has its pick from a much larger pool of talent.
Why is that an advantage?
Expanding the top of the hiring funnel to include a more diverse set of individuals is guaranteed to improve results down the line. While choosing candidates from your alma mater (think unconscious bias) might seem like a good idea, there are a huge number of qualified candidates who didn’t attend that school/college (or who aren’t even recent graduates of any school). It’s worth looking outside of your own ‘box’ to find talent. Further, when hiring for diversity, we need to keep in mind that diversity in itself is a very broad term, with many connotations. The key is considering those myriad connotations as you work to diversify your team.
On a related note, as millennials come to dominate the labor market, D&I becomes an important element. According to Glassdoor, 67% of job seekers today weigh diversity as a factor before evaluating companies and job offers. Another survey from Deloitte also reveals that 83% of millennials are engaged when their organization has a diverse work culture. Millennials have a unique outlook on diversity and want to work in an environment that fosters progressive change and collaborative teamwork.
Diverse Culture
Hiring for cultural fit is a popular strategy for organizations, but there’s a point at which it becomes a barrier to diversity and growth. Celia DeAnca explains in her Harvard Business Review article:
“We might be creating a situation in which companies will be very diverse in appearance, but intrinsically homogeneous. They will be hiring the same profile of people even though they might have very different backgrounds. Thus the company will appear diverse—but we know that appearances can be deceiving. Hiring similar candidates isn’t a culture-building exercise—at best, it’s simply ‘culture maintenance’.”
Diverse Markets
An organization with a diverse workforce has a huge advantage when addressing constantly evolving markets. This is particularly important for companies that deal in retail and consumer goods. A Deloitte Review publication states that:
“Leaders of retail and consumer goods businesses, in particular, will need to take steps to understand and create affinity with an increasingly multicultural and multifaceted consumer base”.
But, the benefits don’t start and end with retail. Organizations of all types can gain from access to an expanded customer base. As the shape of the market changes, it takes diverse views to see its various movements. In keeping with this line of thought, organizations with inclusive business cultures and practices are 57.8% more likely to improve their reputations. Consumers are more likely to purchase or consider purchasing, a product after viewing an advertisement perceived to be diverse or inclusive.
The points listed here are just a few of the many benefits of diversity in the workplace. The substance of it all is that in this modern business landscape, it’s absolutely crucial to embrace diversity early on, and into the future.
BUT… (and this is where the problem with the ‘business case’ arises)
In spite of these business benefits, we find that organizations have largely failed to adopt a learning orientation toward D&I, and haven’t made enough progress. A PWC Report states that only 5% of organizations they surveyed are succeeding in key dimensions of successful D&I programming (the dimensions include: Initiating a continuous data-driven process for understanding the facts of what’s happening in the organization today; Creating a business-focused vision and strategy for D&I that reflects the reality of today and the real potential of tomorrow; Engaging leadership around an inspirational D&I strategy by articulating the business case and establishing supportive governance; Executing the D&I strategy across all elements of the business).
So what’s causing this disconnect? Why hasn’t everyone jumped on the D&I bandwagon? Do top executives actually not find the business case compelling? What complicates this further is that, for every study that endorses the correlation between D&I and better business performance, we also find data that indicates how the business benefits may be circumstantial or that the correlation is inconclusive.
I think this is an important aspect of any discussion on D&I in the workplace. I bring this up not because D&I is redundant, but because it’s time to stop framing these efforts around a business case. I question whether the ‘business case’ is the right approach when discussing the human experience in the workplace? The business case model works well when decisions like “should we upgrade the computer monitors?” need to be made. Further, it’s a methodology employed to convince senior organization leaders to enhance the diversity of their workforce and the inclusiveness of their organizational cultures.
But, this approach seems wrong when used as a primary criterion for addressing the D&I challenge in the workplace. It is true that business outcomes are negatively impacted when diversity and inclusion are deficient, but shouldn’t the psychological and emotional trauma to disadvantaged employees and the need to be a ‘just’ and ‘fair’ workplace take center stage in our logic? Isn’t it time to try a more human-centered approach (akin to the moral case) to why D&I matters in the workplace?
I accept that the ‘human-centered or moral approach’ is tough to crack as it only works when organizations are willing to reshape their power structure. But the ‘business case’ claims of D&I will continue to remain ‘weak’, ‘circumstantial’, and ‘inconclusive’ if it is underpinned primarily by a return on investment (ROI) approach. It will just perpetuate an ‘add diversity and stir’ attitude by organizations that may or may not see gains in a firm’s effectiveness or financial performance.
Increasingly, companies are taking these kinds of principled ‘human-centric/moral’ stances. Salesforce has invested millions in analyzing wages and closing the gender pay gap. Many companies took a stand in North Carolina against the “bathroom bills” that discriminate against transgender people. Microsoft eliminated “stack ranking,” which amplified bias against women’s advancement.
Issues of gender pay parity in India are far from encouraging with only a few companies being equal pay organizations (last year, Tata Starbucks became an equal pay company, Software firm Adobe achieved gender pay parity in India in 2018). Unlike in the UK and some other countries in the West, where it is mandatory for employers with 250 or more employees to calculate and report the gender pay gap in their organization, in India, there’s no such rule. While some companies have started tracking the compensation divide between genders, the data is circulated only within the management. Those who voluntarily reveal this data are mostly multinationals, extending their global practice in markets beyond their home country. However, some organizations are making efforts to engage with D&I in important ways. For e.g. Zomato announced 26 weeks (roughly six months) of paid parental leave for both men and women (in 2019) and extended the same to non-birthing parents (who adopt children). Zomato also revived the controversial Period Leave for women and transgender employees who are unable to attend office owing to the discomfort of their menstrual cycle.
So the question before us is, whether we should abandon the business case for D&I? It is worth noting that one of the reasons we don’t have compelling evidence about the economic impact of diversity is that we haven’t truly moved to inclusion and belonging. I’ve said this in Part I of my blog series, diversity by itself will not produce the benefits that organizations seek to achieve. Being genuinely valued and respected involves more than just ‘feeling’ included. It involves having the power to help set the agenda, influence what—and how—work is done, calling out injustice, taking a stand, and having one’s contributions recognized and rewarded with further opportunities to contribute and advance.
My view is that by taking a more human-centered or moral approach, we will find multiple ways in which diverse workforces benefit companies and society. To put it another way, D&I initiatives will eventually lead us to the benefits of the business case; but I don’t think we should start there.
In the next blog post, I lay out some ways in which organizations can restructure power and work towards more meaningful inclusion and belonging.
#diversityandinclusion #thebusinesscasefordiversityandinclusion #asktherightquestion #syngrity #inclusionintheworkplace
Keya Bardalai is a Senior Research Consultant at Syngrity. She has a Ph.D. in Social Anthropology and specializes in work and employment in the service economy. Keya has a keen interest in gender in the workplace and works on how spaces can be made more just, equitable, and inclusive for all.
SOURCES
https://blog.vantagecircle.com/diversity-in-the-workplace-and-why-it-matters/
https://www.catalyst.org/research/why-diversity-and-inclusion-matter/
https://www.fastcompany.com/90462867/why-the-business-case-for-diversity-isnt-working
https://sifted.eu/articles/diversity-business-case/
