It’s hard to argue against diversity. Embracing gender, ethnic, and cultural differences is a win-win-win not only for society, but for business. Improving gender relations is a priority – both in my role as an executive at SAP and as an issue that is important for our world. But if companies needed more reason to integrate diversity into their corporate DNA, it turns out that diversity is also great for the bottom line.
According to a report by the McKinsey Global Institute, $12 trillion could be added to global GDP just by advancing women’s equity. The economic benefits only grow as inclusion permeates across more segments. Research proves that diverse companies have a competitive advantage.
By contrast, companies with the lowest rates of diversity for gender, ethnicity, and race are true bottom-line laggards. These companies are statistically less likely to achieve above-average financial returns, no matter how you look at the data.
Numbers don’t usually lie, but it may not be completely obvious why diversity ties so directly to financial performance.
The fact is, as customers become increasingly diverse – through globalization and immigration – companies must actively embrace diversity. This helps organizations better understand and build rapport with their customers and inevitably sell more products.
Diversity-centric organizations are not new. For as long as I’ve been in business – over 25 years now – diversity has been part of the corporate priorities of the organizations for which I’ve worked.
My first exposure began with a desire to mirror customer demographics. In one company, we routinely pulled demographic statistics for each geographic region. This helped us establish targets for business unit leaders, with the goal to have a mix of employees who were representative of their geographic unit’s diversity metrics in aggregate.
Why did we weave diversity measures into a unit’s business metrics? It was mostly intuitive. We made the assumption that many of our customers would be representative of those diverse demographic profiles. So it made good business sense to be sensitive to the cultural and ethnic profiles of the region in which our business operated. You want to be able to identify and connect with your customers. And you want them to be able to connect and identify with you.
This also makes sense when it comes to doing business in a global context. If you’re trying to develop solutions and implement them in another country, eventually you’re going to have to have some representation of that culture in your organization, or the cultural divide will be so great you will not succeed.
A good example is China. As one of the world’s largest emerging markets, it represents a significant opportunity for all businesses.
In order to capitalize on this market, companies must initiate hiring practices that include tapping into a pool of Chinese natives with leadership experience who understand the country and how its citizens do business.
But there is much more to it than just being able to relate better to customers, thereby improving sales figures. Studies have shown that greater diversity can increase not only sales, but share prices as well. According to McKinsey, companies with diverse executive boards enjoy significantly higher earnings and returns on equity.
This is likely because fostering diversity, whether cultural, ethnic, or gender, often leads to diversity in thinking. And diverse thinking is a good thing for business.
We already know that having employees and management teams from different industries leads to diversity in thinking. People form ideas and patterns of thought based on their particular and unique background, history, and experience. The more diverse your employees and management teams are, the more diverse your company’s thinking will be in aggregate.
Conversely, if you continue to hire homogeneously, based on a narrow demographic profile, you will suffer from corporate homogeneity. This leads to myopic thinking.
As our economy becomes more global, diverse thinking is becoming an essential business advantage – a true differentiator.
Companies need to innovate and adapt to changing times from a business process and product-offering standpoint. So too must they adapt and adjust based on cultural and diversity shifts. Different thinking allows for new ideas, new ways of looking at existing problems. It actually breeds innovation.
So what can companies do to foster diversity?
Buy-in from the CEO is crucial. Leadership must embrace and encourage diversity and demonstrate that it directly contributes to the company’s success, creativity, and innovation. To that end, many progressive organizations are now hiring chief diversity and inclusion officers to oversee these efforts.
Technology is also available to help detect and prevent unconscious bias across the HR lifecycle. Smart companies will invest in these technologies now for a fast ROI. We leverage our own technology to help move Business Beyond Bias with industry-leading machine learning innovation, and we’re using our business process expertise and machine learning technology to help detect and prevent unconscious bias across the HR lifecycle.
These are just a few ideas to get started. In your organization, make clear that diversity is good for the brand and it’s good for the business – and start making a difference today.
Learn more about driving diversity, inclusion, and gender equity into your business.