When some execs hear about diversity and inclusion (D&I) initiatives, their first thought is of incremental costs. However, not having D&I is far more expensive. Indeed, a lack of D&I not only increases costs but also decreases the potential for revenue growth.
Bias in the workplace, a major barrier to developing D&I, raises costs. Turnover costs at least 20% of a position’s annual salary, and biased behavior in the workplace causes some employees to exit faster than they otherwise would. One in four doctors from non-dominant groups reported leaving positions due to biased behavior, with some even saying they considered leaving medicine altogether.
Businesses that achieve genuine inclusion can recruit from a much wider candidate pool to acquire the best employees. With the shifting demographics in the US, a true commitment to D&I functions as a significant competitive advantage for companies that can attain it.
Reduced Revenue Potential
Revenue growth potential suffers without diversity. As reported in the Financial Times, extensive research shows that diverse companies were 45% more likely than their peers to have grown their market share. What’s more, diverse companies were 70% more likely to have captured new markets.
That should come as little surprise. With ever-increasing global diversity, companies that embrace diversity can better target potential consumers. In fact, when teams have members who belong to the same identities as target consumers, the whole team is 158% more likely to know the habits and attitude of these consumers. The team can then adjust marketing and even the products themselves to best suit these consumers.
The key lesson is that companies that embrace D&I experience better financial results. In its report “Why Diversity Matters”, McKinsey notes that companies in the upper quartile in terms of gender and racial diversity achieve higher profits than those that have less diversity.
What Not to Do
Some companies embark on a slapdash, ad-hoc approach to D&I. They might put up table tents in the cafeteria, bring in a speaker for an all-company presentation once or twice, and put a policy about D&I on their website. Then they’re surprised when D&I fail to materialize.
These cursory efforts fail more often than not. They can actually backfire and reduce productivity and teamwork in a company.
Harvard has documented how other traditional means of addressing this issue (e.g. mandatory diversity training and grievance systems) can backfire as well. These approaches fail because they don’t address the root problems of ignorance and unconscious bias.
How to Achieve Greater D&I
We can’t assume that leaders naturally know how to go about creating a culture that embraces diversity. Leaders need to be properly trained in how to structure organizations, teams, and processes so they’re capable of fostering diversity.
Additionally, everyone in the company needs to reduce their unconscious biases through mindfulness training, so they can be inclusive toward those who differ from them. My TED talk that I gave recently at the University of Wisconsin explains how and why mindfulness has such a huge impact on bias. Mindfulness training also offers a host of other benefits, which makes gaining internal buy-in for this part of the new approach easier.
This approach does require sustained commitment. Each company should go into such an undertaking with eyes wide open. If they follow through, they’ll be the richer for it.