How to leverage diversity to drive business performance
What is one thing you could do in your business to be 35 per cent more likely to outperform your peers? According to the latest research from McKinsey, make sure your team is culturally diverse. While "correlation does not equal causation," the research indicates all types of diversity including gender, ethnicity, age and experience can bring some level of competitive advantage.
Attracting and retaining a diverse workforce makes a great deal of business sense, as countless studies have proven.
"The key is how you leverage that difference," explains Ros Coffey, Macquarie's Banking and Financial Services Global Head of HR. "We see diversity and inclusion as central to achieving our business strategy. I've seen other environments where diversity is held apart as something ‘HR does', but I believe you need to make it a key part of your overall strategy to get the most value from a diverse workforce."
According to The Bottom Line: Corporate Performance and Women's Representation on Boards, Fortune 500 companies with the highest representation of women board directors achieved significantly higher financial performance – outperforming return on equity by 53 per cent and return on invested capital by at least 66 per cent.
Interestingly, the report also found financial performance was notably stronger when a company had three or more female board directors.
"It's important to note the need for a ‘critical mass,'" notes Coffey. "The fact women are there in the workplace is also not enough – they need to be heard."
Cultural and linguistic diversity in the workplace can have an even greater impact on financial outcomes. According to a US study in 2009, it is positively associated with "more customers, increased sales revenue, greater relative profits and greater market share."
Diverse teams can also be more productive, because you have people with different ways of seeing a problem, faster ways of solving it, and ultimately better business decisions.
Expand your customer base
There is also clearly value in having a team who can empathise with all of your customers regardless of their age, gender and ethnicity. This includes staff from the top of an organisation to those at the frontline in customer service roles and team members making decisions about new markets or products.
"If you want to understand how you relate to your current and future client groups, you need to recognise how important it is to listen to points of view from people who may not be the same as you," Coffey says, explaining this is a great way for leaders to stay in touch with the market. "A diversity of clients can ensure the sustainability of your business."
Open up to new ideas
You also need different perspectives to inspire creativity and innovation. But it's important to note the process of innovation can involve conflict within teams – and to get the most value, we need to understand the preconceptions we bring as individuals.
"It's instinctive to attach different value to people's ideas or opinions based on how similar they are to yourself," explains Coffey. "The more open you can be to different points of view from your own, the easier it is to build a more innovative, collaborative and inclusive workplace with better outcomes."
With this in mind, Macquarie has invested in conscious decision making training for its program directors, with plans to roll this out to more staff. "Once you understand your own ‘unconscious bias', you will find it easier to step back and look at an idea or team member more objectively," she says, likening it to the benefits of ‘slow thinking' supported by Daniel Kahneman in his book Thinking, Fast and Slow.
"When we think someone is not ‘like us' we instinctively use the logic part of our brain and are more critical."
Visible and hidden diversity
While gender diversity gets a great deal of focus in Australia, there are many less visible aspects of an individual's background to consider – and you may need to balance inherent traits with acquired ones.
"Age, gender and ethnicity are obvious differentiators," Coffey explains. "But sexual orientation, religious beliefs, education backgrounds – these all form someone's life experience, and the ideas, skills and knowledge they can bring to your team."
She notes that when people with different skills and levels of ability work together on a problem, they are more likely to outperform a homogenous work group. "They have more resources in the ‘mental tool box'."
Recruiting for diversity
"Recruitment starts well before you start interviewing candidates," says Coffey.
"First, look at who is in your business now. What new skills or experience would accelerate that team's performance? It's less about the individual, and more about bringing in something unique or additive rather than more of the same."
Once you consciously determine what that difference is – a certain skillset, access to a particular market or a different perspective – be open to it from the first cut of the short list. You may be surprised how much this opens up your potential talent pool.
And be very conscious of the instinctive impressions you get when you first meet someone. "We typically make 11 judgments in the first seven seconds," she says.
To truly reap the rewards of a diverse culture, you may also need to be prepared to challenge the status quo.
"It's one thing to recruit diversity. You also need to integrate it into the workplace," explains Coffey. She says if you hear people say ‘but that's part of our culture' you may need to re-think. Dominant group styles or work practices may not suit everyone.
Interestingly, a new research report from Deloitte, The role of diversity practices and inclusion in promoting trust and employee engagement, found that not only does diversity improve employee engagement in the workplace, trust (bolstered by perceptions of inclusion) will influence how strong that engagement could be.
An authentic, inclusive workplace culture can provide distinct capabilities including original, engaging ideas that would not be possible among homogenous employee groups. The good news is that, by creating that ‘people-oriented' culture, you'll also be well placed to attract and retain the best talent for your business – across age, gender, cultural and other backgrounds.
Avoid these three diversity traps
- Diversity cannot be ‘tokenistic' – simply setting targets won't work, especially if there's a lack of commitment from senior leadership and strategic integration.
- Think beyond the recruitment phase. Once you recognise and value different skills and knowledge, and create an environment where people feel safe speaking up, you'll get even better outcomes.
- Don't focus on just one area of diversity at the expense of others. Think about other barriers you may unconsciously have in your workplace – for older or younger workers, for example, or for those with disabilities.