McKinsey published research showing that companies in the top quartile for gender or ethnic diversity are more likely to have financial returns above national industry medians. Companies in the bottom quartile are statistically less likely to achieve above-average returns. This highlights that inclusion is probably the differentiator that shifts market share.
I don’t want to overstate the case for inclusion and financial returns – we can only prove correlation, not causation, and gender and other demographic differences are in one sense only a proxy for cognitive diversity (the real prize).
But given the increasingly competitive nature of business, increasingly volatile nature of politics and the operating environment, not to mention rising demands on professionals with information overload, it’s worth another look at the business case for diversity.
That may indeed offer us a different route to the clear blue ocean. Consider the case of the London 2012 Olympics where we took diversity very seriously. It led to better customer service as we had a phenomenal skill set available to welcome the world. A junior, Muslim colleague suggested the idea of “Ramadan packs” that became a new product line and a revenue stream at Games time as well as delighting a significant customer segment.
Diversity in our supply chain helped save £112m of our projected £1.3bn spend. This was largely achieved through decreasing barriers to entry, increasing transparency and competition, driving down costs, and sourcing new and innovative ideas that a closed shop arrangement would have locked out.
I teach the Harvard MBAs a class on inclusive leadership. We ask the students to have an arm wrestle, the goal being to score as many points as possible in one minute and, if at all possible, avoid litigation. After one minute the room of future CEOs splits into two camps.
Some 80-90 per cent of the room, predominantly men, have scored zero points, or possibly one or two. The rest, mostly female, scored 30-40 points. They simply let each other win, through cooperation as opposed to confrontation, enlarging the pie for all parties.
Beyond the classroom, or the large corporation, inclusion comes into its own in small businesses. When budgets are tight and resources constrained, what other assets are at your disposal? Including people with different perspectives can mitigate risk by challenging bad decisions, groupthink and bias. You don’t need to pay people more money for them to have a different viewpoint, perspective or skill set.
But you need to include them to benefit from this difference. The smaller you are, the less resources you have available. The more diverse you are, the more you maximise what you do have.
Including people by allowing them to bring their whole selves to work can increase their productivity. We know that people perform better when they can be themselves. In a small company, like mine, people often get more job satisfaction from being able to be themselves and have more direct responsibility and client contact. This is a free way to retain people and motivate people to deliver excellent client service.
Including difference also increases the resilience of firms. Think of your company as a toolbox. When faced with a problem to solve or a solution to build would you rather have a toolbox of hammers, or a toolbox of different equipment that allowed you to get the job done quicker, and with more resources and options at your disposal?
For some, diversity is still a half-baked idea. The Harvard classroom shows it can actually enlarge the pie for all of us. It’s time for a real discussion on inclusion and to swiftly follow up the talk with concrete actions. There will never be enough time or resources. But diversity is free, in infinite supply and largely within our own control. It’s time to include it.
Stephen Frost is the founder of Frost Included, a consultancy that works with HR professionals to help them embed inclusion in their decision making. Alongside ESCP Europe he is running a two-day diversity course for professionals.
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