Diversity Makes Business Sense

From technology to law and finance to advertising, almost every industry is waking up to the issue of diversity – of lack thereof. We call it out when we see a panel of speakers of only one gender or one race. We hear news stories about sexism, racism and ageism in the workplace.

We know diversity problems when we see them. But what does it look like when a business values diversity?

Prioritising diversity isn’t just a feel-good exercise. Research shows that diverse companies and workplaces make for stronger and more innovative businesses.

Here is why focusing on diversity within your organisation makes perfect business sense:

Some business leaders may believe that being forced to prioritise diversity may decrease productivity and profitability. For instance, they might worry that the most qualified person may not get an opportunity, simply for the sake of diversity, and result in weaker business results. Research suggests, however, that diversity actually increases profitability.

In a study of more than 350 public companies across North America, Latin America and the UK, McKinsey found that companies that ranked highest for racial and ethnic diversity were 35% more likely to have financial returns above their respective national industry medians. Those that ranked high for gender diversity had were 15% more likely to see stronger financial returns. In fact, it found that for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rose 0.8%.

Diversity has also been shown to make businesses more creative and innovative. An eight-country study by BCG found a strong link between the diversity of management teams and overall innovation. In both developing and developed economies, companies with above-average diversity on their leadership teams reported a greater payoff from innovation. In fact, nearly half of the revenue of companies with more diverse leadership came from products and services launched in the past three years. It also found that businesses could make significant gains with relatively small changes to the diversity of management.

The research suggests that making diversity a priority enables businesses to attract and retain top talent and create innovative new products and services more quickly, which can then drive stronger financial results.

We still have a long way to go

The latest statistics around impact that diversity can have on businesses is certainly good news but that doesn’t mean that all businesses are listening. A recent report by Chief Executive Women (CEW) found that one in five of Australia’s top 200 listed companies have no women in their senior executive leadership teams. Only 5% of ASX 200 companies have a female chief executive, while 9% have a female chief financial officer.

The story is similar when it comes to ethnic and racial diversity. A report by the Australian Human Rights Commission found that while more than 10% of the Australian population has a non-European cultural background, only 5% of ASX 200 CEOs have a non-European cultural background. That’s 10 out of 201 chief executives. None of the executives had an Indigenous background.

Diversity issues are equally concerning when it comes to the development of new technologies. Experts have warned that, instead of being an equalizer, AI systems could suffer from unconscious bias depending on their developers and the data they used to make predictions and decisions. Stories have been reported about vehicle voice commands not understanding female voices or facial recognition technology that struggles to identify faces of people of colour. Plus, we must consider the implications of the fact that the top virtual assistants today, such as Siri, Alexa and Cortana, are all made ‘female’ by default.

We say this reality isn’t good enough. And it’s something we want to help change. That’s why we are looking for startups and scaleups that prioritise diversity within their business to participate in our next NYC Immersion program. We know that diverse teams make for stronger businesses and we want to help you get to the next level and fast track your international expansion into the US.

If that sounds like your business or one that you know, apply now for the next program.