Do you need to ramp up company innovation? Need to boost ingenuity? According to research, the solution is simple: Hire a diverse workforce.
In a study, researchers at North Carolina State’s Poole College of Management considered this question: Do companies that foster diversity perform better in developing innovative products and services? Based on data from the 3,000 largest publicly traded companies in the U.S., the answer was clear: “The short answer is that they do,” says Richard Warr, co-author of a paper on the study. “The take-home message here is that a business which relies on innovation will benefit significantly from supporting diversity within its organization. It’s really that simple.”
The N.C. State study isn’t alone in its findings. A few years back the Center for Talent Innovation (CTI), a global talent think tank, published a national survey on Innovation, Diversity, and Market Growth. CTI found that when leaders embody diversity — and an organization’s culture embraces diversity — a “speak-up culture” emerges that harnesses point-of-pain insights to meet the needs of underserved demographics. And it’s this culture that exerts a measurable impact on the bottom line.
Innovation’s Key: Embracing 2D Diversity
CTI examined the importance of two-dimensional (2D) diversity, shorthand for inherent and acquired diversity. Inherent diversity is what you’re born with, including your gender, race, nationality, sexual orientation and religious background. Acquired diversity refers to the awareness or skills you’ve acquired due to life experience, as well as the “experiential intelligence” that broadens your understanding, such as cultural fluency, generational savvy, gender empathy, social media skills and language skills.
But here’s the really interesting part: CTI’s research discovered that when leaders combine acquired and inherent diversity within their teams, their companies reap clear market gains. Promoting 2D diversity was found to create a 70% greater likelihood of capturing a new market, and a 45% greater likelihood of improving market share.
Why 2D Diversity Is Effective
Why does this work so well? Because leaders who possess inherent or acquired diversity are far more likely to see the potential benefit of ideas presented by non-majority team members, and they champion these ideas into implementation.
By contrast, when leaders lack either type of diversity, they tend not to value ideas they don’t “see a need for” — typically ideas presented by women, people of color, LGBTs and millennials. Leaders without acquired diversity are often unreceptive to innovation that doesn’t resonate with their own cultural experiences.
More positively, companies that promote robust employee diversity and inclusion initiatives, and whose leaders possess either inherent or acquired diversity or both, will nurture a work environment in which:
- Everyone feels empowered to speak up, and everyone gets heard.
- Team members feel empowered to make decisions.
- It’s safe for all team members to propose unique ideas.
- Leaders accept advice and implement the feedback they receive.
- Leaders offer actionable feedback to their teams.
- Leaders share credit with team members for their teams’ successes.
It’s easy to see how creating an environment where inclusive behaviors are the norm makes it 75% more likely that employees would have their marketable ideas implemented, as CTI discovered.
The ROI of D&I
A diverse workforce brings unique perspectives, observations, insights and skills, all of which ultimately affect a company’s bottom line.
In the report Global Diversity Primer, four Cisco senior executives compiled data proving the business case for diversity and inclusion. Their number crunching reveals that D&I investments pay off in a variety of areas, including problem solving, innovation, productivity, customer loyalty and financial growth. For example:
- Of 28 teams studied, diverse teams solved complex tasks better, revealing a higher level of creativity compared with homogeneous teams.
- Companies that practice inclusion by tapping the knowledge and experiences of diverse employees meet their product revenue targets 46% more often, and their product launch dates 47% more often, compared with similar companies.
- Hiring employees who match the diversity of consumers pays off in customer loyalty. For example, the 2008 spending power of the LGBT community in the U.S. was estimated at $712 billion — and an estimated 78% of that community, along with their friends and relatives, would switch their brand loyalty to companies known as LGBT-friendly.
- Diversity leads to bottom-line gains: In research conducted on 506 U.S. businesses, each 1% increase in gender diversity led to a 3% increase in sales revenue. Meanwhile, European companies with gender diversity at the management level saw a 17% higher performance rate in their stock compared with companies that lacked such diversity.
A New Approach to Diversity and Inclusion
Reaping these benefits, however, isn’t a plug-and-play exercise. True diversity and inclusion requires a whole new approach, a broader and richer mindset to see the inherent value in normalizing the presence of all kinds of people within your organization.
To attain diversity means to develop a workforce with representatives from many different groups, including race, gender, age, sexual orientation, abilities and cultural background.
Lip-Service Approach: A company hires one or two people of color (or based on other aspects of diversity) and makes a formal announcement to tout that “diversity” has been achieved.
Beyond-Lip-Service Approach: The company takes a critical look at business imperatives and hires stellar diverse talent to meet business needs. These diverse hires are welcomed based on their merit and unique contributions, and they’re seen as key to the organization’s success. For example, the company might hire qualified Hispanic American advertising professionals to design a multimillion-dollar campaign for Product X aimed at communities of color.
To attain inclusion means making it possible for individuals of different groups to succeed by creating a workplace that values who they are and what they offer. An inclusive workplace provides opportunities for all individuals to develop to their full potential.
Lip-Service Approach: An official “Everyone is welcomed here!” corporate declaration is sent out when, unofficially, everyone knows the way to get ahead is to conform with the standards created by the dominant paradigm of corporate life. In other words, the company operates under a “get in where you fit in” philosophy.
Beyond-Lip-Service Approach: The company develops an onboarding practice that connects new hires immediately with mentors, support and resources to allow for their successful integration into the corporate culture and to set them up for success. There are ongoing and routine check-ins so leaders can take the pulse of the employees’ experience throughout their first 18 months on the job. And there are dedicated talent-management opportunities for diverse populations, including succession planning, with widely communicated goals and benchmarks.
Is your company ready to move to this new mindset? What steps can you take today to make diversity and inclusion a priority?