Most managers accept the fact that workplaces benefit from attracting and retaining a diverse team, but quantifying this notion can be difficult, especially when it comes down to measuring innovation. New research suggests that diversity plays a key role in driving market growth and making innovative ideas happen: given that companies with high degrees of ethnic and racial diversity at all management levels are 70% more likely to capture new markets compared to their counterparts, it is critical for organizations to embrace DEI initiatives rather than view it as an obstacle.
What is a Diverse Team?
When it comes to building a diverse team, most recruiters tend to focus on inherent diversity: unique biological and genetic predispositions that make us all different. Inherent diversity consists of traits that people are born with, such as age, birthplace, ethnicity, race, and sexual orientation.
All of these factors are important when it comes to creating a more inclusive workplace, but diversity isn’t just limited to standard, quantifiable demographic factors.
In fact, Harvard Business Review defined a second dimension of diversity in the workplace: acquired diversity. Acquired diversity involves traits that people gain from experiences, specifically mindsets, attitudes, and ways of thinking that are unique to every individual. These characteristics can be learned and are prone to changing over time.
Building a workforce that is representative and inclusive of both forms of diversity can foster a climate in which teams can reach their maximum potential. By recruiting and supporting two dimensional diversity, companies can reap the major benefits of building a diverse team, from fostering a culture of respect to overall better organizational performance.
It’s no surprise that investing in diverse perspectives can lead to better organizational outcomes: increased productivity, innovative ideas, happier workers, and more equity and inclusion. In companies that lack diversity in demographics and experience, historically marginalized communities, including women, people of color (POC), and LGBTQ+ individuals are 20-24% less likely to win endorsement for their ideas than their straight white male counterparts. The implications of this cost are tremendous, because diverse contributors inherently understand the unmet needs of untapped markets.
Companies that recruit and intentionally invest in diverse leadership are more likely to grow their firm’s market share. According to HBR, when at least one member of your team shares common characteristics with the customer—whether it's in terms of demographics or experiences—the entire team benefits. For example, a team with a member who shares the client’s ethnicity is 152% likelier than an ethnically homogenous team to understand that particular client. In a world of increasing globalization, organizational teams should reflect the societies that they operate within to better meet the needs of their customers.
There has never been a better time to be transparent about DEI data than now. Companies that are transparent about their diversity data are more likely to gain the trust and confidence of customers, investors and stakeholders compared to organizations that withhold that information. Today, a growing number of stakeholders are demanding that organizations align with their values, especially when it comes to social issues.
Fostering transparency can help build trust between your organization and stakeholders— releasing diversity information is an opportunity for businesses to hold themselves accountable to the DEI progress they seek to make. Leveraging diversity data can help firms visualize where they are succeeding (ie. recruitment) and where they have room to improve (ie. representation of women, LGBTQ+, and racially and ethnically diverse people at senior levels). Reforming organizational DEI strategy to better align with employees and stakeholders can help nurture the benefits that trust creates.
All too often, employers, who want to know about the diverse identities within their organization that they themselves do not possess, are left confused when employees seem unwilling to share. More often than not, the cause is rooted in a fundamental human need: a lack of psychological safety. In other words: People don’t feel “safe” enough to speak up, even if they are prompted to.
Inclusivity and actively listening go hand in hand: McKinsey found that leaders who demonstrate a combination of both consultative and supportive leadership behaviors can increase the likelihood of their workforce’s psychological safety, fostering a positive team climate. Inclusive leaders are able to listen to the needs of their team, whether it’s by soliciting the team’s input and considering their viewpoints on issues that affect them, or demonstrating concern and supporting them not just as employees, but as individuals. Giving your team a voice has valuable returns on innovation: employees in a “speak up” culture are 3.5x as likely to contribute to the discussion and release their full innovative potential.
From a profitability standpoint, prioritizing the customer experience is the key to success—and making business decisions that yield better outcomes for your customers can fuel your organization’s growth. Investing in a diverse workforce inherently broadens perspectives and brings more experience, knowledge, and expertise to the table: companies that prioritize inclusivity and listening at every management level can foster a level of psychological safety for employees to engage and vocalize their decision-making processes—in fact, Forbes found that diverse teams are better at making decisions 87% of the time over non-diverse teams.
Creating a culture of inclusion makes every party better off: When employees feel comfortable asking for help, sharing suggestions informally, or challenging the status quo without fear of negative social consequences, organizations are more likely to innovate to better meet the needs of their customers—which means better decision making all around.
Building a diverse team also has positive effects on retention rates. When it comes to an organization’s policies surrounding diversity and inclusion, 86% of women and 74% of men agree that D&I is a main factor in deciding where to work. Not only does investing in both inherent and acquired diversity create an atmosphere that attracts and retains people with different life experiences and needs, but it helps employees feel like they belong.
For organizations to sustain a competitive advantage within their respective industry, it’s imperative that leaders attract, hire, develop, and support diverse professionals. The benefits of building a diverse team can lead to a more inclusive way of working and can unlock innovation that drives market growth. Intensifying efforts to ensure that DEI becomes implicit and naturally embedded into organizational practices, talent acquisition, and client strategies can only improve employee engagement, success, and high levels of business performance.
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