How important is diversity?
An obvious answer maybe, yet many companies are still underrepresented across all demographics and we still see reports such as the gender pay gap which highlight that there are issues that need addressing. Perhaps not everyone has given the important topic of diversity enough attention, perhaps the measures being taken are not effective enough or there is a lack of understanding of the benefits of having diversity in all areas and aspects of a company. Diversity is very important to companies and its employees, not only because it is ethical, moral and fair but it has also been shown that it leads to greater productivity, creativity and financial returns. The companies that are leading the way and focusing on this now will gain a competitive advantage in the marketplace, both in terms of performance and in the ability to attract and retain talent.
Productivity can be measured in many ways and be influenced by various factors. A key, recognised factor is the effect of positive employee engagement on work ethic in a company, something that diversity can improve. Diversity and inclusion enrich the work life of employees as well as at a personal level as interactions with people from different backgrounds leads to more open mindedness and understanding, which is invaluable in all aspects of life and work. As a result of this, diverse workforces report higher employee satisfaction and improved collaboration, which is reflected in studies that have been conducted on diversity and companies’ performance.
One of these studies is a report by McKinsey in 2015, Diversity Matters, highlighted that companies with better gender diversity were 15% more likely to show financial returns above their respective national industry medians, and for firms with better ethnic diversity, they were 35% more likely to financially outperform their respective industry medians. There is clearly a correlation between greater diversity, productivity and financial returns, although the exact link has not yet been determined as there are many factors that can affect this.
One clear factor is how diversity in a team, or workforce, improves the ability to solve problems, which is another key measure of productivity. By having a workforce from a wide variety of backgrounds and experiences, problems can be solved by drawing on different perspectives, approaches and ideas, often resulting in more innovative and creative solutions that otherwise would not have been used. Diversity within a team helps create a more balanced mix with more complementary skills, experience and knowledge, as opposed to all coming from the same background. Being exposed to these varying experiences and approaches teaches members of a diverse team to be more creative and develop more innovative solutions when solving problems in the future.
It is for benefits such as this that candidates are increasingly deciding whether they want to work for a company by looking at a company’s values, ethics and principles, of which diversity and inclusion is ranked as being very important. These values form the basis of a company’s brand and image which are key in attracting talent, consumers, markets and the media. Embracing diversity goes a long way to enhance this as it shows that the company cares about its workforce and makes it a more attractive place to work. However, diversity needs to be celebrated and nurtured in a company, rather than being seen as a checkbox exercise or another value that can just be added to a list to improve their brand. As mentioned above, a more diverse workforce has better employee engagement and a higher chance of success, which is definitely something that all companies want their brand to be known for, especially when it comes to attracting and retaining talent.
One avenue that can be used to bring talent into a company is through employee referrals, although this is not the best way to ensure a diverse workforce. Part of the issue of using referrals is that if your company is already struggling to be diverse, this will be perpetuated as more people from the same background are referred in. However, employee referrals can be very beneficial if a company already has a diverse workforce as there is a broader and more diverse base of candidates that can be tapped into. This creates a much stronger position from which to compete against other companies to attract the best talent.
Another benefit of having a diverse workforce is in the understanding of a company’s users or target markets. The success of a product or service depends on a company understanding the users it is serving and only by having a workforce that reflects the diversity of a target market, can a company gain proper insight into its users and their requirements. This is not only when it comes to developing, advertising or marketing its product or service, but also in customer support and other interactions with users. This is especially prevalent in organisations that serve a varied demographic, for example Transport for London states that it wants its workforce to reflect the people and areas it serves. This organisation appreciates that in order to provide the best service they need to understand the people, cultures and nuances of the areas where they work.
The benefits of embracing diversity in a company can affect many aspects, from financial performance to employee engagement and the ability to attract and retain the best talent. However, diversity is still not prevalent in all companies and there is much room for improvement. Organisations need to identify and analyse areas that they can improve in order to promote and instil diversity in their workforce and the companies who do this best are setting themselves up for long term success.
There are many ways to ensure and promote diversity, ranging from job descriptions and the hiring process to establishing the right company culture. At Equitas we are focusing on reducing bias in the interview process, allowing candidates to be selected based on their skills and suitability to the role. We are also using data to help improve the interview process, identify and reduce bias and help companies make better and less biased hiring decisions.
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