Many companies like to claim they value gender and racial diversity, but few actually walk the talk. A study of 16 Fortune 500 companies found that white males accounted for 72% of leadership roles; and while 16 companies may not sound like an adequate data set, when you consider that the data encompasses over 800,000 people at those 16 companies—everyone from their CEOs to service staff—those are substantial numbers. Tech companies in particular have notoriously struggled to be diverse; a 2015 Forbes article reported that Microsoft was over 75% male and 60% white, and tech giants like Google and Apple have similar percentages.
Diversity should be top-of-mind for organizations not only from a social justice perspective, but for other reasons as well. That famous quote that “talent is equally distributed, but opportunity is not,” rings true in that a company may be looking at two candidates for the job who are equally talented, but because of something called “unconscious bias,” the person making the hire chooses the candidate that’s most like themselves. Not only is this morally upsetting, but it’s also bad business. It turns out that the data doesn’t lie when it comes to this fact: diverse companies outperform less diverse companies on a number of factors. Studies show that diverse companies are more innovative, have a wider talent pool, and ultimately turn out to be more financially successful. Let’s explore three ways diversity benefits organizations and ultimately gives them a competitive edge in the marketplace.
Diverse teams bring a diverse array of perspectives when it comes to decision-making and problem solving. They more accurately represent the general population and thus, your client demographics. Let’s face it: the world isn’t all one color or one gender—your client base likely isn’t either—so it would make sense that your company can’t be successful if it’s completely homogenous. Sandra Schmid, a professor at the University of Texas Medical Center who has spent years studying diversity and executive leadership, spoke to Science Magazine about this point, asserting that “diverse teams bring multiple perspectives to problem solving, making strategic decisions that more fully reflect client demographics.” If you have an entire executive team or company with the same background and experiences, your company won’t just lack gender and racial diversity, but a diverse set of ideas and perspectives. If you want to be a successful company on the forefront of innovation, your employees have to be representative of today’s competitive global market
If your company is only known for hiring one type of person, that seeps into your brand reputation and permeates the culture. Word of mouth travels fast, and you may inadvertently discourage people of different backgrounds to your company if it’s perceived that you simply don’t hire them. A company that currently embraces diversity will continue to attract a wider range of candidates to their vacancies, appealing to people of all walks of life. Companies that are more diverse have better retention rates as well by creating a more welcoming work environment and boosting employee engagement. Diverse groups of people learn more from one another and a diverse culture creates a positive environment where people feel that opportunities are awarded based on talent—not on gender, ethnicity, or background.
Based on the two factors above—innovative ideas and increased employee retention—it’s easy to see why diversity also plays into a company’s overall success. But that connection isn’t just an assumption—it’s backed up by hard data. A two-part study from McKinsey, starting in 2015 and updated January 2018, has found a correlation between diversity and a company’s financial success. Drawing on data from over 1,000 companies across twelve countries, the study had some staggering results. “Companies in the top quartile for gender diversity on their executive teams were 21 percent more likely to experience above-average profitability. For ethnic and cultural diversity, the likelihood was a 33 percent likelihood of outperformance.”
This just goes to show that gender and racial diversity should not only be reflected throughout your company, but also at the very top within your executive team, where strategic decisions are made and the tone of the company is set. McKinsey confirms that “companies in which women make up at least a third of board members achieve far higher profit margins than rivals with fewer women on their boards” and that “for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.” There’s no denying that having a more diverse mix of people at the top boosts your company’s success.
Achieving workplace diversity requires those making the hiring decisions to remain aware of their own unconscious bias. Unconscious bias is the concept that people tend to recruit employees who look like them, with similar backgrounds and experiences. To avoid that pitfall, it’s important to prioritize diversity with your hiring decisions. Having a company made up of talented people who actually reflect the makeup of the community is a huge asset; you end up with a diverse set of ideas and perspectives, which promotes innovation, increased employee retention—and overall financial success and profitability.
Particularly when it comes to your executive team, it pays to prioritize diversity. Your executive team sets the culture, tone, and expectations of your company as well as makes strategic and operational decisions. They’re leading the charge—so shouldn’t they reflect a diverse set of experiences? Prioritizing diversity in the workplace benefits everyone involved, creating an environment of innovation, a better employee experience, and increased financial success.
About the Author
Matthew J. Schwartz is the Founder, President and CEO of MJS Executive Search with nearly two decades of experience in retained executive search. Matt’s expertise lies in bringing together key executives that exhibit passion and creativity with leading organizations in a wide range of functional areas such as Marketing, Sales, Digital, Interactive and more. From Digital and Social media to Machine Learning and AI, Matt is passionate about cutting edge technologies and is dedicated using his knowledge to help his clients remain or become leaders in their realm.
Founded in 2003, MJS Executive Search has established itself as a top retained executive search firm that identifies and places unique, hard to find executives in highly specialized roles.
If you are interested in learning more about our Transformational Talent™ solutions, contact MJS Executive Search today to learn more about how we can help your organization. www.mjsearch.com