In the 21st century, more companies have made inclusion and diversity a priority. These businesses are crafting a more expansive tent through their employees, thus expanding their customer base.
Being diverse and inclusive makes moral sense, and companies have also seen the economic benefits. These seven reasons show how organizations worldwide benefit from practicing diversity and inclusion.
1. Larger Hiring Pool
The benefits of diversity and inclusion start in the hiring process. Some companies may have similar candidates applying for positions depending on the industry. However, broadening the talent pool for more diverse candidates gives hiring managers a more well-rounded list of prospects. Thus, increasing the odds the company makes the best hire possible for the company.
Diversity has become a higher priority for companies but is also critical for job seekers. A Glassdoor survey reveals that 76% of workers believe diversity is essential when contemplating job offers from various companies. And about one-third of workers say they won’t apply to an organization if they feel its workforce lacks diversity.
2. New Perspectives
Companies that expand their talent pool benefit from a new wave of perspectives and fresh ideas. Organizations with similar candidates for every position are more likely to face stagnation. However, employees from different backgrounds bring perspectives project leaders have never heard. These new views often lead to increased creativity and better problem-solving. A diverse pool of employees gives a well-rounded view to everyone involved.
A diverse and inclusive workplace also brings the benefit of connections to other businesses. International opportunities arise for organizations that have multilingual employees. They can knock down the language barrier, a common obstacle for companies trying to conduct international business. Workers from different backgrounds can connect to foreign organizations and their leaders.
3. More Innovation
Diversity in the workplace goes beyond demographics. It also breeds diversity of thought. Companies with various perspectives often execute new ideas and spur innovation more than other workplaces. Employees from different backgrounds can target their products and services to fit customer profiles and emerging demographics. Often, these workers have faced adversity and used it to improve their problem-solving skills and drive to succeed.
A Harvard Business Review (HBR) study shows a statistically significant relationship between innovation and diversity in the workplace. Companies with an inclusive workforce based on gender, age, ethnicity, career path, education, and industry background averaged 19% higher innovation revenue and 9% higher earnings before interest and tax. The study also found that companies with higher diversity scores were more likely to engage in fair employment practices, such as equal pay.
4. Tax Credits
An inclusive workplace is essential for a diverse set of perspectives from employees, but the benefits don’t stop there. Businesses see incentives for working with other diverse workplaces. Many states provide tax credits to companies that work with a minority-owned or woman-owned business. The incentives depend on the industry and state in which they operate.
The Nixon Administration created the Minority Business Development Agency (MBDA) in 1969, and President Biden made it a permanent agency in late 2021. More than 38 states, including Washington, D.C., and Puerto Rico, have state-funded programs to incentivize entrepreneurship from minority groups. For example, Georgia offers income tax credits for contractors and subcontractors if they use a minority business.
5. Higher Profits
Tax credits are an excellent incentive for companies to promote workplace diversity, but additional financial rewards exist. Inclusive businesses tend to be more profitable.
A report by McKinsey shows a connection between racial diversity and profitability. Companies see a 0.8% increase in earnings with every 10% increase in the ethnic diversity of the executive team. Diversity in race, ethnicity, and gender creates a 25% better chance of a business’s profitability exceeding the national median.
Whether a small business for car washing or a multinational logistics company, the ROI is clear for diverse workplaces. The inclusiveness also helps during times of crisis. Adverse economic times like the Great Recession of 2008 put many businesses through challenging situations.
Researchers from Great Place to Work examined numerous publicly traded companies and their diversity initiatives. The study monitored how these companies fared before, during, and after a recession. Highly inclusive and diverse companies found a 14.4% increase in their stock performance between 2007 and 2009, whereas other organizations saw their stock decline by 36%.
6. Better Trust and Engagement
Diverse companies tend to perform better in times of economic prosperity and adversity. Why is that? One reason is trust. Inclusive workplaces foster more confidence among employees. Workers feel better about themselves when they feel included in the company and don’t fear others in the office judging or ridiculing them based on cultural differences. Happier workers become more productive and engaged with company objectives.
Trust has become an issue in the workplace. About one-third of workers report they don’t trust their employers. Employee faith in the business is a driving force in productivity, results, and bottom line. One way to increase employee trust is to hire a diverse set of management teams. Employees are more likely to trust diverse supervisors because they’re more relatable and understand multiple backgrounds.
Employees who trust their companies are often more engaged and ready to work daily. Active workers go a long way toward an organization’s productivity, which is paramount for businesses dealing with supply chains. These employees are happier and stay with the company longer, leading to higher retention rates and better health across the board.
7. Effective Decision-making
Another significant reason inclusive companies see higher revenue is that diverse teams typically are better at decision-making. A study by Cloverpop shows that an all-male team makes the right decision 58% of the time. However, a gender-diverse team increases that number to 73%. A group diverse in age and gender improves to 80%, and organizations inclusive with age, gender, and ethnicity spike to 87% better decision-making.
It’s not a coincidence that teams with diversity in thought and demographics end up with better results. These diverse teams are 15% more likely to have friction in their decision-making. However, the discourse is a good thing. It forces teams to think critically and present why one path is better. Homogenous groups often end up stale in their decision-making process with little pushback because they’re similar in thought.
Diversifying the Workplace in 2023
Nowadays, organizations are increasing their focus on diversity and inclusion in the workplace. It makes sense based on ethics, and research shows these initiatives drive innovation.
When diverse in thought and demographics, companies make better decisions, increase employee engagement, and reap higher profits, even during adverse economic times. Diversifying the workplace is vital for businesses across industries.
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