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Diversity has long been a topic of debate in the business world, but it’s becoming increasingly important against the landscape of the global marketplace. Study after study has shown the benefits of nurturing a diverse workforce, and the same is true for the executive team. A recent McKinsey report found that the top companies for ethnic diversity were 35% more likely to exceed industry means in financial return. For gender diversity, they were 15% more likely to exceed that average. The study does point out that while correlation does not equal causation, it is still clear that business success is somehow linked to greater diversity.
Yet, diversity remains elusive for many companies. The McKinsey report suggests that only 16% of executive leaders in the U.S. are women, while 97% of U.S. senior leadership teams fail to represent the national demographic in racial diversity. In many cases, organizations are simply unaware of the benefits to being intentional about diversity; in others, leaders find it difficult to implement this kind of strategy.
Why a Diverse Leadership Team Performs Better
As mentioned, although correlation does not necessitate causation, it’s clear that more diverse companies achieve greater financial return. But why?
One theory is that when the ethnic and gender-based make-up of a board and executive team better reflect their customer or client base, they are more effective in predicting and fulfilling those customers’ needs, expectations, and desires. For example, a study from the Harvard School of Public Health notes that the healthcare industry serves the most diverse customer base of any field; so it makes sense that 43% of hospital executives are women. It’s a balance that better equips hospitals to meet the varied and critical needs of their patients. In any industry, a leadership team that can more organically tune in to the diverse perspectives of their customer base will likely be faster and more effective in responding to market changes and evolving customer habits.
The McKinsey study suggests that greater financial return is likely due to other positive impacts diversity has on an organization. For example, bringing together diverse perspectives, ideas, and approaches often results in creative problem-solving and innovation. It also improves collaboration and employee satisfaction, particularly for ethnic minorities, whose increased job satisfaction likely derives from reduced prejudice and greater support of an intentionally diverse workplace. These factors work together to improve overall business performance.
It’s also apparent that diversity in leadership promotes better decision-making. In a diverse setting, leaders are more aware of their potential biases and more willing to explore a variety of perspectives, objections, and alternatives in their problem-solving. Essentially, this allows for a more objective approach to any situation, challenge, or initiative, once again resulting in higher performance.
Why Implementing Diversity Initiatives Is a Challenge
It’s no surprise that imbalances in both ethnic and gender diversity have roots in historic trends. Thus, it’s common for companies to get stuck in old ways, particularly when hiring. Business Roundtable, an association of CEOs at leading U.S. Go to the full article.
Source:: Business 2 Community