7 ways diversity and inclusion help teams perform better

Diversity and inclusion provide organizations with many benefits, including better financial results, access to talent, innovation, and improved problem solving.

Diversity, equity, and inclusion have become important social issues. In the wake of the George Floyd and Breonna Taylor murders of 2020, companies made massive, highly publicized efforts to correct for systemic bias and improve the mix of race, gender, and lived experiences in the workplace. According to a recent study from Pew Research, most employed adults in the US think this is a good thing.

Not all of those efforts have been successful, though. Opinions on the topic vary widely across demographic and political lines. And many of those campaigns seem, in retrospect, to have been little more than marketing.

Politics — and even marketing — aside, there is no doubt that your teams should be diverse.

“This is not for social justice or corporate altruism,” explains Cheryl Stokes, CEO of CNEXT, a leadership development and executive networking business. “It gives you better business results.”

This is especially true for technical teams, where innovation is your lifeblood, but it is true for every team, everywhere.

“There have been many studies that show that with greater diversity, companies succeed,” says Alphonso David, president and CEO of the Global Black Economic Forum. “It is true in every industry. It is true in the United States, Europe, Asia, Africa, and South America. The principle has been proven over and over again.”

Diversity makes your company — and your teams — more creative and innovative. In fact, it makes your teams so much better that you can see the results (in green) on your bottom line.

“Ethnically diverse companies are 35% more likely to have financial returns above their industry medians,” explains Ashley Kelly, co-founder and CEO of CultureAlly, a D&I consulting and training organization.

Here are seven ways that diversity makes your teams better.

Stronger financial returns

“Diversity for the sake of diversity is a bad idea,” says Javier Palomarez, president and CEO of The United States Hispanic Business Council. “It’s not sustainable.”

Diversity, as companies have attempted it, is often implemented as a department effort. It is handed to a leader who takes it on as a project, separate from standard operating procedures. This, says Palomarez, is a mistake.

“It doesn’t need to be as complicated as most corporations make it,” he says. “I tell corporate leaders to take an honest assessment of the company. What markets do you serve? Where will growth come from? What does the employment market look like in your industry? What does the future employee look like for your brand? Does your leadership team — this is where a lot of companies fall short — reflect the markets you serve?”

You can easily find the demographics your company hopes to serve and hire from. Do your teams look like that mix? How about your leadership? If not, consumers and talent will look elsewhere for a brand that appeals to them, understands their needs, and develops products, solutions, and people who understand their experiences and culture.

For example, says Palomarez, “The Hispanic community has provided over 51% of the overall growth of the United States in the last decade. In the next decade, according to the Department of Labor, 78% of new entrants into the American workforce will be Hispanic.”

Will your brand appeal to that enormous demographic? If not, you are leaving a substantial amount of money on the table. If so, it will be reflected in your revenues.

“When we start doing our work with an organization, we encourage teams to look at the makeup of the company,” agrees Kelly. “Does it reflect the communities you serve? If not, that’s an indication you need to dive deeper.”

Increased access to talent

Hiring technology teams is legendarily difficult and not likely to get easier anytime soon. A diverse team, though, can attract and retain talent that will walk away from a non-inclusive one. “Currently, 70% of folks that are looking for work are looking for diverse companies,” says Kelly. “It is an important factor when they make a decision.”

Given the failures of inclusion exhibited by corporate diversity initiatives of recent years, talented people are wary of a company that claims to be hiring a diverse team but looks like a (less stylish) episode of Mad Men.

“We know that there’s infrastructure that supports non-diverse talent,” says David. “If you are in the majority and walk into a technology company where most of the people are white, you are likely to find support, mentorship opportunities, and an infrastructure that will promote your thoughts and ideas in a way we don’t see for minority populations.”

If your tech and hiring teams are diverse, however, you send a very different message to potential employees.

Everyone contemplating a brand for purchase or employment is asking, says Kelly, “Am I reflected in this organization? Can I see myself here as an employee — or as a consumer?”

Smarter decisions

“Inclusive teams are 87% more likely to make better decisions than non-inclusive ones,” says Kelly. This is because diversity triggers more careful information processing, more questions, and less blind belief in the ideas of people who pontificate.

“When you’ve got a diverse team, and you’re actually being very inclusive, you’re engaging them in the solution, and you get a broader pool of knowledge, a broader pool of skills and experiences,” says Stokes. “Those multiple viewpoints give you a more comprehensive analysis than you would get if you’re all from the same background. You enhance your decision-making processes and have better outcomes when you’ve got diverse insights and viewpoints.”

Enhanced innovation

“If we’re talking about technology, we have to talk about innovation,” says David. “Innovation comes through the lens of diversity. We look at issues differently based on where we are born, how we are raised, where we come from. A diverse team will create products in a way you may miss if you have a homogeneous team.”

Many studies have shown that diverse teams generate more innovative solutions than non-diverse ones.

“Decades of research show that a diverse lived experience, which often comes from demographic diversity, brings diverse insights to the table,” says Stokes. “Those different perspectives lead to more creative ideas and may challenge the prevailing notions of teams that have been together too long. Bringing in different people can challenge the status quo and get you out-of-the-box thinking.”

Better retention

Poor retention is expensive. Some estimates put the cost of replacing lost employees at six to nine months of that employee’s salary. Retention speaks to the inclusion portion of a company’s DEI efforts.

“We’re finding retention rates are abysmal,” says David. “You get hired and then you leave very soon thereafter because you realize this is not an opportunity that will lead to growth and ultimately success.”

Much of this is about promotions, pay, and opportunities. But some of it is discovering, once hired, a culture of discrimination. Your ideas aren’t heard. You are talked over. You work hard and aren’t recognized for it. According to McKinsey’s Women in the Workplace study, women are subjected to demeaning microaggressions at a rate twice that as men. For women of marginalized identities, these are more frequent and more demeaning.

Poor retention is also caused, according to Palomarez, by a failure to embrace the culture of the people you have invited into your workplace. “You should have a culture within your organization that embraces them,” he says, “and makes them feel at home, one that can retain and grow that talent.”

According to Cox, retention boils down to respect. “The key outcome all employees are driving for is respect,” says Cox. “I encourage leaders to focus on this. You can define what respect looks like and what the lack of it — disrespect — looks like. “If you look at Pew Research data, disrespect is one of the top three reasons why people voluntarily leave organizations.”

A diverse team is a welcoming culture for diverse people. It knows what respect looks and feels like, for diverse people. And it gives the people on the team the psychological safety to call out disrespect.

More relevant products

“If your offering is not what your consumer is looking for,” says Palomarez, “you’re talking past each other. If the people building your technology don’t have an appreciation and understanding for the culture of your buyers, you’re not going to optimize your investment.”

This can cover everything from spoken and written language to actual product ideas. If your team doesn’t have lived experience of the people in the markets you want to serve, you will miss something. You might miss many things. There are so many examples of this in AI development that it is affecting the development and application of the technology.

“If the product you’re building does not have the cultural relevance embedded in it, then it’s all for naught,” says Palomarez.

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