Feb 4, 2019 | Ginny Engholm
The ROI of Diversity in Hiring
A 2018 Accenture study
of 140 U.S. companies touted the economic value of a diverse workforce. The study found that companies that were leaders in disability employment and inclusion had, on average, 28 percent higher revenue, double the net income and 30 percent higher economic profit margins.
This research is the latest to reveal that having a diverse workforce is about more than doing the right thing -- it’s about benefiting a company’s bottom line
“When people talk to me about the ROI of diversity and inclusion, even HR professionals, they are still under the impression that it's a to-do item on their list rather than thinking of it as another way to drive business and grow their bottom line,” says Olivia Jaras
, an expert on the gender wage gap and salary negotiations for women.
“We believe supporting diversity throughout our global logistics network is a winning strategy. It drives economic development in local communities, encourages innovation, and ultimately enhances UPS’s products and services for our customers. Simply put, diverse partners bring fresh and innovative approaches to our business,” Juan Perez, chief information and engineering officer at UPS
Here’s why companies need to embrace diversity if they want to drive sustainable growth and compete in a global marketplace.
One concrete way diversity helps companies compete? Diverse teams are more innovative.
“In IT and engineering, we know that a diverse and inclusive team drives innovation faster, and that’s critically important to our business and our customers,” Perez says.
Cheryl Ingram, the CEO of Diverse City
, a diversity, equity and inclusion consulting firm, points out, “Diverse teams tend to be more productive and innovative and also more reflective nowadays of marketplaces for companies. There's a firm belief of ours that a homogenous team cannot be very innovative, especially if you are serving a diverse marketplace.”
Jaras points to the Medici effect
to support this idea. “A study looked at teams that were asked to solve very complex tasks and the mixed team, the heterogeneous team, did far better than the homogeneous ones,” she says. “Basically, the more diverse your group is, the more likely you are to generate groundbreaking ideas. Diverse perspectives are going to lead to innovation.”
Ingram gives a simple example of this phenomenon. When airbags were first created, she says, they were more likely to kill women and children when deployed in a collision. This led to a lot of lawsuits for the manufacturers, which cost them millions of dollars. When they analyzed why women and children were more likely to be injured by airbags, they discovered that the all-male engineering team was simply not accounting for the smaller sizes and different body types of those populations
. Why? Because the team was not diverse.
“When you have those diverse candidates, whether they have people who have disabilities or women or older individuals, you bring in a wealth of knowledge that can improve your product and spur innovation,” Ingram says.
Improve Recruitment and Retention Efforts
Having a diverse workforce is essential to successful recruitment and retention efforts. “If you want to be a diverse and inclusive organization, you need to be in those locations where you can find that diversity. And I’m not talking just about race and ethnicity. We also value diversity of thought and experience,” Perez says. Without it, companies waste money on recruitment efforts that fail or workers who leave their company.
But companies can’t just talk about diversity and inclusion. They have to create a culture that values it. “It is crucial to have a culture within the company that values diversity,” says Perez. “It’s important to provide everyone with access to development and to demonstrate that diverse candidates are advancing within the company.”
Ingram says one of the biggest returns on investment for diversity and inclusion comes from improvement to retention programs, especially among marginalized populations.”It doesn't matter if you recruit them if your climate is not inclusive,” she says. “If you haven't started working to build an inclusive and equitable workplace, even if they come, they're not going to stay, and it's going to cost you more money in the long run.”
“Diversity and inclusion are so intertwined with company culture and how you integrate an employee into it,” Jaras says. Successful companies that create this kind of inclusive culture have workers who are more satisfied and more productive because they feel supported and included.
Compete in a Global Marketplace
Diversity also allows companies to compete in a global marketplace by better understanding the needs of their customers around the world, says Perez.
“Populations are changing. So by having a diverse workforce, we can better adjust to new dynamics,’ says Perez. “Technology is now accessible to people of all backgrounds. It is really important that an organization adopt and create technology that supports diverse users. That starts by ensuring we have a diverse team.”
The more diverse your team is, the broader your customer base is going to be, says Jaras. “If you want to be in any way a global company, you have to have a global perspective. You don't have that by hiring a fully landlocked U.S. team.”
Having a diverse workforce allows companies to serve its customer base more effectively, says Ingram. “When you're serving your customer base more and you're creating a high-quality product, your company is more profitable.”