Why Diversity Works

1 / Improved innovation and problem solving in teams

A robust corpus of research demonstrates that companies benefit when they actively recruit, hire, develop, and promote women and people of color. In fact, heterogeneous groups tend to perform better than homogeneous ones, even when the members of the homogeneous groups are individually more capable! This is because more diverse groups of people tend to have different points of views, different reservoirs of knowledge, consider a wider variety of ideas, and debate the viewpoints of others more vigorously. This leads to higher quality decisions and improved problem solving (Hunt et al., 2015).

2 / Avoid costly litigation.

The costs of harassment and discrimination in the workplace can be devastating to a company. In 2016, a study found that US companies had at least a 10.5% chance of having an employment lawsuit files against them. A representative study of small to medium sized companies found that 24% of these charges resulted in legal costs averaging $160,000 and took almost a year to resolve (Hiscox, 2017). The EEOC recommends that employers take proactive steps to prevent harassment in the workplace and to create a work culture that is respectful of all employees. They recommend that employers conduct regular assessments for the risk factors associate with harassment and assault and conduct climate surveys to assess the extent to which harassment is a problem within their workplace. Further, they recommend that employers use the results of these assessments to design solutions.

3 / BETTER financial performance

Compelling research out of the University of Illinois at Chicago (Herring, 2009) found that racial and gender diversity within an organization is associated with increased sales revenue, more customers and greater relative profits. In fact, Dezso & Ross (2012) found that a company generates, on average, one percent more economic value with at least one women on its top management team than other companies without women in top management.

4 / Enhanced company reputation

When your business demonstrates valuing a variety of employees, the reputation of your organization improves. A recent study found that the diversity of boards significantly affected a business’s corporate social responsibility ratings which, in turn, influenced corporate reputation. (Bear, S., Rahman, N., & Post, C.; 2010). In addition, a diverse and inclusive company culture attracts new hires in positions at all levels. Diverse new hires, in turn, help build your brand and can open doors to new clients, markets, and business partners. 

5 / BETTER ORGANIZATIONAL FUNCTIONING

When organizations foster a culture of diversity and inclusion, companies run better.

Special attention should be paid to the composition of top management because, after all, an organization’s performance is to a large extent a function of its top management team (Carpenter et al., 2004)