It is no secret that the world is becoming more diverse. Census and demographic data show that by 2030 women will make up 51% of the global workforce, minorities will comprise 54% of the population, and five generations will be working side by side. Most business leaders instinctively know that diversity is good for business. The business case for diversity continues to get stronger and leaders are seeing the benefits every day.
THE CURRENT STATE
To understand how important promoting a diverse and inclusive organization is first we need to address the current state of the workforce.
For every 100 men that are promoted to manager, only 85 women are promoted.¹
By the end of 2024, over 44% of people over the age of 65 will be working. The AARP reported that 64% of people have either experienced or witnessed age discrimination in the workplace.¹
In the United States, more than 50 million people have a disability, and together they have over $60 billion in discretionary spending power.¹
57% of employees believe that their company should be doing more to increase diversity and inclusion within the company.²
41% of managers state that they are too busy to make diversity and inclusion a priority.²
Employees want to see the companies they work for prioritizing diversity and inclusion. Customers want to see their core values be reflected in the companies they give their money to. Prioritizing diversity, equity and inclusion are necessary for a company to succeed today. Now let’s take a closer look at how diversity drives business growth.
Having a diverse team is critical to increasing innovation. A study by the International Labor Organization found that diverse teams had a 59.1% increase in innovation. They also found that those companies were able to understand their customers better by 36.5%.³ More than that, gender-diverse teams saw a 34% increase in revenue over a three-year period due to innovation.⁴
Overall companies who are more diverse see over 19% more revenue due to innovation and 9% higher EBIT margins on average.⁵
The benefits of diversity aren’t confined to the boardroom. Companies with diverse teams saw an increase in company reputation by 54.1%⁶ Consumers who saw ads featuring diversity and inclusion were more likely to purchase that product by 64%. That number is even higher (69%) among Black consumers who see themselves being portrayed in a positive way. LGBTQ+ consumers are also more likely to interact with an ad if they see their sexual orientation being portrayed authentically by 71%.⁷
We can see the impact that having a diverse team has on revenue, innovation, and reputation but did you know having a diverse team affects a corporation's social responsibility?
Female directors are more likely to say social issues such as human and income equality should be part of corporate strategy.⁷ They are also more likely to endorse work-life programs such as onsite childcare, wellness programs, and compressed workweeks.⁸
THE BOTTOM LINE
All of these are great reasons to start prioritizing diversity, equity, and inclusion. But what most business leaders want to know is how it affects their bottom line.
75% of companies with diverse and inclusive decision-making teams exceed their financial goals.⁹
Workplace culture can drive employee turnover and affect employee retention. The average cost to replace a salaried employee is 6 to 9 months salary. For example, if a manager is making $55,000 a year the cost to replace them would be around $27,500 - 41,250.¹⁰
Companies in which women held 20% or more management positions generated 2.04% higher cash flow returns on investments compared to companies with 15% or less women in management positions.¹¹
Simply put, diversity drives business growth.
With the world at their fingertips, consumers are more educated than ever before. They won’t spend their money where they don’t see companies aligning their business strategies with their values. Companies can no longer afford to not invest in diversity, equity, and inclusion.
¹“Study: Diversity in the Workplace 2021.” Cloud Access Control System - Secure Door Access, 16 Feb. 2021, www.getkisi.com/blog/study-diversity-in-the-workplace.
²Perry, Nick. “20 Diversity in the Workplace Statistics to Know for 2021.” Fundera, Fundera, 16 Dec. 2020, www.fundera.com/resources/diversity-in-the-workplace-statistics#sources.
³International Labour Organization, Women in Business and Management: The Business Case for Change (2019): p. 16.