The business case for diversity and inclusion is clear to anyone who pays attention. Revolutionary shifts in demographics all over the world have created patterns that directly impact the workforce, workplace and marketplace. The more aligned a company’s diversity strategy is with its overall business objectives, the more it can boost business results.
The bottom-line business case for diversity is that creating a powerful organization-wide diversity culture can increase a company’s market share, productivity and profits. In addition, diversity fuels innovation, resulting in better products and services, and reducing costs associated with employee turnover.
Businesses are investing hundreds of millions of dollars into diversity efforts, and not just to guard against lawsuits. Diversity is often a catalyst to improve community relations, enhance brand and public image and connect with untapped markets. Leveraging global diversity as a core business asset is vital to survive in the new global economy. As companies expand their reach to meet business needs, expand their customer base and reach out to new markets, the realities of global diversity become apparent.
Regardless of an organization’s business, the world is likely the constituency. Leaders must think and act globally, consider best practices and seek opportunities to collaborate, innovate and integrate across nations. The days are gone when top leaders think of diversity and inclusion as solely a legal compliance issue or worse. Most leaders understand that diversity and inclusion are essential to competitive advantage. Yet, it is widely accepted among diversity executives that their jobs and budgets depend upon their ability to demonstrate return on investment. In this formula, the business case for diversity is mainly defined in financial terms. Success or failure is determined by a narrow set of metrics.
Companies need to take a more holistic view. According to an August 2010 IBM Making Change Work survey of 1,500 top executives, most CEOs say they and their organizations execute change poorly. If the purpose is to chase quarterly or short-term profits, the approach will be limited. If long-term sustainability is the goal, successfully embedding diversity and inclusion into an organization’s framework requires longer-term investments such as integrating diversity and inclusion into the overall business strategy, securing leadership buy-in, expanding marketplace segmentation, ensuring that policies and practices enable talent and creating accountability.
A Changing World
Patterns of movement for people all over the world have created a dramatically different human landscape than ever before. According to the 2010 U.S. Census, close to 12 percent of the residential population of the United States is now people who were born outside of the country, the largest percentage since the 19th century.
Similar patterns are occurring in Europe and the Middle East, and the movement of people between countries is happening faster than ever before. Hundreds of millions of people work and live outside of their countries of origin. Data from the National Bureau of Economic Research reveals the Western Hemisphere’s share of the world population has dropped from 33 percent in 1913 to 17 percent today, and its percentage of global gross domestic product from 70 percent in 1950 to less than 50 percent today. Of the 60 most populated cities in the world, only five are in the United States or Europe. In 1955, 75 of the 100 largest industrial businesses in the world were in the United States. By 1996 that number was 24. Estimates are that by 2037 it will be eight.
In the face of these staggering changes in the competitive landscape of global commerce, the notion that diversity and inclusion are only a social agenda is folly. Even if an organization is domestically focused, the large numbers of diverse people within the workforce and marketplace make it necessary to recognize the impact cultural differences can have on a business.
Further, most organizations are increasingly impacted by global business trends: Customers make purchases from companies around the world from their home computers; vendors and suppliers ship across borders and oceans; outsourced labor strategies allow workers to represent a company thousands of miles from their home offices; and businesses operate and sell products all over the world.
It’s simply not possible to be successful in this environment without understanding the impact of diversity and inclusion on business.
The advent of globalism on a scale never before seen calls for organizations that want to have success to be more culturally competent than before. Whether it is a company such as Colgate-Palmolive selling more than 75 percent of its product outside of the United States, or a hospital in Washington, D.C., taking in patients from more than 100 countries in a year, businesses must understand the cultural needs of their employees, customers, patients, vendors and the marketplace.
Diversity executives can identify hundreds of examples of cultural interactions in the business world that mean the difference between success and failure for a business enterprise. Think about how many ways customers and employees from different cultures interact with business. Particular cultural or diverse groups may need or not need certain products or services.
Employees have to understand differences in beliefs, behavior and communication styles among people, both within the workforce and with customers, to effectively service accounts, assist customers or interact on global teams. Further, customers from different cultures may have different expectations regarding interaction with employees, and employees must be culturally savvy when traversing the globe during the course of their work because what’s considered normal business practice in one home office might be considered offensive or confusing to other cultures.
The Need for Culture Development
The challenge is that although diversity and inclusion have become standard corporate language, relatively few organizations have embraced the organizational culture development needed to create true cultural competency. This refers to the enterprise-wide ability to have and utilize the policies, appropriately trained and skilled employees and specialized resources to anticipate, recognize and respond to the varying expectations around language, culture and religion for diverse consumers and employees.
While active, full-throated resistance is seen much less frequently than in the past, in too many places it has become acceptable to use excuses such as budget limitations, time constraints and the illusion of a merit-based organizational culture to resist exploring deeper cultural differences. What is at the root of this resistance? Different motivations for different people. For some it may be fear of the unknown, or fear of a world in which their power and control are reduced. For others it may be a belief that this is social engineering without understanding the business case. Some are just tired of the diversity conversation. Whatever the reason, resisting the impact of reality based on personal dislike or desire is bad business.
The impact of this resistance not only prohibits the advancement and participation of certain groups, resulting in many barriers to full participation for those who remain in the shadows of organizational life, but it also costs organizations millions of dollars in productivity, innovation and market share. Understanding and appreciating the need for cultural intelligence, a developed understanding of the ways in which culture manifests itself in everyday business life, as a true competency is often eclipsed by the concern about diversity “problems,” such as lawsuits or discrimination claims. The notion that diversity is simply about avoiding problems tends to deflect people from thinking about it as a business opportunity.
Inclusion is a business strategy. It is important that leaders have a defined set of values and principles, and demonstrate behaviors, attitudes, policies and structures that enable employees to work effectively cross-culturally to have the capacity to value diversity, conduct self-assessment, manage the dynamics of difference, acquire and institutionalize cultural knowledge and adapt to diversity and to the cultural contexts of the customers and communities they serve. Further, leaders have to incorporate all of the aforementioned skills and characteristics into all aspects of policy making, administration, practice and service delivery, and systematically involve consumers, stakeholders and communities.
In addition to the obvious market-driven realities, similarly impactful dynamics exist to drive business when dealing with an organization’s internal culture. Research shows that original and innovative ideas and unusual connections are formed when people of varying origins, backgrounds and lifestyles work together in teams. New ways of thinking lead to new ways of doing business and new products. Further, diversity can improve an organization’s problem-solving capability by introducing new ways of addressing old problems, or introducing new perspectives that may be able to see and prevent problems. All of this drives productivity, business success and competitive advantage.
A difficult economy requires that organizations get and keep the best employees. GE Corporate Executive Council research from August 2010 indicates employee performance is declining. The number of employees exhibiting high levels of extra effort has decreased by 64 percent since 2005. Further, disengaged employees are 31 percent less likely to quit than in 2006. High-potential employees are more likely to quit. One out of four high-potentials plans to quit in the next 12 months.
A focus on the evolving business case for diversity and inclusion is a roadmap to enhance employee engagement. According to the Hudson Institute’s Workforce 2020 Study, in a market in which less than 20 percent of new entries into the workforce are white, native-born men, a culturally competent, inclusive culture becomes a magnet for the best talent. And when turnover costs can cut directly into a company bottom line, a more inclusive and culturally competent environment creates a greater likelihood the best employees will stick around. It is no accident the companies listed on the “Best Company” diversity lists are usually the same ones that show up on the lists of “Best Places to Work.”
Finally, there are some legalities to consider. Organizations where diversity and inclusion are embedded into the culture often can eliminate or avoid legal expenses where diversity violations are concerned.
The business ROI equation for diversity includes greater innovation, increased work performance, greater job satisfaction and more engaged employees, lower human resources costs, better customer service and wider and deeper market penetration, which equal success at every level at which it can be measured. What more of a business case is necessary to encourage leaders to devote time and resources to creating a more inclusive and culturally competent organizational culture?
During difficult economic times, it is counterproductive to back off from a commitment to diversity and inclusion. Continue to create high performance standards for all employees, including expectations that they will work well with a broad diversity of co-workers. Increase the organization’s awareness of global business. Continue to find ways to enhance customer service standards by expanding awareness of diverse customers’ needs. Develop a stronger focus on employee engagement to retain and continue to develop the best workers. Also, innovate by drawing from the diverse perspectives of all employees.
Inclusion is a business strategy. It is an intentional choice that distinguishes an organization’s brand in the marketplace. Use it.
Howard J. Ross is founder and chief learning officer at Cook Ross Inc., a consulting and training company. He can be reached at email@example.com.