How diversity drives business performance: the FACTS

Taking on the attacks by anti-DEI forces with hard evidence, proving that diversity and inclusion boost innovation, profits, and business performance.

According to some, anything that involves the letters D, E and I is bad.

To the populist movements in the US and UK, the concepts of workplace equity, progressive employment policies and inclusive hiring practices, are all (at best) faddish and (at worst) evil, value-destroying nonsense.

The anti-DEI ‘stormtroopers’ are VERY light on evidence when it comes to backing up their arguments for why DEI is so bad.

They are driven by ideology and promoted by a sense of injured white privilege, by the bro-sphere that rails against black people, women, gays and others having a more equal share of the economic pie.

But the counter-arguments to the anti-DEI movement are plentiful – and backed up by hard evidence.

This is not only about having a moral standpoint. Businesses should reject the anti-DEI positions and continue pursuing the drive for more equity and more inclusion in workplaces. Because it helps businesses thrive.

This is what organisations like DIAL (led by the force for good that is its Founder and CEO, Leila McKenzie-Delis) have sought to do - putting the practical case and the evidence for more diverse businesses, led by more diverse and inclusive leadership teams.

Whether it be through ‘inherent diversity’ (gender, race) or ‘acquired diversity’ (languages, life-experience), companies that have a diversified employee landscape are more likely to drive enhanced commercial performance than those that (consciously or not) encourage conformity.

THAT is what the data shows.

Organisations that actively encourage diversity, including diversity of thought, build wider talent pools that deliver quicker paths to innovation. Put simply, diversity leads to better performance.

For example, a 2017 Peterson Institute for International Economics study found that companies with (at least) 30% female leaders add at least 6% to their net margins.

Is there more? There IS more. Lots of hard evidence that demonstrates why inclusive workplaces, enabled by DEI solutions, make commercial sense.

Here, I’ve summarised facts that demonstrate how inclusion and diversity drive enhanced business performance, supported by credible research and case studies.

DEI driving positive financial impact

1. Market share growth

By correlating diversity in leadership with market outcomes as reported by respondents, a Harvard Business Review study (December, 2013) showed companies with higher diversity out-innovate and out-perform others.

Employees at these companies are 45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the firm captured a new market.

This is because diverse strategies prevent echo chambers and helps focus on their range of customer groups.

Similarly, a study by the Centre for Talent Innovation (2013) identified that businesses with 2-D (acquired and inherent) diversity are significantly more likely to improve market share and acquire new markets than those who have neither form of diversity.

2. Higher sales

Diversity can help your team become more agile and be better equipped to pivot and adapt as necessary to remain competitive. Inclusion of varied perspectives improves problem-solving, thereby defining the efficiencies and productivity needed to secure profitable operations.

A McKinsey study (2023) in the last 2 years showed that companies with top quartile ethnic and gender diversity are 75pts more likely to financially outperform their less diverse peers. Some have sought to question the McKinsey study and show that the basis for its research is potentially questionable.

However, the fundamentals of the McKinsey findings do hold SOME weight.

Ipsos Karian and Box has been able to identify powerful links between more diverse teams and business performance in specific businesses.

Ipsos Karian and Box studies in the last 10 years for retail and financial services businesses have shown a clear correlation between the diversity of teams and sales revenues. While the link with profitability was inconclusive, the relationship between team diversity and sales was much stronger. For example, one retail business with 9,000 stores across the UK was able to demonstrate a positive ~10% difference in sales between teams with upper and lower quartile diverse composition.

DEI securing performance culture

3. Innovation revenue surge

Diverse thinking challenges norms and sparks creativity. Studies by both the Centre for Talent Innovation and the London School of Economics have highlighted important links that show how diversity can drive innovation. The Talent Innovation report showed that teams with 2-D diversity are much more likely to see their ideas developed, prototyped or deployed into the marketplace - compared to those without. It also identified how 2-D diverse teams have double the experience of taking risks or being unafraid to fail.

A BCG report (“How Diverse Leadership Teams Boost Innovation", 2018) has shown how these experiences and related behaviours can drive innovation-based revenue improvements:

Companies with above-average diversity in leadership report 19% higher innovation revenue (revenue from new products/services).

4. Diverse teams make better decisions

According to a study covered in Forbes Magazine, and conducted by Cloverpop ("Hacking Diversity with Inclusive Decision-Making", 2017), teams with diverse perspectives make decisions 50% faster (29pts) than homogenous groups. Cognitive diversity reduces blind spots and fosters critical analysis.

Cloverpop study, 2017

6. Faster problem-solving

A report in the Harvard Business Review highlighted how teams with diversity of thinking solve complex problems 3x faster than homogenous teams. Similarly, a Deloitte study found that cognitively diverse teams can boost innovation by upwards of 20 percent. Multiple viewpoints enable quicker identification of viable solutions.

Source: Harvard Business Review, “Why Diverse Teams Are Smarter” (2016).

The DEI war is going to hot up.

These are just some of the facts out there - all demonstrating the positive commercial impact of diverse businesses. Those of us who believe in more progressive workplaces have to use that evidence.

Decide what side you are on. And use the evidence to fight the good fight against the illiberal forces trying to turn workplace clocks back decades.

---