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Why is Diversity and Inclusion important?
The Basics

Why is Diversity and Inclusion important?

The Basics is a series breaking down the essential questions of purposeful business.

5 minute read

15th Dec 2021

Diversity in the workplace: an inclusion fad, or an ethical and competitive advantage? Mountains of evidence point to the latter. The more diverse a workforce is, the more talent, ideas and innovation it brings – and with it, more profits. Businesses who aren’t actively trying to diversify their workforce are missing out on the untapped potential talent that’s out there. We’ve explored exactly how and why diversity in the workplace has become not just a nice-to-have, but an essential quality to purposeful business.

What is Diversity & Inclusion? 

A 2018 Gallup Report on Diversity and Inclusion (D&I) defined diversity as “represent[ing] the full spectrum of human demographic differences”, which could include gender, age, sexual orientation, ethnicity, religion, class, disability and education. Many companies also consider diversity to include other differences like lifestyle, opinion, personality, family background and more. The idea is that a workplace should reflect our society in its diversity and richness of experience. 

But that’s just the beginning. A truly diverse workplace will not just welcome employees of differing backgrounds, but foster a culture of understanding, learning and exploration of how these differences can make everyone’s workplace experience richer.

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This is where the inclusion part of D&I comes in. Inclusion refers to a cultural feeling of fitting in, and can be measured by how much employees are valued, respected and accepted. “In the context of the workplace, diversity equals representation,” write Laura Sherbin and Ripa Rashid in Harvard Business Review. “Without inclusion, however, the crucial connections that attract diverse talent, encourage their participation, foster innovation, and lead to business growth won’t happen.” In a nutshell, it’s about creating a sense of belonging and acceptance for all employees. 

Though often grouped together, diversity and inclusion must be understood as the distinct and separate concepts that they are. Simply having a diverse workforce might end up being meaningless if the individuals don’t feel comfortable, accepted and safe. 

Sounds good, but what’s the business case for diversity? 

The ethical case for implementing D&I is obvious, but there’s also a business case. McKinsey analysis from 2019 found that companies in the top quartile for gender and ethnic diversity were 25% and 36% more likely to have above-average profitability. Another study by Boston Consulting Group found diverse companies produce 19% more revenue than organisations lacking in D&I. 
So why does greater diversity and inclusion drive higher profits? The majority of it comes down to innovation. When employees feel safe, respected and welcomed, they are far more likely to share their ideas. Diverse teams are also more likely to make better business decisions. The more ideas generated, the more innovation there is.

“When you’re attracted to people who think the same way, you’re getting no uplift at all in collective intelligence.”

Matthew Syed

Diverse thinking is key to innovation. “When it comes to new ideas, strategies, products and businesses, the power of cognitive diversity [is] profound,” argues Matthew Syed in this Aeon Short Video about diversity as a competitive advantage. 

He demonstrates with an example: if ten talented people on a team come up with ten ideas each, how many ideas do you have in total? The answer is not 100. If they all think in similar ways, and have similar experiences and perspectives, you might be left with the same ten ideas across the board. 

But if you have a diverse team who think in different ways and have different perspectives, you can maximise the actual number of ideas your workforce is generating. “When you’re attracted to people who think the same way, you’re getting no uplift at all in collective intelligence,” Syed summarises. 

Is it actually being implemented? 

Rates of D&I have been improving for decades. McKinsey, who have been following the trajectories of hundreds of companies since 2014, reports that even though progress can be slow, many organisations are “making impressive gains in diversity.” 

“Increasing diversity does not, by itself, increase effectiveness; what matters is how an organization harnesses diversity, and whether it’s willing to reshape its power structure.”

Robin J. Ely and David A. Thomas

However, some companies tend to focus solely on checking the diversity box, without addressing inclusion. But increasing the number of women or people of colour within an organisation does little if it isn’t accompanied by inclusion initiatives.

An authentic cultural change must occur within a company in order to improve the experience of employees from different backgrounds. “Increasing diversity does not, by itself, increase effectiveness; what matters is how an organization harnesses diversity, and whether it’s willing to reshape its power structure,” say researchers Robin J. Ely and David A. Thomas

Then there are also the times when a lack of diversity has led to very poor business or marketing decisions – we only need to look at Pepsi’s disastrous Kendall Jenner ad from 2017 (you know, the one where she solves social problems by handing a police officer a Pepsi?). 

So what do businesses need to do to increase their diversity?

  • Identify what you’re aiming for. Having a specific understanding of what you’re trying to achieve in your workplace is key. 
  • Implement. Actions speak louder than words; you’ve got to follow through with those good intentions. 
  • Adjust your recruitment strategy. Widen your talent pool to source individuals from different backgrounds. 
  • Ask, then listen. Talk to employees about how they feel in their workplace. Do they feel included? What can be done to improve the culture? Then take notes and make changes. 

Further reading…