Nowadays, diversity can be a bit of a buzz-word. Companies across the country say they are committed to “increasing diversity,” but what does that mean - and why is it important?
Workforce diversity refers to the composition of the varying characteristics of employees, including, but not limited to, religious and political beliefs, gender identity/expression, ethnicity, education, socioeconomic background, sexual orientation and geographic location. However, the majority of discussion surrounding workplace diversity at present focuses on racial and gender diversity.
Anecdotal evidence tells us that diversity is helpful in team environments — an assortment of perspectives from a variety of backgrounds can help groups consider outcomes and alternatives they might not have considered from the outset of a project.
But, the greater question is, what does diversity look like, and what are the quantitative impacts of it?
Taylor Cox Jr. is a leading expert on cultural diversity, and identified six dimensions of a multicultural organization:
1. Full structural integration is achieved when all demographic groups are adequately represented within various organizational levels, functions, and work groups.
2. Integration in informal networks occurs when all organizational members have equal access to and are included in social and informal networking activities.
3. Low cultural bias is evident in organizations where steps are taken to identify and eliminate discrimination and prejudice in the workplace.
4. Intergroup cohesion is observed when the organization achieves an optimal level of conflict involving work tasks, while minimizing conflict due to social identity group differences, such as race and gender.
5. Acculturation refers to the method by which cultural differences are resolved in organizations. Cox argues that acculturation should involve a two-way process in which minority and majority group members have some influence on organizational norms and values and minority group members are not expected to assimilate or shed their identity when coming to work.
6. Finally, Cox suggests that a multicultural organization may be characterized by the extent to which organizational identification occurs for all employees.
By this point, we understand what diversity is. But, what’s the value of diversity? I’ve taken some of the studies I found the most interesting and summarized them below:
A study conducted by Cedric Herring at the University of Illinois at Chicago, concluded that “racial diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits.” In addition, the report determined that “gender diversity is associated with increased sales revenue, more customers, and greater relative profits.” His work contrasted companies with the highest and lowest levels of racial diversity, realizing that companies with the highest levels of racial diversity had an average of 15 times higher sales revenue than those with the lowest levels. (http://www.eurekalert.org/pub_releases/2009-03/asa-rld033009.php)
Credit Suisse’s Research Institute released a report in 2016 looking at female board membership and its reflection on investment returns. Over a 6 year period, looking at large cap ($10b+) stocks, CS researchers revealed firms with women board members outperformed those with purely men by 26 percent. Likewise, small-to-mid cap stocks where women served as board members outperformed their all-male peers by 17 percent. (https://www.credit-suisse.com/corporate/en/articles/news-and-expertise/higher-returns-with-women-in-decision-making-positions-201610.html)
Finally, McKinsey’s Diversity and Financial Performance report identified that companies with the most ethnically/culturally diverse boards worldwide are 43% more likely to experience higher profits. (https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx)
Clearly, diversity matters. The last question is, how can we measure and promote it in organizations?
The Canadian Institute of Diversity and Inclusion has created a method of measuring the “Return on Investment of Diversity and Inclusion” (https://ccdi.ca/media/1071/ccdi-report-what-gets-measured-gets-done.pdf). Some of the key findings from the report detail the fact that it is not simply enough to have a Diversity & Inclusion program; rather, in order for diversity to positively impact an organization, there need to be systematic incentives in place to demonstrate impact that are tied to strategic goals.
Check out the data from our Diversity survey that was conducted this semester to understand what diversity looks like at Ivey, located in HBA1 classrooms!
By: Grant McNaughton