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So why does D&I make good business sense?

11 March 2022

Organizations are finally starting to focus more on Diversity and Inclusion as part of their internal policies and looking at more than just hiring statistics. It’s a big step forward as organisations also examine the mechanisms they use to drive Diversity and Inclusion, which you can read more about in my first article on the subject. 

However, as organizations identify shortcomings and change internal policies, some are still requiring a “justification” of the business case for D&I — a drive to show bosses that this is not only “the right thing to do” or, “good optics” but that it will actually serve their commercial purpose, and ultimately, their bottom line. 

While this effort to make the business case is somewhat controversial and, in some quarters, has attracted some pushback, can we really afford to wait for every chief executive to have their social justice conscience awakened? We need, to some extent at least, to speak their language and prove that how we harness diversity really matters for success, as well as good ethics.

So, on that premise, I offer, as a start, three suggestions why D&I makes good business sense.

1. Innovation

Diversity drives innovation. It’s that simple. A diverse set of insights will naturally lead to the development of new ways of doing things, whether it’s new products, new processes, or the tackling of challenges in a different way. The blending of different styles and cultures always brings fresh ideas and approaches – it cannot do otherwise. We instinctively know this to be true in areas like food and music, but it applies in business too. The Malaysian born chairman of the QI group, Vijay Eswaran has said that:

“The coming together of people with diverse backgrounds is a key driver of innovation.” 

This is particularly true in big cities, he says, commenting on the fact that the economic progress that has been made in places like Singapore and Malaysia is in large part due to the intentional and aggressive promotion of, in particular, ethnic integration.  

So, the more diverse we are, the more innovative we will be. Diversity creates a melting pot of ideas and creativity, and this has been proven time and time again. 

2. Teams

There is seemingly no end to the research on what makes teams work best and, yes, you’ve guessed it, diverse teams perform better. Interestingly however, the type of diversity which is good for teams looks a little different than the conventional definitions of D&I. The fact that these teams often make better decisions is related to something called “cognitive diversity,” which refers to the inclusion of people who have different ways of thinking, different skill sets, and crucially, different ways of tackling problems. Cognitive diversity may be related to our social and cultural background but often it’s not - this form of diversity is more subtle and can be harder to spot. 

Colleagues tend to subconsciously gravitate towards people who think and express themselves in a similar way, often forming like-minded teams which, counterintuitively, do not necessarily produce better outcomes. Diverse teams actually feel LESS comfortable but are often highly effective. They are more careful at analysing information and will process that information more effectively. To begin to address this challenge, we can start by doing two things: firstly, we can raise awareness of cognitive diversity when we recruit and when we build new teams. Secondly, and more practically, when facing a new and complex situation where everyone seems to agree on what to do, we can dare to seek out someone who disagrees, and be prepared to invite and listen to their input.

3. Financial Performance

The powerfully titled "Diversity Wins" (2019) is the third report in a McKinsey series investigating the business case for diversity. This latest report shows that the relationship between D&I on executive teams and the likelihood of improved financial performance has strengthened over time. The analysis shows that companies in the top quartile for gender diversity were 25% more likely to have above average profitability than companies from the lowest quartile. Similarly, with regard to cultural and ethnic diversity, top quartile companies outperformed the lower quartile by 30% - that is HUGE. It is important to note however, that these financial performance gains were strongly linked to diverse representation at the top level. Top level diversity does not happen organically nor by accident. It requires intentional focus, starting at entry level positions, and will take time to bear fruit. Like DWF Group Chairman Sir Nigel Knowles, I am pleased with the very intentional direction of travel in this regard at DWF but I also agree with him that there is always more we can do and we need to keep each other honest.  

So, there you have it. Regardless of how we may feel about making the business case for D&I, the numbers totally and unquestionably stack up. But perhaps we ought to come back to the fact that, regardless, we instinctively know that it is the right thing to do. Our differences make for a richer, more interesting place for us all to work. It should also mean that people don’t feel the pressure of trying to fit in, or to pretend to be something they are not. Championing Diversity and Inclusion is a vital part of creating a successful organisation where everybody feels that they can bring their whole self to work. 


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