Many studies confirm that socially diverse groups are more innovative and productive than homogeneous groups, and that this is reflected in a company’s revenues. But attracting a diverse set of applicants for open roles won’t achieve the desired objective if their voices are not being heard in the business.
Employee diversity takes many forms and usually includes inborn traits of age, gender, ethnicity, race, and sexual orientation. Further, diversity can include skills acquired through experience such as areas of study, industry background, career path, veteran status, and foreign work experience.
Managers and teams having a mix of inherent and acquired forms of diversity appear to be most productive of all.
Companies with above-average total diversity, measured as the average of six dimensions of diversity (migration, industry, career path, gender, education, age), have both 19% points higher innovation revenues and 9% points higher EBIT margins, on average. This is according to a survey (opens a new window) including more than 1,700 companies across eight countries and a variety of industries and company sizes performed by the Harvard Business Review in cooperation with the Technical University of Munich. All six dimensions of diversity had statistically significant correlations with innovation, both individually and collectively, although industry, nation of origin, and gender had slightly larger effects.
A July 2021 report (opens a new window) from the UK’s Financial Conduct Authority (FCA) found similar benefits to a diverse workplace, noting that boards with a mixed gender representation demonstrated greater innovation. The report put this down to there being a more diverse group of voices, allowing for improved problem solving.
Diversity and risk
Momentum created by the Black Lives Matter movement has led to a flurry of lawsuits (opens a new window) in the US against major technology firms, alleging that the companies failed their fiduciary duty by not hiring black board members. Other lawsuits have also focused on issues of racism in the workplace, focusing on how employees are treated, actions of management deemed insensitive, and the behaviour of executives and directors.
Such lawsuits can be expensive for companies not only directly through the legal costs involved and consequent premium increases for directors & officers liability insurance but also indirectly due to negative press affecting the company’s reputation and potentially revenues if calls for boycott are followed.
The lawsuits can range from compensation for employees, to demands for investigations into the company. Some lawsuits have also led to proxy fights at companies, with firms having to defend against parties seeking to remove directors and executives, issues which have run significant costs for companies seeking to defend their boards.
Creating a diverse workplace
Creating a diverse workplace which is sustainable for the long-term will take time. However, companies can put in place initiatives for the future, while taking steps to attract diverse talent now as well.
Options for companies include:
Recruiting initiatives: Focusing on recruiting at university level will help attract a more diverse group of prospective employees. The route also works to address the mindset surrounding recruiting with an onus on diversity by making the initiative focused on building for the future, with senior leadership directly involved in the navigation of the company’s future makeup.
Diversity committees: Having a dedicated team focused on improving diversity in the workplace will ensure realistic targets are set from short, medium, and long-term initiatives. Some companies have committees alongside executives focused on diversity issues as well, taking action to ensure the company is promoting and paying employees equally and bringing in new talent from various backgrounds.
Employee benefits: Attracting a diverse workforce should be no different than attracting any other potential candidate, with employee benefits playing an important role. Generally, benefits that are broad in design and give the employee freedom of choice will enable a company to cater to a wide range of needs and different stages of life.
Initiatives may include:
Flexibility around maternity and paternity leave
Schemes concerning in vitro fertilisation (IVF),- flexibility in choosing between a range of benefits and swapping between them
Remote working flexibility
Flexibility in when to take bank holidays (swapping Western New Year’s Day for the Chinese or Jewish New Year’s Day for example)
Allowing healthcare benefits to extend beyond family members and spouses, with healthcare-focused benefits to include an employee’s partner, sibling or another person having those benefits
Creating an inclusive workplace
Companies that truly “embrace” diversity have seen the greatest positive impact, according to the FCA report.
Fostering a culture of inclusion within the company, rather than making room for it, will enable companies to effectively utilise the different voices and perspectives they attract to the company.
While mandatory training and initiatives can even negatively impact diversity in the workplace, according to a research paper from the Harvard Business Review, , creating a truly inclusive workplace will need initiatives that promotes a positive mindset when it comes to diversity and inclusion.
Such initiatives may include:
Mentor programmes: Senior managers can offer guidance to employees on a one-to-one basis, transferring knowledge and offering support for career progression but also enabling the sharing of experiences from different perspectives that helps promote diversity. Mentorships should also be an opportunity to discuss the realities of the company culture.
Resource portal: Seeking to make inclusion part of a company’s DNA is a slow process but introducing a collection of resources focused on inclusion can help the process. Subject-matter can range from advice on difficult conversation topics, such as race, to webinars during months which celebrate diversity, like LGBT Pride month in June, Black History month in October, and Women’s History month in March.
If you would like to discuss your employee benefits and the options available to you, please reach out to a Lockton representative:
Victoria Edwards, SVP- Head of Talent & Inclusion
E: Victoria.Edwards@lockton.com (opens a new window)
T: +44 (0)7884 752 488
Learn more about the 2022 BDA awards here (opens a new window)
