Diversity and Inclusion: Proven Returns For Innovation and Business Performance
Canada has recently experienced the lowest jobless rate in almost 40 years. On the one hand, that’s great for the economy overall. On the other hand, if you are an employer looking to fill positions or do transition or succession planning, this is a real challenge!
New and expanding research, however, is really helping to broaden the traditional management and line leader (think revenue line) roles in consideration of non-traditional or alternative employees.
Research Overview
Just this past December, the jobless rate was 5.6%. That means that of all the people in Canada eligible to work or in the job market, 94.4% of Canadians were employed.
The expectation from the Canadian government is that the jobless rate may climb higher but will remain, on average, only at 6.3% until 2022 (this is as far into the future as the government is willing to forecast).
Many organizations, including most universities and big research groups in Deloitte, McKinsey, and others have been conducting longitudinal studies on diversity and innovation, bottom-line performance, and customer experience satisfaction.
The results are pretty startling and fairly homogeneous – making it difficult to challenge their validity in the face of so many different, repeated studies with the same results.
In summary, here are four thought-starters that emerge from that research, which may help you if you are considering succession plans, expansion, or even just continued growth in your organization.
1. DIVERSITY AND INNOVATION
According to a Deloitte study published in January 2018, increasing the gender and other major diversity markers in your employee base enhances innovation by 20%! Can you imagine adding that much organic innovation to product development, customer experience, or internal infrastructure maintenance – just by making sure that your workforce is more diverse?
They also determined that overall innovation risk can be reduced by as much as 30% if you include a cognitively diverse perspective in addition to demographic diversity. The reason, they report, is because solving complex problems requires the consideration of the evidence, options, outcomes, people, process and risk.
Cognitively diverse populations approach their complex challenges differently. Having them work on your problem together decreases the risk of falling into thinking traps.
In a study ranging multiple years, Deloitte also discovered that diverse and intentionally inclusive teams, over time, were six times more likely to be innovative and agile, and twice as likely to meet or exceed set financial targets.
2. DIVERSITY AND BUSINESS PERFORMANCE
In a 2017 study, McKinsey Consulting engaged in a wide-ranging global diversity study of large organizations with more than 500 employees. Their repeated results were astounding.
According to the repeated study, gender diversity accounted for a 21% outperformance in Earnings Before Interest and Taxes (EBIT) margin and a 27% outperformance margin in long-term value creation to their nearest likely competitors who did not actively practice gender diversity in their hiring practices.
This is an interesting result because McKinsey was very careful to state that they only compared organizations within the same culture or country, as every country area was not equivalent in their baseline.
Further to organizational performance, McKinsey also noted that in companies where executives were more balanced in gender roles, there was approximately 9–10% outperformance in line roles.
Adding a better gender balance to sales leadership contributed to revenue performance without adding any additional bonus or performance incentives to those lines.
3. MARKERS OF SUCCESS
Both studies, as well as work done by Catalyst and post-secondary institutions, conclude that there are behaviours within an organization that can drive the increase of diversity and inclusion.
Chief amongst those is the commitment from leadership and formal definitions and agreements.
4. GETTING STARTED
Getting started includes awareness of the principles of inclusion and some reflection on how that manifests in the behaviours (conscious and unconscious) of leadership from the board down to the line or admin manager.
Inclusive behaviour includes a commitment to:
- fairness
- respect
- valued belonging
- empowerment
- growth opportunities
- a safe and open workspace.
Highly inclusive leaders repeatedly display the following characteristics:
- commitment
- courage
- cognizance of bias
- curiosity
- cultural intelligence
- commitment to collaboration.
If you are a leader or board member, would others describe you this way?
Formal statements and accountabilities tied to your business’s strategies for growth and sustainment are the next steps. This includes hiring, compensation, and internal growth opportunities for people and products.
Conclusion
It isn’t easy and may require a mindset shift, but considering how your organization handles cognitive and demographic diversity may help you improve up to 30% over your next competitor, expand your employee pool in a shrinking Canadian labour group, and increase your ability to innovate and grow – all by changing the way you think, not by paying more money or adding perks or increases.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
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