By Yvonne Brown and Tom McCrary
Diversity is increasingly on our minds. Indeed, US census data indicates that our population is becoming more diverse, estimating that by 2042, whites will no longer be a majority of the population. An important business corollary—and a significant opportunity—is that diversity in an organization drives innovation, growth and bottom-line improvement.
The 2018 McKinsey study, Delivering Through Diversity tells the story. Diversity is good for business—and it’s got the numbers to prove it.
The analysis draws on a data set of more than 1,000 companies from 12 countries, measuring not only profitability (EBIT) but also longer-term value creation. It broadly explores the impact of gender, ethnic and cultural diversity at different levels of the organization and provides insight into best practices.
“Our research confirms that gender, ethnic, and cultural diversity, particularly within executive teams, continue to be correlated to financial performance across multiple countries worldwide,” McKinsey’s authors write in the study.
Key Findings of the McKinsey Study:
Based on our 50+ combined years of executive marketing experience, how gender and ethnically diverse companies perform better relates to two important business realities.
First, employees today seek to work in companies where they can be themselves—which implies diversity—given the overall population trends. With a diverse team, companies are better able to attract top talent, as well as to improve employee satisfaction, and therefore, engage and retain them.
Second, diversity fosters different perspectives. Embracing diversity in your organization is like going from black and white film to color. It brings richness and depth to decisions, so you’re running the business with a broader, deeper perspective. The principal applies to both large and small companies. It gives needed perspective.
Whether it’s age, gender, race, ethnic, economic or other diversity factors in play, the essence is that diversity in the organization attracts the talent and perspective that stimulates innovation.
“Diversity fosters creativity. We need to generate the best ideas from our people in all levels of the company and incorporate them into our business practices. Frédéric Rozé, chief executive officer, L’Oréal USA
The positive impacts of diversity such as a global mind-set and cultural fluency are also likely to bring some level of competitive advantage.
Understanding your customers and their needs is critical to develop focused growth strategies, innovations and other programs.
When you understand the needs of your diverse customer base, you improve your company’s customer orientation and decision making. Having people in your company who are similar to or have a connection with your customers helps you relate to your customers and allows them to identify with you. You more effectively capture and understand the needs, language and values of your customers–-the “voice of the customer”.
It is to your advantage to have people in your company that reflect the diverse customer base you are targeting. Do you understand the audiences you’re targeting and does your organization reflect them?
Consider asking your leadership team these questions:
In your discussion, consider many demographic factors and how you might adjust your staff. Say you want to target millennials, but you have none in the organization. Or, your startup is targeting foreign tourists, but your staff is entirely young technicians.
Also, add the long-term view into the mix. Consider how to plant the seeds today for those markets you’re targeting down the road. You’ll need to start building now the organization for those markets.
Here is a simple tool that you can modify and use to get started:
Simply plot the percentage make up for your leadership and team and what you know about your clients, customers and partners. It will give you a place to start in assessing your specific diversity opportunities.
Generating growth depends on insight to inform strategy and effective execution of marketing tactics. Having diversity within your company helps you understand the customer and their buying habits better, a critical component of that insight. Insight guides innovation and shapes your strategy and messaging, which in turn affects the effectiveness of your marketing programs.
Many business leaders think that diversity is nice to have because it looks good, or the laws require it, but it’s not seen as a way to improve the dialog and strategy within the company. Based on the research and confirmed by our experience, those companies that embrace diversity broaden their perspective on the market. Ultimately, that makes their products and marketing better with a positive effect on innovation, growth and the bottom line.