Why and how diversity in the workplace matters [video and slides]

Posted May 31, 2017 by

Last week, College Recruiter presented at an in-person and live stream event, “Eye Opening Tactics for Better Diversity Recruiting,” co-organized by WCN and Stinson Leonard Street. Presenters spoke about four topics: why and how diversity matters, combating bias, big data, and non-discrimination employment law. This blog post shares what was presented in part 1. Scroll down to watch the presentation and download the slide deck.

The claim: diversity in the workplace leads to greater profit and innovation

“Workplace diversity is among the most important predictors of a business’ sales revenue, customer numbers and profitability” (Herring study).

There has been plenty of research done that support this claim. But in addition to illustrating the potential impact of diversity, it’s important to recognize that some employers experience something different. It helps to understand how diversity makes an impact, so employers can reconcile any discrepancies between what their experience tells you, and what they think they’re supposed to be experiencing.

According to the Herring study out of the University of Illinois at Chicago, the most racially diverse companies brought in nearly 15 times more sales revenue than the least racially diverse companies. Gender diversity accounted for $599.1 million in average sales revenue. In fact, they even saw an incremental impact, so any improvement in diversity is worth it. For every percentage increase in the rate of racial or gender diversity, there was an increase in sales revenues of about 9 and 3 percent, respectively. Additionally, even the smallest incremental increase in levels of racial or gender diversity resulted in more than 400 and 200 additional customers, respectively.

This study found racial diversity to be a better determinant of sales revenue and customer numbers than company size, the company’s age or the number of employees.

A McKinsey study is worth highlighting as well. They report that gender diverse organizations are 15% more likely to outperform, and ethnically diverse organizations are 35% more likely to outperform. Conversely, companies in the bottom quartile for gender or racial and ethnic diversity are less likely to achieve above-average returns.

The McKinsey study also shows a linear relationship between diversity and financial performance. So again, there is no bar or tipping point you have to hit before you start seeing results. They found that for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes rose 0.8 percent.

These studies measure gender and racial diversity, which are fairly easy to measure. For practical purposes, it should be assumed that other dimensions of diversity—sexual orientation, personal experience, personality—probably have similar effects.

If your experience does not match the claims

Many employers may say they see a different picture. Some have succeeded in hiring diverse staff and then start to see interpersonal issues crop up. Group dynamics may go south, or communication suffers. Some see legal problems related to discrimination claims.

This isn’t necessarily an illusion. Interacting with people from different backgrounds or with others who we perceive as different can be a source of discomfort. It can be a source of mistrust, or even resentment. Frankly speaking, diversity can cause conflict.

The research does apply, and it is valid. It helps to understand what is going on when you get diversity in the door.

How exactly diversity is effective

Simply put, diversity is a catalyst for creativity and deep thinking. Diversity promotes higher quality decision-making, spurs deeper information processing and more complex thinking. This happens because a diverse group has access to a greater variety of perspectives. So everyone in the group, both minority and majority individuals, must consider more information and process that information more deeply and accurately. A 2006 study placed participants onto mock juries. When Black participants were part of the jury, the White jurors processed the case facts more carefully, and deliberated more effectively. The White jurors who were on a diverse jury cited more case facts, made fewer errors, and were more amenable to discussion of racism, compared to the White jurors who were on an all-White jury.

Here’s why all of this is still so hard for most of us. Homogenous teams just feel easier. So people, inside and outside the group, assume they are more effective. The Fluency Hueristic says we prefer to process information that is familiar and easy. We just don’t want to have to think very hard. People on diverse teams feel they have to work harder, and they judge their own effectiveness as less. From the research, we know that diverse teams are not actually less effective, but the perception is there. A study published by Organization Science had participants read through transcripts and watch videos of team discussions, then allocate resources to the teams based on how they judged their effectiveness. People who read transcripts of diverse teams judged them as having more conflict, and they allocated fewer resources to those diverse teams. What they didn’t know was, the conversations and transcripts for each group—both diverse and homogenous—were identical. So here we see a representation of how our biases and perceptions have a real economic impact.

We overly trust people who seem like us. A study from the University of Texas showed that disrupting conformity prompts people to scrutinize facts, think more deeply and develop their own opinions. They asked participants to calculate accurate prices for simulated stocks. They collected individual answers, then participants had the opportunity to buy and sell those stocks to others. They used real money so they wanted to get it right.  When participants were in diverse company, their answers were 58% more accurate. The stock prices they guessed were much closer to the true values of the stocks. As they spent more time interacting in diverse groups, their performance improved.

When participants were surrounded by others of the same ethnicity or race, however, they were more likely to those around them, in the wrong direction. They made all kinds of mistakes because they put undue trust in others’ answers, mindlessly imitating them. In the diverse groups, people were more likely to distinguish between wrong and accurate answers. So here we see how diversity brings some cognitive friction that makes us deliberate more. We overly trust those that are “like us.”

Conflict is normal. The key is managing it.

“If companies want their young, diverse talent to become the next generation of leaders, they need to create a culture that truly embraces diverse opinions, perspectives, and lifestyles.”

We make much more effort now than we ever have on building a pipeline of diversity. That’s the good news, but we even as we see an increase in entry-level diversity, organizations aren’t promoting the diversity up to leadership levels. This is a sign that organizations are not focusing on inclusion. Without managing inclusion, diversity can have negative effects. The communication issues mentioned above—even they are just a perception—and legal issues, for example. To harness the power of diversity—and increase deeper thought, more creativity, better decision making—you can’t ignore inclusion because your diverse talent will walk right out the door.

One key to managing conflict due to cultural clashing is “perspective taking.” Imagining the world from another person’s point of view decreases bias and can smooth out interpersonal interactions. When team members are asked to consider each another’s perspectives, that potential for more creativity and innovation can be released.

Only when people feel welcome and respected will their teams be able to benefit from their unique perspective and experience. The secret here is NOT to take a kumbaya approach, or teach colorblindness. If your organization’s culture acknowledges differences, as opposed to pretending we are all the same, the more people will feel free to express their different opinions. If your mentality is, “I love everyone; I don’t care if you are green, blue, pink, red, or gray”, that doesn’t help. You want to get to a place where you can say, “I like this about some green people, I like what some blue people bring to the table, and I like that some pink people offer this.” That’s embracing, not ignoring, difference, and that is an essential step toward an inclusive environment.

Watch the presentation  of this content from “Eye-Opening Tactics for Better Diversity Recruiting”:


Download the presentation slide deck here

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