The Business Case for Diversity


Research Proves that Firms with Diverse Workforces Perform Better Financially

Sharon Fenster, Diversity Consultant and Immediate Past-President at PRSA-NY

Today, diversity is a hot topic of discussion for business leaders across the country and for good reason. The issue is constantly in the public eye and it’s not going away.  Demographic changes are driving seismic cultural shifts in behavior and attitudes every day and these trends will provide both opportunities and challenges for businesses.

It makes good business sense for organizations to get ahead of this issue and the best way to do so is to promote a culture of diversity and inclusion.  The business case is straightforward.  Research shows that organizations that are successful in dealing with these issues prosper relative to their competitors that don’t.  Failure to manage it effectively can both impact the bottom line and create business risks that management ignores at its own peril.

McKInsey has been examining the value of diversity in the work place for years and finds that it is a competitive advantage that skews market share in the direction of more diverse companies.  According to their recent study, companies that reflect the racial and ethnic composition of the communities they serve earn about 35 percent more than their competition.  The advantage for gender equity is smaller – about 15 percent- which may reflect previous gender initiatives that have generated positive results.

This has become a business imperative for many of the leading marketers in our nation.  The U.S. Census Bureau reports that by 2045, persons of color will make up the majority of the nation’s population.  Today, whether it’s a multi-racial family having a bowl of cereal or a man proposing to another man, an increasing number of TV commercials are pushing the envelope on diversity for still another reason—individuals are proud of their cultural heritage and uniqueness. The traditional “melting pot” concept is passé.  To the sophisticated marketer, this sounds a diversity-alarm that demands immediate attention.

In addition to profitability there is a more challenging and complex reason for promoting a culture of diversity.  As the Starbucks racial debacle last year shows, no one is immune from damage to their reputation, not even a company that was generally viewed favorably by the public in this regard.

Russell Reynold’s current analyses demonstrated a powerful connection between finances and public incidents of racist and sexist scandals in 2017 and 2018—resulting in an average 7 percent decline in market capitalization following the news.

Take note that increasing numbers of companies are hiring diversity and inclusion officers.  The Wall Street Journal says that as of 2012, 60 percent of Fortune 500 companies had diversity executives.  This is not a coincidence.  The red flags have been unfurled and companies have clearly decided that accountability for satisfying legal mandates and protecting the company’s reputation needs to reside with a senior corporate officer.

All of this makes a compelling argument for greater diversity in the workplace.  The evolving 21st century cultural context has made it essential that companies tap into what will be an increasingly diverse future workforce and customer base.  Implementing a culture of diversity is a critical step in the process, so it should come as no surprise that diversity can be the difference between profitability and poor performance.  Now is the time to take full advantage of these changes and bring them to reflect on your bottom line.  Remember, it is better to invest now because those who hesitate will be left behind.

About the Author: Sharon Fenster is an entrepreneur and owner of Sharon Fenster Consulting. The company is a strategic partner that advises its clients on custom solutions that significantly increase employee productivity and morale through business practices and a culture that is enlightened and inclusive. Sharon’s workplace strategies help employees bring their full selves to work. She is passionate about helping each workforce stratum find their authentic voice. As a powerful advocate of implicit bias training, Sharon provides a broad cross-section of solutions that leave all kinds of talent with feelings of respect, being valued, welcomed and heard. Her area of expertise is catalyzing diversity to drive innovation and business results.



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