(originally published in Entrepreneur Magazine)
Workforce diversity is becoming an increasingly vital component in the business world. There is good reason for this trend. Research shows that more diverse staffs have been linked to rising company productivity levels, which directly correlate with increased profitability. In fact, Barron’s recently published an article highlighting the many ways diversity has measurable impacts on firms’s success. In short, today’s businesses simply cannot afford to ignore diversity when hiring.
Bottom lines are impacted by diversity across the board: gender and sexuality, ethnicity — even age, which is often overlooked as a category of potential discrimination. Understanding how diversity of all types affects profitability is the first step to incorporating this broader-minded philosophy into a company’s culture. Below are four ways diversity impacts the bottom line for businesses of all sizes.
1. Diversity attracts more talent
Companies that display ethnic, gender and age diversity appeal to a broader spectrum of job seekers, giving those companies a better chance at attracting top talent. Today’s companies are in a fierce competition for the best employees and are always looking for ways to draw them in. Simply put, diverse companies appeal to a diverse workforce and have a distinct advantage over companies that do not have a healthy percentage of women and people of color and varying ages on staff. When recruiting, businesses that source candidates from a diverse base are more likely to hire people with diverse characteristics.
2. Different experiences lead to more innovation
If everyone on the team thinks the same way, there’s little room for innovation, which creates a stifling environment for inventing the next big thing. On the other hand, people from dissimilar walks of life approach the world from a wide range of perspectives and offer unique intellectual capital to the companies for which they work.
Listening to the viewpoints of those who have had different experiences engenders richer brainstorming sessions, which foster outside-the-box thinking and higher levels of creativity for today’s companies. These sessions can in turn lead to an idea or invention that will help a firm distinguish itself from its competitors and become more successful.
3. Diverse thought leads to increased customer satisfaction
Serving the end user is difficult if a company’s decision-making team doesn’t include people who can relate to that customer. A diverse team is more likely to relate to a particular audience’s wants, needs and pain points, creating greater opportunities to resonate with customers. Also, a diverse staff introduces the potential to reach new demographics in ways that might not have come to light with a homogenous group at the helm. Ultimately, customer volume and satisfaction can be improved through higher levels of diversity, which raises profitability.
4. A diverse team resonates with both customers and investors
Today’s investors and customers are keeping a keen eye on Environmental, Social and Corporate Governance (ESG) when it comes to the companies they invest in and support. Diversity is playing an increasing role in how these groups assess ESG. As clients and customers become more diverse, they want to work with and support diverse people; therefore, these groups seek out companies that actively and openly champion diversity as a pillar of their philosophy. Having a more diverse workforce gives entrepreneurial firms a better chance of connecting with the investors and customers who will help them grow their businesses.
Growing demand to increase company diversity is leading to a greater emphasis on this characteristic in the business realm. Just as sustainability was once a “nice-to-have” quality in a company and is now a necessity, diversity is fast becoming the norm rather than the exception among businesses. By recognizing how diversity is linked with greater innovation, increased customer volume and satisfaction, better ESG profiles and a higher likelihood of attracting top talent, entrepreneurial firms can begin to incorporate diverse hiring strategies that will lead to rising profitability.