CFO Insights 2021 January has been saved
CFO Insights 2021 January
Diversity in Workplace
CFO Insights is a monthly publication to deliver an easily digestible and regular stream of perspectives on the challenges confronting CFOs. In this article, we describe why diversity and inclusion are important in workplace.
A lot has been spoken and written about ‘diversity and inclusion’ and it continues to be in the top 5 priorities for every large organization year on year.
In the most basic definition, diversity for an employer would mean employing a workforce that is different by race, gender, religion, ethnicity, sexual orientation, age, education or other attributes. Inclusion goes a step forward, ensuring that the diversity amongst colleagues is encouraged, respected and valued.
Till the start of 1970, organizations hired and promoted without considerations of diversity and inclusivity. The definition of ‘diversity’ has been evolving ever since. The need to promote diversity might have originated to support underrepresented groups like the African Americans but has expanded to include all minority groups in the last five decades.
Till a few years ago, the term LGBT was commonly used by organizations in their diversity initiatives. The abbreviation now includes a few more minority groups and is called LGBTQIA.
However, it is important to understand that the definition of diversity may vary from country to country. Taking an example of a country like the US which has welcomed immigrants throughout its existence may look very different from that of Japan.
A major issue of the discourse on diversity is how we define and recognize it. Narrow definitions often mirror the existence of non-discriminatory legislation, the one visible on the surface.
A few examples of those:
- Gender: bias to a gender
- Age: associated with age or years of experience
- Race: with people who look a certain way or are from certain nationalities like the Africans, Koreans, etc.
- Sexual orientation: towards gay, lesbian, bisexual, transgender, queer, intersex or asexual (LGBTQIA)
- Cultural / Religious: for people from a certain society or religion
- Disability: this may range from mental to physical. Companies today make reasonable accommodations to help people with disabilities by employing them to jobs that can best utilize them
While the surface level diversity is easily recognizable, deep level diversity is harder to identify since it originates from many years of perceptions and value systems.
Consider the below examples:
- Rejecting an obese person during the interview because the interviewer is a fitness freak
- Selecting someone who graduated from the same college even though the other applicants had similar experience/qualifications
- Promoting a male employee instead of a female employee who had similar performance because another female team member has recently left for a maternity break
The list is endless only because biases have their own way of seeping into critical decision making knowingly or unknowingly. This is what we call the ‘unconscious bias’, the blocker between the strategy and implementation of diversity in an organization.
Companies like Google and IBM have set some great examples and benchmarks in the space of D&I by making some small, but impactful changes.
Google does not mention the upper experience limit or the education requirement for any role in their job descriptions. Their job descriptions read “4+ years of experience, Bachelor of Technology or equivalent work experience” helping eliminate bias related to age, experience and education.
IBM has launched a handful of ‘return to work’ initiatives for women who took a career break due to childbirth and struggling to resume work. Such programs enable functional and technical training for the first 3 months before the hires are assigned to client projects. This is the investment the company is willing to make to bridge the gender gap.
Why is diversity important?
All leading companies have policies for diversity and inclusion, some of which are mandated by the country’s legislation and others that are in line with the competitor benchmarks.
But why be a diverse workplace? What’s in it for the employer and the employees? Shouldn’t all our focus be on making more profit which may result in higher bonuses instead?
One of US-based companies has been trying to answer that question by looking at the relationship between the level of diversity (more women, more mixed ethnic and racial composition in the leadership) and the company’s financial performance.
The research involved analyzing data from 366 companies across a range of industries including the United Kingdom, Canada, the United States and Latin America. The study showed that companies who were doing better on gender diversity than their competitors were 15 - 35% more likely to have financial returns above their nation’s industry median. What this does not mean is that higher number of women or diverse employees would result in higher revenues.
Another study in 2017 shared that diversity is a key driver for innovation and results in 19% growth in revenue. Results showed that these companies were able to develop more relevant products/services for their customers/clients since they are more in tune with their changing needs. Agility and adaptability are key for businesses to grow in today’s dynamic world – both are results of having diverse teams with diverse backgrounds which can generate creative and relevant ideas.
When employees, who are different from their colleagues are given opportunities to flourish, companies benefit from their ideas, skills and engagement and the retention rate of those workers also increases.
Bringing the change
What most companies do is create a dedicated team for diversity that creates several programs for change. Professor David Thomas of Harvard University, shared that companies who do it most effectively are the ones that integrate diversity into all the processes, making it a lens to view all aspects of talent – hiring, performance, engagement, developing, training and upskilling.
Making gradual, but impactful changes over a period will result in great outcomes; however, diversity cannot be a short-term goal. Staying relevant is important. For instance, the race is not the concern in Nigeria but dealing with tribal differences is extremely critical.
A diverse team excels best under a diverse leadership. When the leader displays fairness and inclusivity, the employees are more motivated and engaged and create the ‘culture’ of the organization that attracts other great talent.
However, it is important to remember that everyone has the personal responsibility to be inclusive, investigate unconscious biases and educate themselves on diversity and intersectionality. Celebrating each other’s differences, listening to colleagues and calling out the ‘wrong’ is important.
- Mckinsey&Company： “Diversity Matters”
- Forbes: “The benefits of creating a diverse workforce”
- Yale insights: "What do leaders need to understand about diversity?"
- SHRM: “6 ways of building an inclusive workplace”