4 Reasons Why Diversity Will Boost Your Company’s Performance

A 2015 study by the management consulting firm McKinsey & Company revealed that the level of diversity in a company is correlated with its overall financial performance. This finding was based on data from over 350 companies and thousands of executives in the United States, Canada, the UK, and several Latin American countries. Companies in the top quartile for racial and ethnic diversity in their leadership teams were 35% more likely to have greater profitability than the median for their industry.

Why does this correlation between greater diversity and improved profitability exist? Diversity can boost your company’s performance for the following reasons:

The recruitment advantage

Since the 1990s, employers have known that the combination of changing demographic pressures and economic growth would ramp up competition for skilled workers in advanced economies. As talent has become scarcer and pricier, companies have engaged in a “war for talent” to recruit and retain qualified employees.

However, employers have not done enough to adapt their talent management practices to the scarce labor marketplace. In a survey of 2,700 employers, only 31% believed that they were recruiting and retaining young talent effectively.

Diverse leadership can help a company gain access to a broader range of talent sources, gain an advantage over its competitors, and increase its market performance. Additionally, diversity can help a company win over job candidates they are courting. Two-thirds of individuals polled in a Glassdoor survey said that they consider a diverse workforce to be an important factor when they are evaluating companies and job offers.

More effective customer orientation

As the consumer population of the U.S. and the world more broadly grows increasingly heterogeneous, businesses that commit to workforce diversity will have a distinct advantage. Diverse leadership enhances a company’s ability to anticipate market shifts and the needs and interests of customers.

For this reason, more executives from different industries have begun to believe that it is important for “a company’s employees to reflect the people they serve.” For example, the global food and beverage company PepsiCo has committed to hiring and developing employees from diverse backgrounds. In 2012, it implemented an on-campus recruiting program in the United States that ensured that women, people of color, and people from diverse backgrounds comprised more than 60% of new hires.



Improved employee engagement and satisfaction

Diversity in the workplace also boosts employee satisfaction and helps cultivate greater engagement. A 2015 Gallup poll estimated that only 31.5% of U.S. employees are engaged in their work, while 52% are not engaged and 16.5% are actively disengaged.

Among generations of workers surveyed, Millennials were the least engaged, with an engagement rate of 28.9%. However, numerous studies have indicated that a commitment to diversity and inclusion is especially important to the Millennial population. As the labor force ages and Millennials comprise an increasingly large part of it (75% by 2025), it will become increasingly important for companies to recruit and retain diverse talent in order to maximize employee engagement and performance.

strong>Better innovation and decision making

Companies that commit to greater diversity in leadership and their workforces more broadly are better equipped to innovate and solve complex, real-world business problems. A 2013 study by the Center for Talent Innovation and Hewlett Consulting Partners found that employees at companies with higher levels of both inherent and acquired diversity were 70% more likely to report that their firm captured a new market. Multiple layers of diversity in the workplace help create an environment in which unconventional ideas are heard and leadership can be persuaded to invest in developing those ideas.

Many of the world’s leading companies are aware of the benefits diversity can contribute to decision making. 85% of 321 large global companies (each with more than $500 million in annual revenue) surveyed in a 2011 Forbes study agreed or strongly agreed that diversity is key to driving innovation in the workplace.

Despite evidence that shows the myriad benefits of diversity to businesses, most companies still have work to do to make their workforce and leadership teams more diverse. Given the increasing returns that diversity will yield in the global and interconnected 21st century economy, this is an investment that will only see its value compounded over time.


The GradsofLifeVoice Forbes team provides thought leadership, research and expert commentary on innovative talent pipelines and related issues such as the skills gap, income inequality, workforce diversity, and the business case for employment pathways. We seek to change employers’ perceptions of young adults with atypical resumes from social liabilities to economic assets. This post was originally featured here.


Business Case, Diversity, Hiring & Retention Practices,
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