de&i as a driver of innovation and performance

Leading the change

The adoption of diversity, equality and inclusion policies can deliver real benefits. There’s a clear link between effective DE&I strategies and the ability of organisations to innovate and improve performance.

We live in an increasingly diverse society. You might initially see that in terms of gender or sexual identity, ethnicity, cultural background, neurodiversity or – more realistically – a mix of all of the above, but whatever prism you look through, it’s clear that organisations are recruiting from a rich and increasingly complex talent pool. Diversity, Equality and Inclusion Policies are designed to ensure that recruitment reflects society as it actually is today, but they can all too easily be regarded as a good deed in a wicked world rather than something that actually benefits the business. That would be a mistake. In fact, there is a clear link between diversity and performance.

Why so? Well, one important factor is the ability of companies to innovate. Whether that means doing things differently and more efficiently within the workplace, designing new products, creating fresh business models or reaching out to untapped markets, having a diverse workforce has been proven to deliver tangible benefits. And in today’s competitive environment, innovation feeds through an improved bottom line.

This is more than theory. There is hard evidence. McKinsey has been tracking the benefits of diversity since 2015, issuing reports at regular intervals. A clear theme of the research is the strong link between diverse, inclusive companies and performance.

Companies with more than 30% representation of female executives tended to outperform rivals with fewer women in senior positions. Through the lens of ethnic and cultural diversity, companies in the top 25% outperformed those in the bottom quarter of representation by 36%.

Research also points to some of the underlying reasons why diverse businesses do better. For one thing, they are 47% more likely to retain staff. And there is a strong link between innovation and diversity. Companies drawing staff from a range of backgrounds are 157% more likely to experiment with new ways of working.

So why should this be the case? Well, groupthink is the enemy of innovation and in organisations where employees tend to be drawn from a single background, there is a real danger that everyone will tend to think along parallel lines rather than being prepared to look at problems and challenges from different perspectives.

Then there is product design. Businesses clearly want to sell to as many people as possible but all too often a product won’t meet the needs of all users equally. To take just one example, for many years safety standards on cars were established using research from male-sized crash test dummies. The data didn’t reveal that people with smaller bodies were disproportionately affected by vehicle impacts. Or to put it another way, cars were less safe for women. Arguably more women on design teams would have identified that problem much earlier.

Slow Progress

But here’s the conundrum. In Europe, 75% of major companies have allocated budgets to DE&I programmes. And yet progress towards a more diverse workplace is slower than you might expect. Witness the high unemployment rate among ethnic minorities and migrants. Across the EU, the unemployment rate for people born outside the bloc’s borders is three times the average. In the UK, people with names that sound foreign are a third less likely to be shortlisted for jobs, according to research by an anti-racism network.

There is also a career progression problem. Research from 2022 demonstrates that – women continue to be underrepresented at the leadership level. Additionally, people from minority backgrounds face an even more acute glass ceiling problem. For instance, a UK survey found that people from ethnic minority backgrounds accounted for just 3.7% of leadership posts.

And as Deloitte has pointed out, diverse recruitment is not enough. Organisations won’t necessarily reap the benefits of differing perspectives unless they are genuinely inclusive in their approach to nurturing staff.

The Career Ladder

A company might have a 50/50 male/female mix across the organisation as a whole but very few women at higher levels. In the same company, people from minority ethnic backgrounds might also struggle to climb the ladder. More fundamentally, there is the question of whether team members from diverse backgrounds are being not only encouraged to climb the career ladder but also listened to. Recent reports stress the importance of creating an environment in which all colleagues are treated with fairness and respect and recognised as valued contributors to the business. Team members should also feel safe and empowered.

So, what can be done? Writing for Forbes in a recent article. Burcin Ressamoglu urges businesses to continue to invest in DE&I but stresses the importance of assigning rigorous and measurable KPIs around their recruitment and career progressions. For instance, a company might decide to recruit from a wider and more diverse pool, but unless the results are measured the initiative might not deliver on its ambitions.

Measurement and metrics – along with industry data – will in turn help leaders sell the benefits of DE&I policies to their teams. It should be clear to everyone that diversity is not a nice-to-have. It is a driver of business success.