Feb 09, 2018

The Business Case for Creating a Diverse Workplace

More and more business are turning to diversity as a means of bolstering employee performance, and their efforts are paying off in spades.

Recent research suggests that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians. Diversity is becoming a competitive differentiator, shifting market share towards companies willing to embrace a more diverse cast.

In fact, the recently released Diversity Matters report uncovered a litany of benefits associated with diverse hiring practices:

  • Ethnically diverse companies are 35% more likely to have financial returns above national industry medians
  • Gender-diverse companies are 15% more likely to have financial returns above national industry medians
  • For every 10% increase in racial and ethnic diversity on the senior-executive teams, earnings before interest and taxes rise 0.8%

These findings point to an overarching thesis: diversity in the workplace is better for business in the best possible way. But why is this the case? How does diversity meaningfully impact business performance?

According to the Harvard Business Review, a team of employees that has a member of a specific ethnicity is 152% likelier to understand a client of that ethnicity. When client and employee can bond over cultural background, the company is better able to both please the client and capture or retain more business.

The same is true about women. Shifting a workplace populace from all-male to a more balanced split between men and women can increase revenue by up to 41%. Also, companies with more female board members statistically outperform those with less. These benefits are largely due to women understanding the female consumer base – a group responsible for 70-80% of all consumer purchasing.

Study after study has shown the power of diversity to bolster business. Real change, however, can only happen if forward-thinking entrepreneurs update their hiring practices. Top-tier business professionals are already bringing in diverse talent and reaping the benefits. Additionally, many marketplace lenders and venture capital companies prefer to fund businesses that are striving to cast a diverse team of workers and executives. This is because diverse companies are a safer investment, as they’re more likely to earn an above-average return.

So, any business owner in need of capital and in pursuit of becoming an industry leader should start taking diversity serious. It’s simple: diversity brings businesses significant financial benefits, and we’ve only just started scratching the surface.

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About the author

Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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