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Business Case for Diversity and Inclusion

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Diversity and Inclusion are 2 interlocked ideas.  However, they are anything, but interchangeable.  Managing Diversity and Inclusion (D&I) involves actions beyond policies, programs, or headcounts.

Diversity pertains to representation of races, ethnicities, and other minority groups in an entity or in other words the make-up of an organization.

Inclusion represents the degree of value given to inputs, existence, and viewpoints of various groups of people and the extent of their integration in a setting.

There are many benefits of Diverse and Inclusive workplace such as better revenue growth, more innovative capability, enhanced capacity for recruiting a diverse talent pool, greater employee retention.

Maintaining an Inclusive workplace culture not only assists in enticing a diverse group of talent but also aids in keeping the diverse talent enticed in the first place.

Diversity matters in the overall business performance of today.  So does Inclusion of diverse points of view.  Inclusion seems to have a positive impact on the bottom line, as indicated by data coming out of a long-term study conducted by global consulting firm McKinsey.

Trajectories of 100s of large companies have been followed by the research since 2014.  It tracks Ethnic and Cultural Diversity, as well as Gender based Diversity.  More than 1,000 large companies from 15 countries were included in the 3rd analysis, the largest data set by far.  Report based on this data set was titled “Diversity Wins” (2019).

Most recent data points to the following 6 key areas of focus that affect performance positively or negatively:

  1. Gender Diversity on Executive Teams leads to stronger performance.
  2. Progress in Gender Diversity in Boards is slow.
  3. Women representation low on executive teams all across the studied countries.
  4. Executive teams with more women perform better.
  5. Female executive representation across big industries is slow.
  6. Business justification for Ethnic Diversity on executive teams is very strong.

As per the study findings, association between diversity on executive teams and the prospect of unsurpassed financial accomplishment is now even clearer than previously.

Let us delve a little more deeply into some of the findings.

1. Gender Diversity on Executive Teams leads to stronger Performance.

Data has brought to light the fact that more representation increases the prospect of enhanced performance.  Businesses with 30% or more women on their Executive teams are considerably more likely to perform better than those with between 10-30% women.  Companies with 10-30% women on Executives teams, in turn, will possibly outdo those businesses with fewer or no women executives.  As a consequence of women representation, there is a significant performance gap of 48% amid the most and least gender-diverse businesses.

2. Progress in Gender Diversity in Boards is slow.

Female representation on boards has risen from 21% in 2014 to 28% in 2019 in businesses located in the United States and the United Kingdom.  Although this is progress but it is slow.  Positive correlation between board diversity and financial outperformance had been seen in the 2014 data set, but it was not observed to be as significant as it has been in the new data set.

3. Women representation low on Executive Teams all across the studied countries.

Data set of 2019 that includes 15 countries on 5 continents shows that advancement with regard to women representation on executive teams is slow in most countries.

Extremities are displayed in women representation where on one end is Norway with at least 1 woman on all executive teams in the studied businesses and countries like Brazil and India where 83% companies did not have a single woman.

Interested in learning more about the Business Case for Diversity & Inclusion (D&I)?  You can download an editable PowerPoint presentation on Business Case for Diversity & Inclusion (D&I) here on the Flevy documents marketplace.

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The purpose of Human Resources (HR) is to ensure our organization achieves success through our people. Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.

This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization's Strategy. In fact, having strong HRM capabilities is a source of Competitive Advantage.

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Diversity pertains to representation of races, ethnicities, and other minority groups in an entity or, in other words, the make-up of an organization. Inclusion, on the other hand, represents the degree of value given to inputs, existence, and viewpoints of various groups of people and the extent [read more]

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About Mark Bridges

Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.

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