Over the last few years, corporations around the world have finally warmed up to the idea that diversity in the workplace is important. What once was something simply relegated to HR is now sometimes a whole department at Fortune 500 companies, and it’s a beautiful thing to see. The trick here is of course selling everyone on the idea that diversity isn’t just important because everyone deserves a seat at the table- it’s also just plain, old good business sense. When consumers see a generally diverse group of people in a company’s advertising campaigns, they are far more likely to trust that brand and buy their products. A Boston Consulting Group survey found that companies with a more diverse leadership team saw, on average, 19% more profitability than those leadership teams with below-average diversity scores. Diversity is inarguably great for an organization’s bottom line. What is a little less talked about is its effect on an organization’s end product. Does diversity actually allow for greater innovation at companies, and at the end of the day can that innovation lead to a stronger end deliverable?
A Harvard Business Review study soundly puts that first question to rest. The researchers studied 1,800 professionals, 40 case studies, and numerous focus groups, and broke down diversity in two ways. The first, Inherent Diversity, breaks down traits by those we are born with: gender, race, sexual orientation. The second, Acquired Diversity, breaks traits down by experience: living in a foreign country, working for diverse team members, international work experience. Leaders that fell into both buckets (known as 2D Diversity) universally unlocked stronger innovation at organizations than those who had one or neither.
This is, of course, because leaders with stronger diverse backgrounds are more likely to invest time and money into more “outside the box” ideas because they themselves think a little more “outside the box” than the average person, due to their background. When leaders invest in time, giving everyone’s ideas equal attention, employees are “3-5 times more likely to live up to their full innovation potential and twice as likely to unleash value-driven insights.”
Taking these ideas into account, or representing a concept known as “informational diversity” within an organization, is an obvious way to create a stronger deliverable. Think about building a car. A male and female engineer are going to have different perspectives on how to build the car, the fun features it needs to have, the safety features necessary, the construction of its overall body. Bring a physicist into the mix, more engineers of different backgrounds and genders, maybe a few people with design-specific backgrounds, and you’ll be able to build a car through the lens of multiple points of view.
If the end deliverable is ultimately revenue, another study conducted by the Boston Consulting Group can make this connection for us as well. Looking at revenue coming directly from products launched within the last three years, an indicator of innovation, BCG estimated that on average innovation drives 26% of an organization’s total revenue. When diversity is layered on top of that they saw a much larger share of total revenue driven from innovation- 46%.
This brings us full circle to our initial question- whether or not diversity drives innovation and a better end product. Ultimately, diversity promotes new ideas. New ideas lead to innovation. Innovation leads to a better end product. And a better end product leads to higher revenue. It’s also important to remember that increasing diversity in the workplace isn’t easy. It requires everyone to make adjustments, question their day-to-day process, and be more flexible with their working styles. But as the old saying goes, the pain is ultimately worth the gain. In our case, though, the pain is something we should all be working towards in the first place, and the gain is great for both the individual and the company. When diversity is brought to the workplace, everyone wins. And one of the clearest indicators of winning is through the innovation and better work that diversity drives.