With the movement against racism gaining more strength now than ever, the topic of workplace diversity finds itself on the hot seat. The organizations that have failed to uphold equal representation and treatment of all their employees have received vicious backlash. In turn, several organizations are prioritizing a strong representation of minorities, but the efforts to increase diversity are far more rewarding than protection from public ridicule.
$16 Billion Lost by Tech Companies Each Year
Extensive research reveals the long term consequences of a lack of diversity. Before addressing the opportunities to gain from a diverse team of employees, let's dive in with what should be keeping organizations up at night. More than 2,000 adults who recently left a technology-related position in the U.S. were surveyed by the Kapor Center and Harris Poll. The survey found that workplace culture is a powerful driver of turnover, costing the tech industry more than $16 billion every year. Workplace culture directly affects the retention rate of underrepresented groups. Many employees left their company due to poor treatment and unfairness. The survey further established that stereotyping was the most pivotal reason men and women of color left their position; 35% of those surveyed stated that stereotyping played a role in their decision to leave. Organizations value retention of positive and contributing employees. A strong employee retention helps reduce costs of recruiting, hiring, and training. Employees who have also worked at the same company for longer develop an understanding of their organization's goals, which is necessary for maintaining a productive team. The cost of reduced productivity is no issue to shy away from.
A consideration in addition to productivity is an organization's morale. Imagine trying to feel motivated and inspired in a workplace where your coworkers are consistently leaving because they become frustrated with unfairness or stereotyping. The Kapor Center and Harris Poll identified that stereotyping was a major category that related to length of employment. The more stereotyping individuals witnessed, the shorter their length of stay in their previous position. Do not lose hope just yet: changes to develop an inclusive workplace can have a large influence on employees. The survey reported that if employers improved their culture, nearly two-thirds of individuals in the tech industry would not have left. Also, adopting a strategy for diversity and inclusion is associated with fewer reports of unfairness and, as a result, greater retention rates.
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What 90% of CEOs Agree On for Diversity
Aside from improving employee retention rate and reducing unfairness, the benefits of diversity are reaped in a number of crucial areas. A diversity report from PricewaterhouseCoopers points out the percentage of CEOs that concur with specific benefits they have gained from their organization's diversity and inclusion strategies. For instance, 75% of CEOs agree that diversity promotion serves new and evolving customer needs, 85% support that it enhances business performance, and 90% agree that it attracts talent.
More Diversity, Better Finances
An additional report from McKinsey & Company explored the relevance of diversity in financial performance. The statistics spoke for themselves:
- For companies in the top quartile for racial and ethnic diversity, they are 35% more likely to attain financial returns above their national industry medians.
- In the United States, earnings before interest and taxes (EBIT) increases 0.8% for every 10% increase in racial and ethnic diversity on senior-executive teams.
Thus, a clear linear relationship exists between diversity and stronger financial performance.
A Difference of $600 Million in Sales Revenue
The monetary benefits of diversity soar when observing sales revenue. Research conducted by sociologist Cedric Herring exhibits the positive business outcomes as a result of both a racially and gender diverse workforce. The findings of Herring's study continues to demonstrate the rewards of a diverse organization:
- Companies with the high level of racial diversity have sales revenue that is nearly 15 times greater on average than companies with the lowest levels.
- Organizations with the greatest gender diversity reported averages of $644.3 million, while the average sales revenue for companies with the least gender diversity was $45.2 million. This is a difference of $599.1 million.
- An identified 3% increase in sales revenue is associated with every 1% increase in the rate of an organization's racial diversity and a 9% increase in sales revenue for every 1% increase in gender diversity.
Beyond sales revenue, Herring's study found better results in terms of average customers and competitive positioning for organizations with greater diversity. Companies with the highest rate of racial diversity reported an average of 35,000 customers, whereas the organizations with the lowest rates reported 22,700 on average. For gender diversity, an average of 15,000 more customers was reported for companies with the highest rates.
It's Time to Develop Your Strategy
Convinced whether diversity can influence your results yet? The reasons to adopt a diversity and inclusion strategy extend further than social opinions. Financial results are just the beginning. A well-rounded culture, different perspectives, and unique backgrounds all bring new ideas to the table. And the encouragement this brings to minorities with more disadvantaged roots is worthy support to contribute.