Building the Business Case for Diversity
Diversity is top of mind for many business leaders today, with companies both large and small embracing it. In the current disruptive economic environment, building a strong business case for diversity and implementing it across your organization can help you reap its benefits and potentially gain a competitive edge.
Factors driving diversity
With globalization leading to complex supply chains and highly diverse customer bases, diversity plays a critical role in helping companies create products and services that appeal to different cultures and backgrounds. Customers in China and India have different needs and expectations than those in Europe or the US. Those complex supply chains often span multiple countries, necessitating greater cultural awareness to work smoothly.
In addition, communication technologies like instant messaging and video conferencing have enabled greater connectedness. This means businesses can hire and do business across international borders, bringing more voices and perspectives into the fold.
The tangible benefits of diversity
A more diverse team will view the same problem from a variety of perspectives. This may empower them to generate a greater range of creative solutions, increasing the likelihood that one will be highly effective. In today's rapidly changing business environment, a more responsive company with better ideas will be able to adapt to dynamic market conditions, regulatory environments and consumer tastes.
While diversity at all levels is important, one of the most significant impacts is at the leadership level. If your firm embraces diverse leadership teams with some mixture of gender, age, national origin, industry background or education, the overall innovation level will likely be significantly higher. These groups come up with new products and services or resolve existing issues, which drive additional revenue while reducing costs.
Improve employee retention
If employees feel ostracized, it will be tough to fully realize the benefits of cultural diversity in business. A welcoming and inclusive atmosphere plays a crucial role in employee happiness and retention. For diverse teams to create and innovate, everyone must fully participate and share their real thoughts. Therefore, all team members must believe their voice matters and feel supported.
Quantify your success
Because diverse teams can drive increased revenue, you'll likely need to segment revenue within your accounting system by product or service type. You may also want to further break out revenue by add-ons, such as delivery or consults. This level of detail lets you directly attribute group actions to revenue impact.
Individual teams will be able to impact the cost of goods or services sold, so consider delineating gross margin by product or service type. Your team may increase pricing, identify and implement operational efficiencies or find ways to purchase goods or services at a lower cost—all of which improve the gross margin. Although overhead is largely fixed, track overall operating margins to readily identify any upticks in profitability.
The impact on revenue and margins may take several months, especially if you're only now hiring or re-structuring teams to increase their diversity or developing a more inclusive environment. Sports teams need time to onboard new teammates before they become serious playoff contenders—the same applies to your team.
You can initially focus on softer metrics such as reduced turnover or engagement levels to show progress and maintain commitment. Employee retention and job satisfaction can also be helpful metrics to provide a sense of how your diversity efforts are having an impact.
To continue gaining internal support for diversity, seek out stellar examples. What teams experienced great performance on a project? What group saved the company money? Who won back one or more highly dissatisfied customers? If diverse groups drove these wins, share this fact through your monthly newsletter, intranet or company meetings. You could create case studies of the high-performing groups and share these with other managers.
The benefits of cultural diversity in business are far-ranging, and it can help your company in ways that reflects your specific needs. Maybe you need teams with a broader set of perspectives to problem-solve more creatively. Perhaps you're looking to create a more inclusive environment that fosters employee happiness. Or maybe you're looking to expand globally and need employees who understand a wider range of international markets. If you build a business case for diversity that's unique to your organization, you can hopefully hasten adoption and see results faster.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.