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How a Lack of Diversity Hurts Profits

Allie Kelly

The verdict is clear: If you’re not a diverse company, you’re going to fall behind.

Research shows that diverse workforces are intricately linked to the overall success of an organization, including its profits. When it comes down to it, non-diverse companies stagnate. Companies with employees from a vibrant array of cultures and backgrounds thrive.

Here’s more information on how a lack of diversity hurts profits:

Link to profits

In the 2017 update to its “Why Diversity Matters” report, McKinsey&Company found that organizations in the top quartile for gender diversity in their executive teams were 21 percent more likely to have above-average profitability than companies that were in the fourth quartile for gender diversity.

Furthermore, companies in the top quartile for ethnic diversity were 35 percent more likely to have above-average profitability.

News source Quartz also cites a study from researchers at the Massachusetts Institute of Technology and George Washington University that found that shifting to gender-balanced teams led to a 41 percent increase in revenue.

Behind the stats

So why exactly does diversity improve a company’s bottom line? There are several factors at play here.

1. A wealth of perspectives

Collaboration and innovation are two keys to remaining competitive in the 21st century business landscape. Having a workforce with a wealth of perspectives from a variety of backgrounds encourages thinking about problems and solutions in new ways, a quality that is critical to long-term organizational success.

Diversity can improve critical and creative thinking. Business Insider cited a study published in the Journal of Personality and Social Psychology, which found that diverse teams make fewer errors and consider facts more closely. These team members were found to display more in-depth consideration of other points of view. The site also cited a study published in Economic Geography that found that culturally diverse teams were more likely to come up with new products than homogenous teams.

2. More desirable workplaces

Another reason that diverse companies may be more profitable is because they attract the most skilled employees. The McKinsey study found that top talent would rather work for diverse companies, the Financial Times noted.

“If you haven’t got the best talent you’re not going to be the best, if you’re not representing properly the available pool of talent then you’re missing an opportunity,” said Bank of America-Merrill Lynch EMEA President Alex Wilmot-Sitwell in an interview with the newspaper.

3. Inclusive, supportive cultures

Survey after survey shows that engagement is key to corporate success. Engagement, in large part, comes down to the work culture that a company creates. When cultures are inclusive of all employees and nurture the professional development of each individual, employees feel empowered to grow, learn and do their best work.

Diversity is critical to the success of every organization. The research shows it – Having employees from a variety of backgrounds, cultures and genders, improves profitability.

Allie Kelly


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