Diversity and Inclusivity - Factors for

Sustaining Business Excellence

Globalisation has aided and eased the mobility of people across geographies seeking better
opportunities. UNO reports that 232 million people in 2013 were international migrants of which 38
million were Asians
1
. Migration is just one of the many dimensions contributing to diversity of any
geography and to be precise in any organisation. It has become inevitable for organisations to not just
focus on specialist-skilled people but also the diversity they bring along in terms of ethnicity, culture
and gender among others. This article identifies some such challenges faced by organisations
worldwide with some possible solutions. Overall, the attempt is to emphasise on how organisations
can embrace diversity by adopting the inclusion approach and benefit from it.
Organisational Challenges:
Most organisations face challenges in executing its growth plan. Some of these basic challenges in
relation to diversity include
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how to:
Access the insights of people who closely understand the needs of emerging demographic
groups to break into new markets?
Understand our customer base better so that we can better customise our products, services,
and marketing efforts?
Leverage diverse perspectives and ideas to foster creativity and new product and service
innovation?
Facilitate knowledge transfer between baby boomers and younger generations to ensure
retention of critical knowledge?
Ensure the engagement, productivity and retention of employees who are becoming
increasing diverse?
Develop a reputation as having a culture where the best people want to work?
Finding Answers:
Some leading organisations around the world are finding the answers to these questions in developing
and implementing best practice Diversity and Inclusion (D&I) Strategies and are reporting benefits of:

Improved Innovation and creativity:
A diverse team has a far better chance of generating unlikely idea combinations that can be truly
ground breaking because people from different cultures and backgrounds approach any given
challenge from different perspectives. A study of 28 teams found those that were heterogeneous
solved complex tasks better than the homogeneous teams. They noted the diverse teams exhibited a
higher level of creativity and a broader thought process
3
. Being willing to embrace new ideas and
jettison traditional approaches and norms allows us to imagine what may be possible. Companies that
drive innovation by leveraging employee ideas and knowledge meet product revenue targets 46
percent more often and product launch dates 47 percent more often than industry peers
4
.

1
International Migration Report 2013: Department of Economic and Social Affairs, United Nations,
http://esa.un.org/unmigration/wallchart2013.htm.
2
Leading by Example: The case for making diversity part of your business strategy (Deloitte, 2012)
3
Henley Management College, UK; Ford Germany
4
Aberdeen Group, 2009
New market penetration and customer loyalty:
When the workforce is diverse and representative of target customers and partners there is an inherent
understanding of the unique requirements of different markets. It has been found that more than half
of all international joint ventures fail within two or three years, due to a lack of cultural competency
versus technical or professional expertise.
5
Communities seek out organizations they can identify
with or feel supported by. For example, in 2008, when the estimated spending power of the lesbian,
gay, bisexual and transgender (LGBT) community was 81 billion in the United Kingdom
6
and $712
billion in the United States
7
, it was also estimated that 78 percent of the LGBT community and their
friends and relatives would switch brands to companies known to be LGBT-friendly
8
.
Employee engagement and productivity:
Studies show that when employees are engaged, productivity goes up. Diverse work teams properly
managed and trained produced results that were six-times higher than homogenous teams. Companies
with high employee engagement had a 19 percent increase in operating income and almost 28 percent
growth in earnings per share.
9

Recruitment and retention of top talent:
Using a Strategic Review model, a diversity and inclusion expert in each business unit of Cisco
presents the findings to their own business leaders in a way that is relevant and impactful for them. To
do this consistently and cost-effectively, it became important to operationalize this process with
database. As a result, they began to focus less on trying to just get the data and more on actually using
it to stimulate change. The team reached a new level of metrics maturity when they developed
forward-looking demographic projections that allowed them to model different speeds of company
growth or stasis. This allowed them to uncover potential issues that werent necessarily apparent.
While a leader or staffing department might assume hiring or retention practices are fine, and that
non-ideal numbers would fix themselves with company growth alone, Ciscos projection model could
conclude just the opposite. Over a three-year period, region leaders instituted training around diversity
and inclusion issues, new hiring practices and policies, and succession planning, among other things.
Employees noted a marked difference in the work environment over this time and saw acceleration in
the progression of women in the workplace.
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Brand reputation:
By drawing on the concept of stakeholder engagement deriving from CSR, it is possible to construct
brand messages that take diversity into consideration. This would allow organisations to create
employer brands that fulfil the important predicament of being inclusive. Inclusive employer brands
are potentially much more effective in ensuring employee engagement and participation. The very
least an employer brand has to do, is to avoid any messages that can be read as fostering non-
diversity.
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Financial growth:
When individuals are valued and empowered to be their best selves, tangible results can be seen in the
bottom line. In a study of 506 U.S.-based businesses, each 1 percent increase in the rate of gender
diversity resulted in an approximately 3 percent increase in sales revenues, up to the rate represented

5
CulturalSavvy.com
6
] http://www.echelonmagazine.com/index.php?id=176
7
http://www.echelonmagazine.com/index.php?id=197
8
Witech-Commbs/Harris Interactive, 2009
9
Towers Perrin Global Workforce Study, 2008
10
Measurement: Proving the ROI of Global Diversity and Inclusion Efforts, Cisco
11
Employer Branding and Diversity: Foes or Friends? (M.R. and Kelan, E.K., 2011)
in the relevant population.
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Top-listed European companies with gender diversity in management
achieved higher than average stock performance64 percent versus 47 percent.
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Dimensions of Diversity:

There are two kinds of diversity: inherent (traits one in born with, such as gender, ethnicity and sexual
orientation) and acquired (traits you gain from experience, such as working with/in other countries
and cultures will enable us to appreciate the differences). Employees of firms with 2-D diversity are
45% likelier to report a growth in market share over the previous year and 70% likelier to report that
the firm captured a new market
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.

Following are some global diversity dimensions that should be measured and analysed through a
regional lens in order to determine the best interventions:
Gender:
Looking specifically at the role of gender diversity on boards, McKinsey (2007) found that European
companies with the highest levels outperform their sector in a number of key business indicators,
including return on equity (11.4% vs 10.3%); EBIT (11.1% vs 5.8%); and growth in stock price over
three years (64% vs 47%). Companies like PepsiCo have gained market share in key demographics by
leveraging relationships with suppliers who have roots in those communities
15
.

Leadership:
Companies should assess the make-up of their leadership teams in each country in which they operate.
The following questions should be asked regarding representation:
Who is represented in leadership?
Is the leadership team dominated by a particular nationality?
Is it too heavily expat American?
Is local talent being developed?

Gary Hamel (1998) found that diverse teams were better at generating new ideas and problem solving.
More specifically, this diversity results in bringing a diverse set of voices into the strategy dialogue,
creating opportunities for conversations about opportunities in un-served markets, focusing on
passions that lie outside of the normal firm repertoire, developing new perspectives on both
capabilities and customer needs and launching low risk market experiments.

More diverse senior management teams produce superior outcomes to homogeneous teams
particularly where tasks are complex, interdependent, and involve creative thinking or problem
solving (Cordero et al, 1996; Dwyer et al, 2003; Dalton & Dalton, 2005). Quite simply, diverse teams
are more likely to have access to a wide variety of information sources and experiences that are
necessary for complex problem solving (Leonard, Levine & Joshi, 2004)
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.


12
Employer Branding and Diversity: Foes or Friends? (M.R. and Kelan, E.K., 2011)
13
From 2005-2007, McKinsey & Co, 2007
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How Diversity Can Drive Innovation (Harvard Business Review, 2013)
15
How Diversity Can Drive Innovation (Harvard Business Review, 2013)
16
DiversityInc Top 50 Diverse Companies (2013) cross referenced against Top 50 Best Employers (Forbes,
2013) and Top 50 Most Innovative Companies
Race, Culture and Ethnicity:
Organisations that have been recognised by Diversity Inc for excellence in Diversity and Inclusion
(based on CEO commitment, workforce diversity, organisational structures, and supplier diversity) as
well as excellence in other categories associated with cultures of inclusion such as the Top 50 best
companies to work for and the top 50 most innovative companies, include Microsoft, Coca-Cola,
AT&T, IBM, Procter & Gamble, Accenture, Colgate-Palmolive, Verizon Communications, Monsanto
and Toyota
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. Slater et al (2008) also compared Diversity Incs Top 50 companies with companies in
the same industry and similar market capitalisation and found that the Diversity Incs Top 50
companies exhibit an average 2.7% higher net profit margin and 2.5-6.0% higher return on equity
than comparable companies
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.

Workforce diversity is also linked to a better understanding of different segments of the market, and
therefore improved capacity to satisfy consumer preferences and less costly outreach to those
segments (McCuiston, et al, 2004). A culturally diverse workforce that gets its customers also leads
to increased market share, partly driven by increased sales to minority ethnicities (Fernandez, 1991;
Cox and Blake, 1993), but also through improved understanding of consumer preferences (Slater et al,
2008)
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.

Sexual Orientation:
With homosexuality illegal in some countries, tracking lesbian, gay, bisexual and transgender
employees as well as creating inclusive environments for them, is challenging in various parts of the
world.
Other factors:
Capital markets and investors are increasingly attentive to business diversity measures. Some
investment funds (e.g. Calpers in US or Amazone in Europe) include diversity measures in their
investment criteria and others are increasing their investments in socially responsible firms (Roberson
and Park, 2006).
Likewise, some rating agencies are developing tools to measure gender diversity (McKinsey, 2007).
A study by the European Commission found that diversity programs had a positive impact on brand
image for approximately 70% of companies surveyed (McKinsey, 2007)
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.
Guidelines for Measurement and Improvement:
With these propositions and dimensions, following three guidelines can be used to shape an
organizations global measurement strategy:

Principle #1: Assessment need not be based on U.S. standards
Principle #2: Not all ratios of diversity need to be equal
Principle #3: Personalise the D&I approach based on the organisation factors


17
] DiversityInc Top 50 Diverse Companies (2013) cross referenced against Top 50 Best Employers
18
A Business Case for Diversity and Inclusion in NZ Organisations (DiverseNZ Inc, 2013)
19
American Sociological Association
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DiversityInc Top 50 Diverse Companies (2013) cross referenced against Top 50 Best Employers (Forbes,
2013) and Top 50 Most Innovative Companies
Maturity models
There are several useful maturity models that can be used as a framework to guide the development of
the Diversity and Inclusion Strategy. These models are designed to help organisations assess their
current state and to plan action to take them to the next level of maturity.

We can take a cue from DiverseNZ inc (2013) which recommends starting the journey with an
assessment of where we are in the following model
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. The corporate intent at each of the levels is
described as:

0: Identify internal champions, make the business case and build leadership understanding through
conversations with respected peers.
1: Create a fully considered strategy spanning all business areas, ensuring buy-in and relevance across
the business.
2: Engage business unit leaders completely; overcome resistance to cultural change.
3: A focus on innovation and maximum engagement through a culture of inclusion. Capture and
disseminate novel practices developed internally and connect with international peers, as there are
fewer local organisations at this level.

Successful investors are smart. Given the research summarised above, it is not surprising that there is
a positive relationship between diversity reputation and book-to-market equity. This suggests that
being recognised as one of the top companies for diversity and diversity management may serve as an
effective signal to investors about a firms future earnings prospects (Roberson and Park, 2006).


21
A Business Case for Diversity and Inclusion in NZ Organisations (DiverseNZ Inc, 2013)