Diversity as a business

value

Women in Tech Member Guide Tips on generating business value by integrating diversity and inclusion in company’s strategy and challenges that still exist.

27.3.2019

Introduction

Women in Tech Network In Women in Tech, we aim to discuss how women could have a larger role in creating success stories in business and

technology. It has been amazing to see how Women in Tech activities have grown over the years. From a single event

– Women in Tech Forum 2013 – to an organizational network that has multiple events around Finland, as well as

satellite events up to South America.

Thank you members for the all the valuable actions you are doing to make technology business welcoming for

everyone!

- Piia Simpanen, Lead of Women in Tech activities & Head of Growth Programmes, Technology Industries of

Finland

What This Guide Is Based On On the 18th of March 2019 Women in Tech member companies gathered to share experiences and thoughts on

challenges, tools and ideas of promoting diversity and its business value. During the event, Laura Juvonen, Executive

Director at Technology Industries of Finland (home of the Women in Tech network) made a presentation on why

diversity makes business sense. Frantic and Accenture presented their company journeys in the area of diversity and

inclusion. In addition to this, vivid discussions and brainstorming sessions on the topic took place.

This short guide, whose aim is to provide the reader with an overview, is based on the results of the workshop,

presentations as well as on the studies on the topic, amongst which are, for instance, studies by McKinsey (2018) and

Catalyst (2015). The links to the studies used are provided in the reference section.

By “diversity” in this paper we mean a wide range of characteristics and experiences that people may have, examples

include and are not limited to culture, ethnicity, gender, or age.

What is the business value of diversity?

Improved Financial Performance Studies of both McKinsey (1) and Credit Suisse Research Institute (2) show that companies are likelier to have

healthier financial performance, if executive team and/or board of directors is diverse. Average return on equity

(ROE) of the companies with at least one woman on the board of directors is four percentage points higher than of

those with no women (2). In general, financial performance of companies with women in their executive teams is 21% likelier to be above national industry median, and likewise companies with culturally/ethnically diverse executive

teams are 33% likelier to have a financial performance above the national industry median. On the contrary,

companies with least gender and ethnic diversity in their executive teams are 29% likelier to underperform on

profitability than companies with more diverse teams. (1)

There is also a correlation with higher risk aversion in companies with women on the board of directors (2), and better

performance during the times of crisis (such as the financial crisis in 2008). Large-cap companies with at least one

woman on the board have outperformed their competitors by 26% in the timescale of the Credit Suisse research. (2)

In addition to that, participants of the workshop pointed out that companies with culturally diverse teams have better

understanding across cultures and languages, which can positively affect global performance.

Drastically Increased Level of Innovation This aspect of diversity was highlighted multiple times during the workshop. Accenture’s presentation covered the

results of the company’s research “Getting To Equal 2019”, which highlighted the culture of equality and its

tremendous impact on companies’ ability to innovate. According to this research, in companies in which the factors

driving the culture of equality are most common, individual’s ability and willingness to innovate is 7.5 times higher than in companies where such factors are least present. In such companies, people are not afraid to fail. If innovation

mindset would increase by 10% in all countries, the global GDP would grow up to USD 8 trillion by the year 2028. (4)

According to the results of the workshop, productivity of teams also increases due to higher level of engagement, and

thus more innovative solutions can be produced. This is also proven by the researches, which say that, first of all,

companies with more gender diverse teams are more likely to introduce radical innovation in a 2-year period, and

second, companies run by culturally diverse teams are more likely to develop new product innovations compared to

companies with homogenous leaderships. (6,7)

Improved Customer Understanding The results of the workshop show that diverse and inclusive companies have improved customer understanding and

can develop products and services more effectively. Frantic, for example, aims at engaging senior citizens in

development of their products, which, amongst all, yields even more customer-oriented services and products.

Diverse teams can also attract more diverse customers and keep the end-user perspective in place.

Improved Team Performance According to researches of both McKinsey and NASA (2), women are particularly good at defining responsibilities

clearly and at being strong coaches and mentors for the employees, which not only improves team performance but

eventually also financial performance. One essential aspect brought up during the workshop both during Accenture’s

presentation and discussions, culture of equality drives teams to perform well and to innovate. According to

Accenture, diversity is a critical building block and culture of equality is a multiplier. (4)

Workshop participants underlined that diverse teams have a steep learning curve and “learn to learn faster” and they

also solve problems with a great variety of approaches. Members of such teams also have a sense of belonging and

authenticity, which increases employee retention.

In addition, another aspect of diversity was brought up by Frantic – the diversity of work habits and life situations.

Some people thrive in the office, others – working from home. Taking that into account, and allowing, for example, to

work while traveling, increase individual performance and thus drive teams forward. (8)

Positive Impact on Society Laura Juvonen presented the numbers in her presentation, which tell that Finland needs labor-related migration as the

demand for skilled personnel is expected to grow in all the technology industries. Out of the total recruitment demand,

60 % is for university graduates and 40 % is for employees with vocational degrees. Currently Finnish educational system is capable of supplying only 70% of the university degree demand and only less than half of that of

vocational degrees. (5) In other words, in order to succeed Finnish companies need to have more diverse teams in

terms people with a different cultural background. This way business can increase their positive impact on society by

succeeding in their respective areas and increasing their competitiveness.

With more diverse personnel and with creating the culture of inclusion and equality, companies are more capable of

having a positive impact on society by employing people from different backgrounds and proving that backgrounds do

not matter. As it was said during the workshop, “what matters is how you work and what your strengths are, not your background.”

In addition to that, according to Catalyst research (3), Corporate Social Performance of companies with higher

percentage of women on the boards of directors show higher in the following dimensions: environment, customers,

community and supply chain. Examples of these dimensions in practice include reduction of negative impact on

environment, fair trade products, responsible marketing.

Increased Employee Pool Workshop participants and researches agree on the fact that companies have a great benefit of a wider variety of

employees to pick the best talent from and thus grow the business.

Challenges of promoting diversity

Customers’ Bias and Requirements Results of the workshop show that there is still a great challenge of customer acceptance of diverse teams. Some of

them might have their bias towards certain cultures or genders, some might have a strict language requirement.

Many companies face the challenge when working with public sector in Finland, when customer expects fluent Finnish language skills (the language, which is used by only around 5 million people, and thus it is challenging to find

diverse personnel). Also, certain professions have been stigmatized as female and male, and clients might have a

picture of the “right” professional in mind.

Lack of Company Strategy and/or Management Commitment This challenge appeared multiple times during the workshop. First of all, company employees “should share the same DNA” with company’s leadership, in other words, the decisions of management are to be understood and

backed up by employees and vice versa. There should also be transparency in decision-making. In addition to that,

management allocates resources and sees and communicates the big picture, if a culture of diversity and inclusion is

not supported by the management, there will be no allocated resources.

Lack of commitment leads to lack of measurement and lack of understanding of what diversity actually is and what

measurable benefits to company’s performance it can have. This, in turn, leads to lack of it being a business priority in

general.

This can also be applied on a larger scale, for example, on a country-wide scale. The workshop participants talked

about improving branding of Finland in order to receive diverse employees from elsewhere. Also, the bureaucracy associated with employing foreigners should be alleviated by those in the power of decision-making and

companies have a say in it.

Unconscious Bias Humans are biased, and cultural traditions in which people are brought up have a great impact on prejudices formed.

This is another challenge that companies are facing both in their work with clients, in the teams and on the managerial

level. Often, people need to get out of their comfort zones to embrace diversity and commit to it.

Participants also discussed Finland’s own biases, which are rooted in the mentality of society being already perfect. Due to society being advanced, there is a belief that everything possible to promote inclusion, diversity and

equality has already been done. There is also an image of “Finnish engineering society” attributed to successes of

Finnish tech industry, which leads to lack of belief that Finland needs foreign engineers. Finns are also too shy and

this might prevent them from breaking prejudice of others’ skills, culture etc.

In addition to this, global companies can be biased to think that being global means being diverse. In many cases,

this is not true and has to be corrected and proven with data.

Lack of Understanding of What Diversity Is Participants of the workshop mentioned, that there often is a lack of understanding of what diversity and inclusion

actually are. The terms are widely-used, and people often misuse them and the meaning becomes blur. Aspect of

labeling people who promote diversity and inclusion was also brought up. In addition, there is often a lack of

knowledge of business value of diversity and understanding that diversity is a long-term activity.

What can be done to promote diversity in business?

Co-operation It was underlined that co-operation in this area has an immense business and societal value. Participants noted that

co-operating with non-profit organizations and membership in different networks have a positive effect on companies’

development in this sphere. Working with schools and universities to both attract talent and to discuss common

strategies is also vital for success.

Another important aspect is that companies should work together not against each other to promote diversity and

understand and generate the business value of it.

Measuring and Showing Numbers The best way to convince those in the power of decision-making, be it a client or an executive director, is to show

numbers. The employee satisfaction surveys should be taken into use. However, not only the value of success should

be shown, but also the cost of not having diverse teams. McKinsey’s research (1) shows that one common thing in

the companies successfully incorporating diversity in their agenda and subsequently showing above median financial

performance is investing in internal research. Such research gives data and helps forming a strategy.

Strategy Diversity and Inclusion should be included in company’s strategic agenda. If there is a strong commitment from the management, both on top and middle management levels, there is a better allocation of resources and personal commitment on all levels. In addition, growth factors for business should be clearly associated with diversity agenda, and this agenda has to be localized (1). One tip mentioned during the workshop: top level meeting agendas should always include Inclusion and Diversity, if they do not, then it is your responsibility to add it there.

Trainings and Other Internal Activities Training on inclusion, equality and diversity have to be done on all levels. This way awareness can be improved.

There is also a great benefit on providing unconscious bias training, according to Accenture. A key point underlined

by the workshop participants is that companies should not measure success of trainings based on the amount of

people showed up. If one person attends, it is already a step forward.

It may be a great idea to arrange days dedicated to employees introducing their cultures to others, especially if a

company is small. Guilds inside companies also play a large role in promoting diversity and inclusion.

Outward Awareness Building In addition to providing internal trainings on increasing awareness, it should also be done outwards both on company

and individual levels. Large media and social media should be aware of the value of diversity. Companies should

show to the outer world their commitments.

Content produced by the companies should be tailored with Inclusion & Diversity in mind. Job postings should also

reflect this agenda, while reflecting the actual situation in the company or being mildly aspirational. The idea of looking for people to enrich company’s culture, not to fit this culture, is also worth taking into account.

Author: Daria Hedberg /Women in Tech Team

References 1.“Delivering through diversity”, McKinsey (2018)

https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20throu

gh%20diversity/delivering-through-diversity_full-report.ashx

2. “Gender Diversity and Corporate Governance” (Press Release), Credit Suisse Research Institute (2012)

https://www.credit-suisse.com/corporate/en/media/news/articles/media-releases/2012/07/en/42035.html

3. “Companies Behaving Responsibly: Gender Diversity on Boards”, Catalyst (2015)

https://www.catalyst.org/research/companies-behaving-responsibly-gender-diversity-on-boards/

4. Presentation: “Getting to Equal”, Hanna-Mari Parkkinen, Accenture (2019)

5. Presentation: “Why diversity makes business sense?”, Laura Juvonen, Technology Industries of Finland (2019)

6. Journal “Innovation: Organization & Management” Volume 15, 2013 - Issue 2:

“Gender diversity within R&D teams: Its impact on radicalness of innovation”

7. Journal “Economic Geography” Volume 89, 2013 - Issue 4:

“Cultural Diversity, Innovation, and Entrepreneurship: Firm-level Evidence from London”

8. Presentation: “Diversity as a business value at Frantic”, Maija Typpi-Häkkinen & Salla Järvinen, Frantic (2019)