The Business Case for Diversity & Inclusion:Why Diversity is Good for Business

Eric PetersonManager, Diversity & Inclusion

Society for Human Resource Management

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The Evolution of the FieldOver the last twenty years, the field has evolved considerably …

Compliance Case“Diversity is something

we’re forced to do … by law.”

Values Case“Diversity is the right thing

to do … for our people.”

BusinessCase

“Diversity is the smartthing to do … for

our business.”

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The Compliance Case for DiversityDiversity in the US began as a legal mandate, and that tradition continues …

1960 1970 1990 20001980

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1961: Creation of the Equal Employment Opportunity Commission (EEOC)

1964: Passage of the Civil Rights Act (incl. Title VII)

1965: Creation of the Office of Federal Contract Compliance

1967: Passage of the Age Discrimination in Employment Act

1973: Passage of the Rehabilitation Act of 1973

1990: Passage of the Americans with Disabilities Act

1996, 2007: Failed attempts to pass the Employment Non-Discrimination Act

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3

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1983: Expansion of Title VII of the Civil Rights Act of 1964

The Values Case “vs.” The Business Case

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• There are many reasons why an organization might/should focus on Diversity.

• Usually, these fall under two broad themes: the Values Case and the Business Case.

Values CaseValues Case Business CaseBusiness Case

“It’s the right thing to do, and will make our people happier.”

“It’s a smart thing to do for business , and will improve our bottom line.”

• Both the Values Case and the Business Case are important and necessary; they do not contradict each other, but rather complement each other.

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Why is a Business Case Important?

• Strategic Diversity Management Plans depend on the commitment of many people in the organization, not the least of which are your CEO or equivalent, and Senior Leadership Team.

• These leaders are naturally focused on the financial health and well-being of the organization.

• A strong business case for diversity will clearly show that creating a diverse and inclusive workplace will benefit everyone in the organization, by making the organization stronger, more resilient, and more competitive.

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After all, why isn’t “doing the right thing” enough?

The Business Case for Diversity

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When managed well, diversity is one of the most important assets an organization has in order to achieve and maintain a competitive

advantage.

Effective diversity management = competitive advantage

Workplace Diversity Defined

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Skin color

Gender

Age

Education

Socio-economic StatusNative born/non native

Geographic Location

Military Experience

Parental Status

Smoker/Non smoker

Thinking Styles

Work Background

Religion

Functional SpecialtyCommunication Style

Marital StatusBeliefs

Culture Values

Behaviors

Visible Diversity

Traits

Invisible Diversity

Traits

Sexual OrientationPhysical Abilities/Qualities

Personality Level in Organization

Body Type/Size

Ethnicity

Two Definitions of “Inclusion”

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Inclusion is the achievement of a work environment in which all individuals are treated fairly and respectfully; have equal access to opportunities and resources; and can contribute fully toward an organization’s success.

Inclusion is the capacity to leverage difference.

Key Challenges a More Diverse Workforce Brings

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Communication & Language Issues

Expectations (salaries, benefits)

Increased Turnover

More Training

Potential for Conflict

Generational Differences

Accommodations

Opportunities a more Diverse Workplace Brings

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Fresh, new ideas

Technological Competence

Greater capacity for

Risk

Cultural Competence

Increased Language

Skills

Global Focus

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The Business Case for Diversity (cont’d)

1. Greater adaptability and flexibility in a rapidly changing marketplace

2. Attracting and retaining the best talent

3. Reducing costs associated with turnover, absenteeism and low productivity

4. Return on investment from various initiatives, policies and practices

5. Gaining and keeping greater/new market share (locally and globally) with an expanded diverse customer base

6. Increased sales and profits

7. Mitigate and minimize legal risks

Source: Lockwood, N., June 2005, “Workplace Diversity: Leveraging the Power of Difference for Competitive Advantage”, Research Quarterly. Society for Human Resource Management: www.shrm.org/hrresources

Diversity & Inclusion helps the business’s bottom line in the following ways:

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1. Greater flexibility and adaptability

Customer Service

Flexibility & Adaptability

The Changing Workforce

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2. Attracting & Retaining the Best Talent

• Which do you believe?1. Talent exists independently of variables such as race, gender,

sexual orientation, ability, religion, marital/parental status, or socio-economic background, or

2. Talent is tied to variables such as race, gender, sexual orientation, ability, religion, marital/parental status, or socio-economic background.

• If #1, how much talent does your organization currently have access to?

• We are facing a global shortage of talent – are you prepared?

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2. Attracting & Retaining the Best Talent (cont’d)

Greater competitiveintensity

22%

Increasing numberof markets served

11%

Increasing size of company

19%

Finding talent 31%

Source: McKinsey & Company

Finding talent is seen as the most important management challenge facing business executives in the next 5 years

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• Building leadership capability starts with creating a culture that makes employees want to stay

• Ensuring that all employees have full and equal access to opportunities

• Implementing leading-edge talent management programs such as:– Mentoring– Cross-functional development assignments– Job rotations– Special assignments– Career pathing– Skills inventories– Succession planning (55% of employers are already doing succession

planning)

2. Attracting & Retaining the Best Talent (cont’d)

3. Turnover, Absenteeism, Low Productivity

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• More likely to stay with that company

• More likely to recommend their company to others

• Less likely to have experienced discrimination

• Less likely to have missed days at work

• More engaged in their work

In diverse & inclusive work environments, employees are:

Source: Gallup Organization, “Civil Rights in the Workplace Survey,” 2005

3. Turnover, Absenteeism, Low Productivity (cont’d)

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• Each year, more than 2 million people voluntarily leave organizations due to perceived unfairness (cumulative comments/jokes, unfair policies, perceived invisibility)

• This trend costs U.S. corporation $64 billion each year

• This figure is nearly equivalent to the combined revenues of Google, Goldman Sachs, Starbucks, and Amazon.com, and does not include costs associated with litigation or loss of reputation

Source: Level Playing Field Institute, “The Corporate Leavers Survey,” 2007, LPFI.org

4. Return on Investment

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=

HR Outcomes Business Outcomes

5. Greater/New Market Share

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2000 2007 2012

BlackHispanic/LatinoNative AmericanAsianMultiracial

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Billi

ons

Buying Power by Race

Source: Jeffrey M. Humphreys, The Multicultural Economy 2007, www.selig.uga.edu

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6. Increased Sales and Profits

• NASDAQ by 28%• Standard & Poor’s 500 by 25%• Dow Jones Industrial Average by 22%

Source: – DeGroat, TJ, No Way to Measure Diversity's Value? Mainstream Article Ignores the Hard Facts, DiversityInc.com http://www.diversityinc.com/public/19452.cfm

Over a 10-year period, the index of publicly traded companies in DiversityInc’s Top 50 Companies for Diversity list outperformed the:

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7. Mitigate and Minimize Legal Risk

• Over the past 10 years, major race and gender discrimination lawsuits cost U.S. corporations $2.3 billion in settlements alone.

• In FY 2007, there were 17,734 disability discrimination charge filings.

• In the same year, there were 2,880 religion-based discrimination charge filings

Source: U.S. Equal Employment Opportunity Commission; http://www.eeoc.gov/

2.3 Billion?

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Questions/Comments