diversity: the business case

Various studies have shown that more diverse teams are better at solving complex problems, exhibit a higher level of creativity and broader thought processes.

In ‘Delivery through Diversity’, McKinsey found that the relationship between a more diverse leadership team and financial outperformance is a continuing global trend. Research by the Kellogg School of Management found diverse teams often made better decisions as they ensured different views were considered. The research showed that the better decisions were not the result of new ideas but, rather, diversity among the management group caused more careful information processing than in the homogeneous groups. Embracing diversity also gives organisations the pick of the talent pool and having a team that reflects the diversity of your customers also contributes to the company’s bottom line. 

While legal and governmental intervention in the area of diversity goes back more than 40 years, in practice it seems that business can benefit from promotion of a diverse workforce.

Both the ‘Catalyst report into Fortune 500 companies’ and the ‘2010 McKinsey & Company Women Matter series’, which looked at organisations in Europe, China, India, Brazil and Russia, found that organisations with the highest representation of women on their boards of directors had significantly better financial results compared to those with the lowest representation of women. 

If diversity is well managed, organisations can benefit from increased innovation, productivity, and problem-solving skills. Employees benefit from increased mental health and wellbeing, knowing that they feel included and their contributions are valued. While Australia is one of the most multi-cultural countries in the world – home to people who identify with more than 270 ancestries and 49% of the population either first or second generation Australian – this is not reflected within the workplace. Research by O’Leary and Tilly ‘Cracking the Cultural Ceiling’ (2014) found that less than 5% of executive positions are held by Asian-born employees.

With research indicating that diversity pays, the obvious question is ‘what is diversity?’ The CIPD defines it as valuing everyone as an individual, be they employees, customers or clients. In its report ‘Only Skin Deep: re-examining the business case for diversity’, Deloitte suggests that by widening the approach away from visible characteristics and towards diversity of thought, organisations are able to ask better questions. So, instead of ‘How can increasing gender and racial diversity help us improve business outcomes?’ you move to ‘How rich is our knowledge bank?’ and ‘Do we have the variety of perspectives necessary to deal with complex problems and create innovative solutions?’

The Deloitte report identified that it is not enough to have a diverse workforce, organisations must also practise inclusion – the sense of being valued and included – to truly gain the maximum business benefits from a diverse workforce. Leaders need to create an open and inclusive environment with a sense of collective identity or shared goals.

Just as important as a leader’s abilities is an organisational culture that supports, recognizes, and rewards diversity and collaboration.


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