What Makes Workforce Diversity Important for Employers

Learn about workforce diversity and critical factors of ensuring teams’ success

April 27, 2022 By Ravijojla Novakovic

Businesses can no longer focus on making profits alone in the contemporary social climate. Brands have started taking a stand with social causes, while people are looking for proof of brands’ commitment even beneath the surface. Diversity, equity and inclusion (DEI) are increasingly seen as key factors in setting teams up for success.

While a diverse workforce is a recent buzzword in corporate culture, various entities have already been using diversity organically as a means to success. Think of cultures that thrive because of multiple components bringing their specific knowledge to build organizations that overpower homogenous ones.

Historically, the dominant culture, white males alone, could never have created the world we’re living in without the hard work of minority groups. What’s really changing is that minority groups are finally getting the visibility they deserve, and we’ve only just started.

What is a diverse workforce?

A diverse workforce comprises individuals different from each other based on their ethnic, racial, and religious backgrounds. There’s also diversity by gender, age, class, work style, sexual orientation, and neurodiversity. In a nutshell, a diverse workforce implies that a company hires a wide range of diverse individuals to construct teams whose members’ skills, knowledge, and experience complement each other’s.

While it seems that ensuring equal opportunities to all and welcoming a diverse workforce is entirely an HR department’s agenda, research shows us differently. According to the 2021 DEI Report by Perceptyx, companies who commit to diversity from a strategic business level are more successful than companies that don’t.

Why is diversity in the workforce important?

Millenial and Gen Z population is more diverse than any generation before them. Changes brought upon us due to shifting dynamic relations resulting from the Black Lives Matter and the #MeToo and other movements increased demands for brands to realize and respond to social issues. Social media allows people to talk back and that has significantly reshaped relationships between consumers and brands.

The social media era allowed protests and boycotts to have greater power as employees and consumers can publicly and instantly voice their views on brands’ social strategies. What is commonly referred to as the WOKE culture is not a mask companies can just put on – as people seek to support brands that share their values thoroughly.

Gen Zers and Gen Yers research corporate cultures and look for proof that brands’ outward messaging matches their internal messaging. Companies would be wise to avoid such risk-taking and implement a complete value system and look for ways to diversify their workforce.

Corporate culture activism and backlash

While brands can benefit from embracing progressive stances on civic issues, people are increasingly demanding that the values they promote are internally integrated. Following the death of George Floyd, many brands shared social media posts endorsing the movement and condemning systemic racism.

Still, consumers were quick to call out companies whose performative activism did not match their policies. Companies were questioned about what they were doing for Black communities and demanded companies to show how many Black employees they had in senior positions.

UNILEVER is one example of a brand receiving a significant global backlash after their BLM statement, whose outward statement did not match their branding policies. Their product for skin lightening was immensely criticized for its name ‘Fair and Lovely’. After deciding to change the product’s name, the backlash persisted, as the customers claimed the mere title change was only a cosmetic measure and, therefore, not enough. Gen Yers and Zers expect real change and highly value corporate transparency.

Why should a firm employ diverse employees

While brands are being held accountable for their values, that’s not where the impetus to embrace inclusive strategies ends. There are more significant reasons companies would be wise to focus on employing a diverse workforce: profit, and employee attraction and retention.

McKinsey’s series of reports investigating the business case for diversity shows that “the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time.” The data McKinsey collected encompasses 15 countries and more than 1000 large companies and reveals that the gender, ethnic and cultural diversity in leadership roles is a strong indicator that companies with diverse leadership are more likely to outperform less diverse peers on profitability.

McKinsey’s research also finds that representation of diversity in leadership roles is improving with time, but not fast enough. The longer companies wait to employ DEI best practices and work on keeping their diverse talents, the gap between companies that succeed and those that fight a losing battle grows bigger.

The case to increase diversity in leadership roles becomes even more compelling if we look at more numbers: “companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile”.

As for employee attraction: a Glassdoor study from 2020 shows that “76% of employees and job seekers report a diverse workforce is an important factor when evaluating companies and job offers”, adding to a plethora of reasons why companies need their workforce diverse.

Workplace diversity is key to talent retention

With the challenges imposed by the pandemic and the avalanche of changes in the job market – it is becoming increasingly more challenging than ever for companies to retain their employees. While employees across the demographic groups report challenges due to increased levels of stress, uncertainty, and worry, it has been recorded that these challenges are more pronounced in developing nations and with diverse employees (McKinsey, 2020).

Inequalities at work demotivate everyone. A survey from Working Mother shows that 50% of multicultural women are considering leaving their companies by 2022, showing that businesses are failing to retain talent and nurture employees through their existing inclusivity strategies. The correlation reveals itself as soon as we acknowledge that diverse employees encounter the most challenges and feel them most urgently.

Employees stay when they feel valued, and a sense of belonging is instrumental in achieving that. Employees who don’t feel like they have a share of the cake don’t feel included and lack a sense of belonging – making them likely to leave for greener pastures.

A report from the SHRM called attention to the fact that 46% of Black employees in the US think that their workplace does not create enough career opportunities for Black employees.

Another survey from 2017 conducted by Deloitte found that two-thirds of Gen Yers say that an organization’s purpose and capacity for positively impacting society were key factors in deciding where they worked. These findings emphasize the need for progressive policies in the workplace that empower staff members and help provide a sense of belonging and purpose.

How to ensure diversity in the workforce

No company is alike, and the already massive body of literature outlining DEI best practices makes this mission challenging – but not impossible. Using the hiring quota has been criticized because it may prolong discrimination.

Some organizations, like the NFL, are instituting the Rooney Rule for recruiting leadership positions: which demands interviewing a certain number of minority representatives for the leadership position.

Most companies who focus on diversity training and diverse recruiting find that these programs alone cannot drive real change. According to the 2021 DEI report issued by Josh Bersin, HR has a pivotal role to play. However, these strategies are cumbersome and ineffective unless achieving workplace diversity is tackled on a strategic business level instead of just having the HR department focus on it.

Recognize and reward positive behaviors

One concrete solution to promote diversity values in workplaces for companies is to set recognition programs around the values companies wish to support. Rewards and Recognition initiatives serve to reinforce and reward certain behaviors in a company.

For example, if an employee positively impacts employee experience of diverse workforce by honoring their religious practices and consequently strengthens a feeling of belonging, that behavior can be highlighted. Thus, companies actively encourage employees to share their voice and shape the culture in the company, creating an inclusive workplace.

Foster connection with internal communication

Secondly, a company signals its value system by clearly communicating company values, which doesn’t come without challenges. All too often, employees miss important company updates and unwillingly stay out of the loop with company’s goals.

Deskless employees don’t necessarily have the easy access needed for responding to company updates. A tangible way to avoid employees feeling discriminated against is an internal communication system designed for both deskless and desktop employees. Everyone in the company should be aligned and connected, regardless of where they work.

Learn who your employees are

A third concrete way to nourish an inclusive workforce is to rely on employee data. Tailoring effective inclusion strategies requires knowing who your employees are. Diversity is intersectional, and the traditional employee data will not suffice.

The most effective way to understand what your employees think and feel about company culture is to ask relevant questions regularly. Surveys that ask questions on the subjective feelings of your employees provide the necessary data to make informed decisions about what DEI strategies are working and which aren’t.

What is tokenism?

Aside from the standard error of pushing for diversity on a cosmetical level alone, it is also important to avoid tokenism. Tokenism is the byproduct of hiring for diversity half-heartedly, and it fails to ensure actual inclusion in the workplace. While the 2021 DEI report authors argue that inclusion results from diversity in the workforce, tokenism in the workplace is a red flag for any company that aims for diversity.

The article It’s not Black and White: Toward a Contingency Perspective on the Consequences of Being a Token shows that an employee becomes a token when they’re a part of a team or organization where 15% or fewer of their colleagues are like themselves, resulting in ‘tokens’ feeling more depressed, under stress and less satisfied, making them more likely to leave the organization.

Diversity, inclusion and belonging best practice

Despite the best efforts, achieving diversity is still in its evolutionary stages. Consider the following numbers: the number of women in Fortune 500 CEO positions has reached the highest number yet in 2020: 37. Still, this figure only represents less than 10% of businesses on the list, showing us that the glass ceiling is still a very relevant term.

The 2021 DEI report outlines five essential strategies for DEI excellence: 1. Listen, hear, act. 2. Strengthen HR capabilities in all roles, 3. Engage senior leadership commitment, 4. set goals and measure and 5. Create accountability for results. Diversity audits, long-term roadmaps, and honest internal discussion about social issues can help brands be seen as genuinely committed to a cause.

Conclusion

Those who hold power must be willing to look critically into themselves and step down to create greater harmony in the workplace and beyond. Often, this doesn’t happen without accountability for results. One example of senior leadership deeply committed to a cause is the co-founder of Reddit, Alexis Ohanian, who has stepped down from his board role to support Black leaders in the company.

Whatever methods and strategies your company chooses for strengthening its DEI positioning, the only guarantee of continued success is to be ready to drive the change your employees crave, measure your progress and continue adapting for best results.