Companies with the most ethnically or culturally diverse boards are 43% more likely to generate higher profits. Image: Shutterstock
During the first Industrial Revolution that began more than 250 years ago, the idea of success hinged upon how well and how fast industries adopted steam and water-powered machines to accelerate growth. Since then, every new chapter of the Industrial Revolution, characterised by the rise of newer, better and smarter technologies, has led to increased levels of productivity and economic growth. The success of Industrial Revolution led to the conception of information revolution, and today, we are witnessing the rise of social revolution, even in the aspirations of people.
From meeting basic necessities, it is now about maintaining a standard of living. And the millennial workforce prioritises quality of living above everything else – what is it that the organisation offers them in terms of opportunities, role and pursuing their passion. Today, when we are well into the social revolution, it behoves us to ask against the backdrop of a degrading environment, growing geopolitical tensions, and rising inequality: How does one define success in the 21st century business landscape?
To answer it, one can take clues from the World Economic Forum’s manifesto for modern companies, as well as the positive developments taking place globally. A successful company in today’s world, focuses and delivers on social inclusive growth in keeping with the precepts of sustainability and ethical corporate governance. This is not to suggest that businesses must focus on driving inclusivity and diversity (I&D) in the workplace at the cost of financial performance. But on the contrary, to promote I&D to unlock superior performance, productivity and profitability.
The link between workplace diversity and business outperformance
The correlation between a diverse, skilled population and greater innovation and economic performance has been drawn innumerable times. People from different backgrounds, regions and ethnicities bring with them their unique skills, insights and experiences. This diverse population expands the pool of innovative ideas, leading to new avenues of commercialisation and inclusive growth.
In its 2017 data set, McKinsey observed a positive correlation between gender diversity and financial performance. It noted that companies with more women on executive teams were 21 percent more likely to financially outperform the companies where women executives were underrepresented. It also found that companies with the most ethnically or culturally diverse boards are 43 percent more likely to generate higher profits.
The business case of inclusive growth falls in step with the moral necessity of doing it. With younger generations entering the workforce, ensuring inclusive growth has become a non-negotiable priority for businesses. This is because millennials and post-millennials are less tolerant of exclusion, inequality and lack of diversity in the workplace than their predecessors. Glassdoor found that 76 percent of job seekers consider workplace diversity an important factor when sizing up potential employers. Further, more than 50 percent of current employees want their organisations to do more to foster diversity.
Companies must also deliver on inclusion and diversity at all levels through appropriate leadership, mentorship, L&D, employee engagement programs, and employee rewards, recognition, and promotion policies. Creating equitable avenues for enabling career growth for underrepresented members can create a diverse workforce as well as leadership. In its recent survey, McKinsey highlighted that the employees working under a diverse and inclusive leadership are 1.5 times more likely to say they feel very included. Even in organisations that haven't achieved a diverse leadership, leaders focused on building team cohesion can make employees 1.7 times more likely to feel more included.
While progress has been taking place over the years, it has been slow. Organisations must act decisively to accelerate inclusivity and diversity in the workplace. Doing so requires modern companies to identify and eliminate the challenges to establishing a workplace where all feel welcomed and valued.
Barriers to inclusion and how to overcome them
Any person is bound to feel unwelcomed when their ideas and opinions are not valued or, worse, are met with ridicule or judgment. Often, subconsciously, team members behave disrespectfully that ends up creating a culture of exclusion.
This is where inclusive leadership comes into play in making the workplace more diverse. Empathy becomes a key factor in driving inclusive leadership. It allows leaders to build a respectful work environment and shape employee experiences.
Organisations can address this challenge through extensive sensitisation programs coupled with a zero-tolerance policy towards incidences of racial, gender, religious and sexual discrimination. By minimising micro-aggressions in the workplace, companies can foster an open and transparent work environment where everybody can freely share innovative ideas and contribute towards organisational growth.
In the long run, making the workplace a more inclusive environment benefits every employee, including those from majority groups. It makes for a healthier and more vibrant work environment where ideas flow faster, and people feel motivated to work hard and contribute towards delivering organisational objectives. Such a dynamic is crucial for businesses to thrive in the post-pandemic world where unpredictability is the set theme. In the face of the many variables of the 21st century, modern businesses can gain a surer footing by investing in the only constant of the business world: the people. Why? As Michael Scott, from the popular series The Office, says, “People will never go out of business.”
The author is MD & CEO, Marico Limited.
The thoughts and opinions shared here are of the author.
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