The Benefits of Diversity in the Workplace
According to the U.S. Bureau of Labor Statistics, in 2020, 30% of construction industry workers were Hispanic or Latino, 10.9% were women, 6% were African American, and 2% were Asian. In recent years, there have been several studies highlighting the advantages of a more diversified workplace and its impact on overall company profitability. Here is a summary of those studies.
A 2018 Boston Consulting Group study titled HOW DIVERSE LEADERSHIP TEAMS BOOST INNOVATION found that companies with more diverse management teams have 19% higher revenues due to innovation. From the study: “For company leaders, this is a clear path to creating a more innovative organization. People with different backgrounds and experiences often see the same problem in different ways and come up with different solutions, increasing the odds that one of those solutions will be a hit.”
According to a 2019 article by the World Economic Forum (The business case for diversity in the workplace is now overwhelming): “By the year 2025, 75% of the global workforce will be made up of millennials - which means this group will occupy the majority of leadership roles over the coming decade. They will be responsible for making important decisions that affect workplace cultures and people's lives. This group has a unique perspective on diversity. While older generations tend to view diversity through the lenses of race, demographics, equality and representation, millennials see diversity as a melding of varying experiences, different backgrounds and individual perspectives.”
McKinsey & Company has also tackled this issue, twice. In their original research, using 2014 diversity data, they found that companies in the top quartile for gender diversity on their executive teams were 15 percent more likely to experience above-average profitability than companies in the fourth quartile. In the expanded 2017 data set, this number rose to 21 percent and continued to be statistically significant. For ethnic and cultural diversity, the 2014 finding was a 35 percent likelihood of outperformance, comparable to the 2017 finding of a 33 percent likelihood of outperformance on EBIT margin.
Conversely, the study found that the penalty for not being diverse on both measures persists. Now, as previously, companies in the fourth quartile on both gender and ethnic diversity are more likely to underperform their industry peers on profitability by 29 percent in the 2017 data set.
It is possible that addressing diversity in your workplace might help solve the overall labor shortage problem while also making your company more innovative and profitable.
Started on March 31, 2021 by Tom Hardiman