How Diversity Can Earn You More Money This Year
The argument for increased diversity in the workplace is often a moral one. In the land of the free and the home of the brave, shouldn’t everyone have equal opportunity? But as companies ramp up their investments in diversity initiatives, they’re increasingly finding that diversity makes a lot of business sense. And that’s not just good news for your company’s bottom line — that’s good news for you.
In the McKinsey study “Why Diversity Matters,” authors Vivian Hunt, Dennis Layton and Sara Prince examined metrics from 366 different public companies around the world related to both financial results and demographic composition and discovered that “companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.” On the other hand, “companies in the bottom quartile in these dimensions are statistically less likely to achieve above-average returns.”
In fact, data from the U.S. showed that “there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.” Overall, the study concluded that “diversity is probably a competitive differentiator that shifts market share toward more diverse companies over time.”
The Diversity/Performance Connection
Aside from financial returns, can diversity impact overall performance? Yes, according to Juliet Bourke, Human Capital Partner at Deloitte and author of the essay “Which two heads are better than one? How diverse teams create breakthrough ideas and make smarter decisions. Bourke cites one Carnegie Mellon University/Massachusetts Institute of Technology study in which two groups were tasked with “visual puzzles, brainstorming, making collective judgments and negotiating over limited resources”. One team vastly outperformed the other, and researchers were able to determine that that team benefitted from having women on the team.
“The inclusion of women was important not because the women were extra smart, or had access to gender-specific knowledge, but because women scored slightly better on the social sensitivity test,” Bourke writes, which ultimately played a significant role in the team’s “collective intelligence.”
[Related: Inspiring Advice from Women CEOs]
And this wasn’t a one-off occasion — this same scenario played out across the researchers’ observations of 699 different people. In another example, Bourke shares that when asked to “calculate accurate prices for simulated stocks,” racially and ethnically diverse teams outperformed others because “racial diversity triggered stimulated uncertainty, bringing ‘cognitive friction that enhanced deliberation’.” There are scores of other studies that demonstrate the numerous benefits of diversity, but overall, many of them boil down to this: diverse teams simply perform better.
What it Means For You
The perks of increased performance can trickle down to you in a variety of ways. If your company engages in current profit sharing, increases in profit will directly result in an increased bonus when divided amongst employees. If you are awarded stock options, the better your company does, the better the value of your stocks. And if your company has merit-based raises, improved team performance can lead to a larger paycheck.
[Related: 4 Tips For Getting The Raise You Deserve]
However, even if your company does not have these specific processes in place, you can capitalize on the increased performance, innovation and profits that come with diversity in salary negotiations. Demonstrating the value you have added, bringing along a brag report and providing specific evidence will all help you make a strong case for higher pay.
So what are you waiting for? Advocating for diversity and working to create a more inclusive, tolerant workplace isn’t just for HR — when your performance and pay is at stake, getting personally involved just makes sense.
February 02, 2017 at 09:38AM