The case for diversity – how it can benefit your workplace
Katherine Watkins from our HR proposition partner IHRS (part of the UKGI Group), shares insight on recent studies, regulation and the benefits having a diverse workforce can bring:
The idea that diversity correlates with improved financial performance has found its way into received wisdom over recent years. Its origins can be traced back to a series of studies carried out by McKinsey & Company between 2015 and 2020, which found, among other things, that U.S. 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.
These findings have since been widely publicised by a range of organisations including the World Economic Forum and the Wall Street Journal. However, a recently published academic study has cast doubt, both on McKinsey & Company’s methodology and its conclusions. The paper’s authors conclude that the correlation between diversity and profitability is ‘statistically insignificant’. So, is it time to dial back efforts to promote diversity?
Actually, no. Whether or not it is directly linked to profitability, diversity must be a priority for any employer in today’s financial services sector. There are many reasons why. Not least of which is the FCA’s repeated insistence that “diversity and inclusion are critical to our work on culture and governance”; they are a central strand in its approach to regulation. An industry-wide consultation on how to drive forward the diversity and inclusion agenda closes at the end of this month, with more detailed proposals expected in Q1 2022 followed by a Policy Statement later that year.
Be in no doubt that the regulator takes these issues very seriously and will not hesitate to fine companies who it feels, aren’t doing enough. Meanwhile, any business that does not take account of issues around diversity and inclusion could be laying itself open to future claims from disgruntled employees or other parties.
Even for the most reluctant converts to the diversity agenda, it’s by no means all stick and no carrot. The direct financial benefits may not have been established beyond doubt, but it makes obvious sense that diversity of experience and opinion within your business will help it respond and adapt effectively to a fast-changing business landscape and fast-changing customer needs and expectations. As Matthew Syed’s recent book Rebel Ideas: The Power of Diverse Thinking so persuasively argues, cognitive diversity can be a powerful source of corporate resilience and competitive advantage.
Taking on board the diversity and inclusion agenda can also generate significant benefits in terms of recruitment and retention. Surveys are now showing that diversity and inclusion rank high among job seekers’ priorities, and a growing number of people, particularly in younger generations, genuinely care about working for a business that pays more than lip service to these issues. At first sight they might seem intangible, but the benefits of embracing diversity are real – and they are there to be grasped.
The attitudes of senior employees and managers are crucial. Sadly, it’s not uncommon still to encounter resistance and unwillingness to engage around what is sometimes written off as an unwelcome imposition or a passing fad. But engage we all must - or pay an all too tangible price. Businesses – including their senior employees – need to understand and buy into what diversity means for their firm.
Yes, there are pitfalls for the unwary, but if implemented with intelligence and sensitivity, an appropriate and tailored diversity and inclusion programme can support and complement your governance, compliance and HR landscape and make your business more robust.
Do you need help or advice?
If this still feels like unfamiliar territory, the team at IHRS can help you create and implement a roadmap for diversity and turn what might seem like a challenge into an opportunity. You can email them on HRhelp@ihrsolutions.co.uk or call 01604 709509.