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Two heads are better than one…sometimes!

20 Mar 15:00 by Dan Robertson

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Two heads are better than one…sometimes!

 

During a recent workshop exploring the benefits of adopting the principles of inclusive leadership to a group of senior executives in New York, I was asked by one participant this question (it’s one I’m often asked): “Is there any real evidence that diversity and inclusion adds to our bottom line”?

Well, let’s look at the evidence I say. And here it is…

 

Driving innovation through diversity

Firstly, there is an assumption than two heads are better than one, three are better than two, four are better than three and so on and so on. But on closer scrutiny, the picture is a little more complex. Professor Scott E.Page from the University of Michigan challenges traditional assumptions about business decision-making by demonstrating how the power of difference can help organisations to innovate and grow through utilising an organisation’s collective wisdom. His research shows that not only do groups of individuals out-smart single decision-makers, but that diversity groups of people out-smart and out innovate non-diverse groups.

Supporting this, a 2017 study by Boston Consulting Group (BCG) – The Mix that Matters: Innovation through Diversity found a positive relationship between diversity and business innovation. Measuring outcomes from 171 companies the study found a statistically significant relationship between management diversity and business innovation, meaning that companies with higher levels of diversity get more revenue from new products and services.

 

Inclusive decision-making and business outcomes: Research by the cloud-based decision-making platform Cloverpop has shown how inclusive decision-making significantly increases business performance. Specifically, inclusive decision-making assists with:

  • Identifying new choices that were not previously considered resulting in a better decision
  • Bring more perspectives, experience, and information, which helps to reduce cognitive biases

 

Diversity and business profit: Mckinsey’s 2018 report Delivering Through Diversity found a statistically significant correlation between levels of diversity in leadership teams and financial performance. Specifically:

  • Companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation
  • Companies in the top quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability

A study by the global non-for-profit Catalyst found that companies with the most women board directors outperformed those with the least on return on sales (ROS) by 16 percent and return on invested capital (ROIC) by 26 percent. A 2017 Peterson Institute for International Economics study found that companies with at least 30% female leaders can add as much as 6% to their net margins.

As stated in a 2018 report by Deloitte, the global professional services company, businesses that promote diverse and inclusive work cultures are:

  • Twice as likely to meet or exceed financial targets
  • Three times as likely to be high- performing
  • Six times more likely to be innovative and agile
  • Eight times more likely to produce better business outcomes

Thus, whilst I’m sure the debate will continue, what I am convinced of, when I look at the data, is that diverse and inclusive organisations out-smart mono-cultural companies and gain four key strategic advantages over their competitors:

 

  1. A reduction in Groupthink
  2. Greater innovation and creativity, leading to new products and services
  3. Closer connection to customer and client needs
  4. An up-lift in financial reward

 

Are you convinced…?

 

Written by Dan Robertson, Director of Vercidaconsulting.com

He is highly respected as a subject matter expert on workplace diversity & inclusion management, unconscious bias and inclusive leadership.

Contact Dan: dan@vercidaconsulting.com / +44 7946 466 180