There is more to diversity than what meets the eye

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, Maya Korica, Warwick Business School, diversity, inclusivityCan’t get your team’s consensus on anything lately? It could be a good sign.

Maja Korica, Associate Professor of Management and Organisation at Warwick Business School, sheds light on how differences and inclusivity in organisations can improve their performance – in more ways than one.

Don’t cause, only correlate

Yes, we have all heard it before – company diversity leads to more profits. And for good reason: a study by McKinsey based on 366 Canadian companies in 2015 suggested that ethnic and racial diversity correlated to a 35% increase in financial returns while gender diversity led to a 15% increase in the same. It is one of the many instances that we can find of cases where diversity has positively affected the bottom line. The CEO of the Royal Academy of Engineering recently argued that “Inclusion is the key to your bottom line”. But, equating diversity and inclusion with the bottom line can be both dangerous and counterproductive. Studies like that of McKinsey’s are careful to stress that correlation is not the same as causation. Clearly there are other factors entwined in it.

Untangling these factors to demonstrate a direct link between the two principle factors is exceedingly difficult, especially in large studies. And besides, an argument revolving around the bottom line breeds an unhealthy assumption to begin with.

A different perspective

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, Maya Korica, Warwick Business School, diversity, inclusivityRenowned psychologist and writer Cordelia Fine suggests that this correlation places an unhealthy obligation on women and minorities to justify their inclusion through their contributions to the company’s financial performance, rather than on the majority to justify their continued prevalence. And given the context where non-inclusive organisations are continually failing, including financially, this certainly raises a few red flags. Instead, if the business case of diversity and inclusion were to focus on how greater diversity and inclusion contribute to better work and business in a broad sense, it would be more productive both for individuals and organisations.

From Diversity to Inclusion

In a talk at the London School of Economics, Professor Quinetta Roberson, an expert in organisational diversity and inclusion, outlined what diversity is – the representation of different groups, their fair treatment and an equal opportunity for contribution.

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, Maya Korica, Warwick Business School, diversity, inclusivityInclusion, on the other hand, implies taking this a step further – it means extracting the true value that these differences bring. It is about being ‘meaningfully involved in the work’. For this to take place, what is important is that such individuals need to know what is going on or are well-informed, have the means or resources to act on this information, and can work in a sound collaboration to maximise the potential of that diversity. Additionally, it’s also critical that such individuals are engaged as equal members and not just representatives or spokespersons for their minority categories.

Through decades of research on groups under these circumstances, it was found that greater diversity and inclusion facilitated better creativity, innovation and problem solving. In a recent book called ‘Meltdown: Why our systems fail and what we can do about it’, co-authors Chris Clearfield and Andras Tilcsik offer an interesting insight. They state that it’s not the unique perspective of the individuals, but the overall scepticism of the group arising out of it, that makes diversity so important. Their claim is backed up through examples ranging from boards of small US banks during the 2008 financial crisis to lab experiments studying how admission committees decide on which students should be accepted at their universities. Each instance demonstrated that more diverse groups questioned more, paused to consider different evidence and perspectives, and were less likely to accept a clearly wrong answer. Specifically, such groups worked well because they countered the three key dangers of homogeneous groups:  over-reliance on experience, over-confidence, and little productive conflict.

More to it than meets the eye

CSR, leadership, social enterprise, management, philanthropy, diversity, gender equity, healthcare, sustainability, ethics, industrial relations, healthcare, employee wellbeing, Council on Business & Society, Global Voice magazine, ESSEC Business School, ESSEC Asia-Pacific, FGV-EAESP, Trinity College Dublin Business School, Keio Business School, Warwick Business School, School of Management Fudan University, Tom Gamble, Global Voice 11 special issue Responsible Leadership & Sustainable Business Practices, Maya Korica, Warwick Business School, diversity, inclusivityAs such, all evidence points to the fact that greater inclusion could very well lead to better decision making. And although the effects of better decision making are hard to statistically quantify, they are positive nonetheless, since peer scrutiny makes us focus better on our work. Another take away from this is that financial outcome is only one of the many forms of organisational value that diversity brings. Inclusion can bring positive value to organisations in the form of innovation, creation, culture and negotiations – essentially in any situation where homogeneous thinking is considered a deterrent to progress.

As such, diversity and inclusion might only correlate to financial performance – but we can very well see a direct impact on other value brought to the company and in fields which, in future years, will take on more importance.

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