If I told you there’s a lever in your business you could pull that would increase EBITDA by 33%, I’m willing to bet you’d be interested. Now, what if I told you that lever was recruiting for diversity? Are you still listening?
That 33% is pretty hard to ignore, yet just 0.8% of Fortune 500 CEOs are Black and we continue to hire for “cultural fit,” a practice that only ever amounts to uniformity. When you recruit executives from your own network, you end up with more of the same. Considering diverse workforces are twice as likely to meet or exceed their financial goals, if you’re falling down on this point, your shareholders should be mad.
The fact is, businesses can wield enormous power to effect social change, far more than government regulation or mandates in my opinion. Capitalism rewards ideas that generate higher profitability. And research proves that diversity does just that.
But when it comes to DEI efforts, I’ve observed that most companies appoint a DEI officer, issue a press release and call it done. It’s time we understood diversity isn’t about businesses doing good—it’s just good business.
DEI doesn’t mean taking your eyes off the bottom line.
A one-third increase. I can keep quoting that statistic, but it can be hard to see the connection between diversity and dollars. It’s actually a fairly direct line: diversity drives innovation; innovation drives profitability.
This isn’t just an opinion. And it’s not just one study. Research from Deloitte, Boston Consulting Group, the Harvard Business Review, Forbes and more all show the same thing: more diverse and inclusive companies are more innovative and, therefore, more profitable. But why?
It’s divergent thinking that sparks innovation.
This isn’t just about changing the faces of your organization. It’s about getting more diverse opinions, experiences, knowledge and networks a seat—and a voice—at the table.
The research from Deloitte found cognitive diversity (the way different people tackle problems) alone isn’t enough to drive innovation. Inclusion is the key. It’s not enough to be invited to the party; you need to be asked to dance. The divergent thinking that leads to innovation means exploring all solutions, and all of those solutions need to be seen and plumbed. That’s hard to achieve when your leadership team shares the same lens on the world. Echo chambers don’t produce new sounds.
Address that imbalance, and you increase innovation. But the research also issues a warning: failing to act won’t just leave you standing still, you risk falling behind.
DEI positions HR as a revenue generator, not just an overhead expense.
Note our eyes are still on the money here. We don’t usually expect an ROI from the HR function. But when we recognize the role HR plays in recruiting a more diverse and innovative, and hence more profitable, workforce, we transform this cost center into a profit center.
That means a commitment to implementing purposeful change in the way you recruit executive talent. The Four Ps that drive a sustainable and more profitable inclusion program include:
• Process: When you do what you’ve always done, you’ll get what you’ve always had. It’s not enough to hope for change.
• Protocol: Are your systems in writing? Is everyone aware of them?
• Procedure: If you have protocols, are they actually followed? Or do “everyday realities” (read: convenience) mean steps are bypassed?
• People: Are your people committed to your vision? Do they share a passion for achieving DEI goals? Do they understand the true value?
There’s no magic shortcut to inclusion, but realizing that a more diverse executive suite is a more profitable one can spur the kind of change that will have an impact not just on your company’s bottom line but also on the broader culture around us all.
Structuring your business to achieve higher levels of DEI by starting with the way you recruit talent will establish a long-term approach to achieving your diversity goals. (And could improve your EBITDA by 33% or more.)
via Desmund Adams, photo credit: Luis Alvarez