Four Competitive Advantages of Organizational Diversity

12/3/2020 1:00:00 PM

While the inherent value and benefits of diversity on employee well-being and company culture are commonly understood, its impact on business performance is less frequently cited. Many studies have been conducted on the topic in the last decade, and the findings are clear: Diversity is not a buzzword; it’s a golden egg.

To compete in today’s global economy and meet the demands of an increasingly diversified client network, prioritizing diversity and inclusivity in the workplace is paramount to success.

This blog post highlights four competitive advantages attributed to diversity and inclusion in the workplace.

1) Diverse teams make better decisions.

When it comes to decision making and business outcomes, teams have been shown to perform better than individuals, with diverse teams outperforming homogenous ones.

A recent study analyzing approximately 600 business decisions made by 200 different business teams in a wide variety of companies over two years found that all-male teams made better business decisions than individual decision makers 58% of the time, while gender diverse teams made better decisions 73% of the time. Teams with diversity across gender, age and geography made better decisions 87% of the time.

Diverse teams with inclusion-centered practices fare best of all. In the same study, teams with an inclusive decision-making process were able to reach decisions twice as fast and with 50% fewer meetings. When employees feel included, they are more engaged with their work and are generally more inclined to take positive risks such as speaking up during a meeting or leveraging previous experience to help the company, even when such experience falls outside of their job description.

2) Diversity fosters innovation.

Diversity-borne innovation has become a market differentiator. With diversity and inclusion come enhanced perspective and a free exchange of ideas, which lead to innovation.

Recently, Tim Cook, CEO of Apple Inc., one of the world’s most innovative companies, published a statement on diversity, noting, “Diversity is critical to innovation and essential to Apple’s future.”

Diverse teams are more likely to check biases, question assumptions and anticipate alternatives, all of which lead to better, more creative solutions. A 2018 Boston Consulting Group survey revealed that companies with above average diversity scores attributed nearly half of their total revenue to innovation revenue, with innovation revenue defined as products and services launched in the past three years. By comparison, companies with below average diversity scores reported an average innovation revenue of 26% of total revenue.

Making a case for gender diversity in particular, the International Labour Organization (ILO) conducted a global survey on the positive effects of diversity and received responses from nearly 13,000 companies. Of those surveyed, 54.4% reported an observable correlation between equal employment opportunity policies, gender-inclusive cultures and innovation.

Similar studies have shown that companies with greater numbers of women in their ranks introduced more market innovations over a two-year period, and that businesses with culturally diverse executive leadership teams were more likely to develop new products than homogenous peers.

3) Teams with diverse leadership generate more revenue.

Diversity is more than a metric; it’s an integral component of revenue generation. A Gallup study found that gender diversity predicts financial performance, with gender diversity and employee engagement resulting in 46% higher revenue and 58% higher net profit.

With data from more than 1,000 companies and 15 countries, a 2019 McKinsey & Co. study exploring correlations between workplace diversity and financial performance demonstrated that companies in the top quartile for gender diversity on their executive teams were 25% more likely to experience above-average profitability than companies in the fourth quartile. In the same study, the top quartile of companies with ethnically and culturally diverse executive teams outperformed companies in the fourth quartile by 36%.

It's not just gender diversity, either. Companies staffed to mirror global market demographics outperform those that fail to implement diverse hiring practices (or perhaps, those who hire diverse talent, but fail to establish a sustainable and inclusive work environment). McKinsey research has linked racial and ethnic diversity to financial returns 35% higher than industry medians.

The business case for organizational diversity couldn't be clearer, particularly in executive leadership and upper-level management. In 2019, 6.6% of Fortune 500 companies had women CEOs. This year, the number of women running Fortune 500 companies reached a record high of 37 (7.4%). Only 18 (1%) of the Fortune 500 have black CEOs, and all are male. Expect these numbers to rise in 2021.

4) Diversity attracts and retains top talent.

Employees in diverse and inclusive environments feel respected by their peers, valued by management, and free to be their full, authentic selves. In other words, diverse and inclusive workplaces are desirable workplaces.



Staffing a diverse workforce and creating a space where all employees feel included attracts and retains top talent. With high performers being up to 400% more productive than average ones, retention of superior talent matters and provides a distinct advantage to any organization, no matter the industry.


As global demographics change, growth-oriented businesses are changing with them. The statistics cited in this blog post prove that diversity not only pays – it pays dividends. Diverse hiring initiatives and inclusive practices go a long way, increasing individual employee engagement and group performance while driving profit and establishing a healthy and self-sustaining company culture.


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