No Diversity at Work? No Top Performance

Personal branding can be challenging if you have a too foreign-sounding name. It does not matter how much value you can deliver if unconscious bias get in the way: the perception of your name is reduced to stereotypes related to your origin without considering what you are able to do and what you have already achieved. To put it simply: you are judged by your package rather than your content. It is especially evident in recruitment: there is a good chance that your application will be rejected if your name stands out. In Australia, Chinese applicants need to submit 68% more applications than applicants with an Anglo-Saxon name to get the same amount of job interviews. Applicants of Middle Eastern origin need 64% more applications, followed by Indigenous Australians (35%) and Italians (12%). Addressing this problem, last month the Australian state of Victoria launched an 18-month pilot blind recruitment programme, Recruit Smarter, to assess which personal details should be removed from applications to ensure unbiased recruitment and workplace diversity.

Why is it important to have a diverse work team? Azmat Mohammed, Director General of the UK Institute of Recruiters (IOR), believes that it reflects a “customer base more accurately”: if your employees have different backgrounds, you can better understand customer needs across the communities they represent and better target your products or services. A case in point: It is estimated that 17% of nationalities in the UK are black and minority ethnic (BME). By 2021, their number will increase to 20%. At the moment, one in six people at the working age have a BME background, while 20% have some disability. Their spending power is estimated at £300 billion and £120 billion respectively. These figures mean that if British companies do not have enough employees from BME backgrounds or with some disability, they risk losing customers from their communities. They will not be able to reflect the insider’s perspective in their marketing campaigns as well as companies which will have a lot of insiders on board.

In addition, more diverse companies financially outperform homogeneous ones. According to a 2015 McKinsey report on diversity in the workplace, companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above national industry medians. Companies in the top quartile for gender diversity are 15% more likely to have financial returns above national industry medians. There is also a close correspondence between diversity among senior executives and better financial performance. In the US, every 10% increase in racial and ethnic diversity at the senior-executive level is followed by a 0.8 % increase of earnings before interest and taxes (EBIT). In the UK, for every 10% increase in gender diversity among senior executives, EBIT increases by 3.5%.

Workplace diversity also helps build a strong employer brand. Diverse staff bring more perspectives to the table so they can brainstorm more innovative ideas. Deloitte observes that a diversity of backgrounds does not necessarily lead to different perspectives. It recommends companies to look beyond the traditional understanding of workplace diversity and to focus on diversity of thought instead. Diverse thinkers can process information more critically and creatively, which helps make better decisions. Understanding of how each employee thinks (e.g. Is s/he a problem-solver or innovator?) also helps companies make the best cognitive fit for certain tasks. If employees can use and develop their subject-matter expertise, an employer brand will be associated with professional fulfillment / development, creativity / innovation and quality work – values that attract top talent.

Finally, diverse staff work better in teams. Every employee has a unique set of experiences and values, which affects the way they think and perceive things. When their perspectives are brought together, teamwork becomes more dynamic. Prof. Scott E. Page’s research on group diversity shows that attitude differences are especially evident in 3 areas: (1) problem-solving, (2) conflict resolution and (3) creativity. A dynamic exchange of opinions and attitude friction make a company better prepared for dealing with complex issues. Prof. Margaret Neale, who specializes in negotiation and team performance, claims that diverse staff perform better in unusual creative tasks such as developing a new product or figuring out how to successfully enter a new market. Her research conducted in cooperation with Profs. Gregory Northcraft and Karen Jehn shows that ‘informational diversity’ triggers a constructive conflict over a task. Staff confront their ideas in a debate trying to find the best course of action. However, if they fail to resolve the conflict and find a satisfying solution for most of them, overall team performance gets worse. This problem can be overcome with appropriate training in communication differences across cultures, creative problem-solving, constructive debating or negotiations.

References:  [1] Alison Booth, Crawford School of Public Policy, Australian National University / [2] Johnny Lieu, Mashable / [3] Michael Grothaus, Fast Company / [4] Robert Leeming, HRreview / [5] Vivian Hunt, Dennis Layton and Sara Prince, McKinsey / [6] Joao Araujo, Universum / [7] Anesa Diaz-Uda, Carmen Medina and Beth Schill, Deloitte University Press / [8] Katherine W. Phillips, Kellogg Insight / [9] Stanford GSB Staff / [10] Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies via Hcareers / [11] Margaret Neale et al. via Stanford GSB Staff