Discussions about diversity in the workplace can be very difficult when they touch upon emotional and sometimes divisive topics. Often, what seems like a harmless question or comment to one group of people can be quite offensive to others. Unfortunately, these divergent viewpoints can become the focus of the discussion, distracting us from the underlying issues. A case in point is the following, commonly heard question:
“What is the business case for diversity?”
Although to some people it may seem reasonable and entirely legitimate, this question is sometimes used to justify the lack of action by companies that are not very diverse, which other people find offensive.
Setting momentarily aside our feelings about the emotional aspects of this question, I will explain why – purely from a business perspective – this is not a sensible question to ask, and why this question reflects flawed assumptions that can interfere with a company’s success. And for those who don’t understand why anyone should find the question offensive, I will also try to offer a perspective of why asking this question reflects an inappropriate lack of sensitivity and awareness.
To understand the business implications of the question, think about your company as a collection of individuals with different professional skills and personal traits – essentially a portfolio of human capital. Nobody would think that building a company in which most people have the same professional skills would be “optimal.” But then, what reason do we have to believe that a company in which most people have the same personal traits would be optimal?
One might argue that the comparison is not valid because, while professional skills clearly impact performance, personal traits should have no influence on performance. However, this is a naïve argument because the personal traits of your human capital determine the experience of each employee, and they clearly impact how your company interacts with customers, prospective employees, the media, regulators and vendors. Hence, while we may agree or disagree that a diverse workforce could be better than a homogeneous one, there should be no question that changing the blend of your human capital will influence your company’s performance in some way.
But if you agree that it is at least possible that changing the blend of personal traits of your company may influence performance, then why wouldn’t you want to explore this facet of company performance? Any large company can be configured with a nearly infinite mixture of people, which means that there is only an infinitesimal probability that the current configuration is optimal.
Asking to prove the business case for diversity reflects an implicit assumption that the current situation is already optimal, or at least sufficiently close to optimal that changing your human capital is likely to make it worse. But what proof is there that the current situation is in fact already optimal? Has anybody ever demonstrated that a homogeneous leadership team is better? Has anyone provided proof that male CEOs are better than female CEOs? Why are we not asking leaders to justify the business case for a homogeneous workforce?
To help you see how irrational this is from a business perspective, let’s imagine an analogous situation applied to advertising. Suppose that a product company has enjoyed success while only advertising on TV. Now let’s extend the analogy: the CEO of the company assumes that this is the optimal or close to optimal marketing strategy. His CMO points out that consumers like to use other media channels and asks for budget to explore more diverse marketing strategies, but the CEO steadfastly insists that he will not even consider any exploratory investments, unless he can be first shown the business case for multi-channel advertising.
Hopefully everyone will agree that the fact that this CEO’s company has enjoyed past success does not justify his attitude, and that his irrational strategy will likely interfere with the company’s future success.
In reality, the reluctance to focus on diversity can be more devastating than refusing to diversify marketing. For virtually every company, human capital is both the most expensive budget item and the most valuable asset: on the expense side, a 2015 study by the US Department of Commerce found that annual payroll in the U.S. cost employers $5.4 trillion (and that does not include other labor costs, such as recruiting, training, and retention), 30 times more than the total 2015 advertising spend of $180 billion; on the asset side, a recent study by Korn Ferry estimates that in service-based nations like the U.S., the value of human capital exceeds the value of physical capital by factor of 4 – not to mention the obvious fact that a company is nothing without its people. To give this paragraph a more positive spin, any efforts to improve workforce have the potential for a much larger ROI than virtually any other corporate activity.
Given these observations, why aren’t more companies rushing to embrace diversity as a key competitive advantage? This is where lack of awareness comes into play. Many leaders, including some whose heart is in the right place, believe that performance should have nothing to do with gender, skin color, sexual orientation or any other personal trait, taking pride in being “color-blind.” This view is both naïve and dangerous.
It is naïve, because it ignores the dramatic imbalances in corporate America that are largely the result of historical advantages enjoyed by a specific class of people. How can we explain the fact that, for instance, of all Fortune 500 CEOs only 32 are women and only three are African American? Unless you believe that white men are intrinsically better than other people, the stunning imbalances we see in corporate America (whether you look within or across organizations) suggest something fundamentally wrong.
It is dangerous, because by arguing that performance should be color-blind, those who have used privilege to create the current system are forcing those who have been historically disadvantaged to live up to standards rooted in the current, biased system – thereby preserving power structures while perpetuating inequalities and stifling opportunities for growth and improvement.
The future of corporate America is in the hands of leaders who understand that there is no business case for homogeneity, and that the best way to succeed is to embrace individual differences, and to create an environment where all employees can bring to the table their full range of professional skills and personal traits that makes them unique and productive contributors to the success of any organization.
By Paolo Gaudiano
“My biggest mistake is not recognizing the power of compounding and the ability for it to build wealth, and therefore, not investing early enough,” she says. “To me, if there is one thing that can change our society, our economy, and the world, it is getting more money in the hands of women.
Indigenous Americans make up less than 1% of board members for major, publicly traded businesses, according to DiversIQ analysis. Only five people among the 5,537 board members for the S&P 500 identify as fully or partially American Indian or Alaska Native.
These three questions can not only play a pivotal role in strengthening an organization’s DEI culture; they can also serve as team-building exercise. The process of evaluating one’s understanding of DEI principles promotes open discussions, knowledge sharing, and alignment within the team.