Equating the ‘business case’ for diversity with only the financial bottom line, is both dangerous and counterproductive.
Recently, we’ve heard much about the business case for diversity and inclusion. “Inclusion is key to your bottom line”, argued the CEO of the Royal Academy of Engineering. In 2015, McKinsey examined the finances and composition of top management and boards of 366 public companies in Canada, Latin America, the US and the UK. Their results suggested that more racially and ethnically diverse companies were 35% more likely to have higher financial returns. For companies with higher gender diversity, the figure was 15%. As one Financial Times article summarised, “the evidence is growing – there really is a business case for diversity”.
However, equating the ‘business case’ with the financial bottom line only is both dangerous and counterproductive.
In particular, even studies like McKinsey’s are careful to stress that correlation does not equal causation. Other factors matter too. Untangling them to demonstrate robust causal links is exceedingly difficult, especially in larger samples. Beyond this, there is also the question of what this line of argument assumes. In particular, as scholars like Cordelia Fine suggested, the ‘bottom line’ argument places an unhelpful onus on women and minorities to justify their inclusion by positively contributing to corporate financial performance, rather than on the majority to justify their continued prevalence. In a context where non-inclusive organisations continually fail, including financially, this is curious to say the least.
Instead, if there should be a ‘business case’ for diversity and inclusion, this is more productively focused on how greater diversity and inclusion contributes to better work and business more broadly: for individuals, and for organisations.
Diversity and inclusion means more than just being a category’s ‘spokesperson’
In a recent talk at the LSE, Professor Quinetta Roberson, an expert in organisational diversity and inclusion, outlined a “baseline” of diversity. This included representation of different groups, their fair treatment, and an equal opportunity for contribution. Inclusion, on the other hand, meant taking this a step further. It was about being “meaningfully involved in the work”.
Importantly, for this to be the case, such individuals needed to know what was going on (information), have the means to act on this (resources), and work in sound collaborations to maximise the potential of that diversity (context). It was also critical that such individuals were engaged as equal members of a team making actual decisions – instead of merely as spokespersons for their categories, whatever those might be.
Diversity introduces productive conflict
These insights crucially align with decades of research on groups, which found that greater diversity facilitated better creativity, innovation, and problem-solving. As Chris Clearfield and Andras Tilcsik summarised in their recent book, Meltdown: Why Our Systems Fail and What We Can Do About It, “surface-level diversity and diversity in expertise work in remarkably similar ways. In both cases, diversity is helpful not so much because of a unique perspective that minorities or amateurs bring to the table but because diversity makes the whole group more sceptical.”
Examples they give range from boards of small US banks during the financial crisis and the disgraced healthcare start-up, Theranos, to lab experiments studying how people collectively decide which student ought to be accepted to university, or who committed a fictional murder. All demonstrated that such groups doubted, introduced uncomfortable tensions, and worked. Specifically, they countered the three key dangers of homogenous groups: (over)reliance on experience, overconfidence, and little productive conflict.
Diversity often removes group think
Greater, meaningful inclusion, and time and resources to engage resulting tensions productively, enables better decisions by everyone.
This is important because it focuses on the work itself. After all, financial outcomes are but one expression of organisational value. Organisations are also places of innovation, negotiation, creation, and belonging. Including a wider range of diverse people helps us counter dangerous group thinking. It also recognises that valuing unique contributions of increased inclusion matters not only for those individuals, but improves us all. That’s good business too.