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The business case for diversity

Why workforces with a greater mix of experiences and demographics create better outcomes for businesses.

By Jessen O’Brien — August 24, 2021

When exploring ways to boost back-to-school sales of PCs and printers, a marketing team at HP didn’t create a new ad campaign or experiment with novel sales strategies. Instead, they did something much simpler — they listened. The team homed in on specific geographic regions and discovered that many members of the community were Latino families in which younger generations typically translated for older ones. Armed with these insights, they created marketing materials in Spanish and English and provided face-to-face HP sales ambassadors onsite. As a result, they saw sales pop 128% year over year — a win the team might not have achieved if there weren’t diverse perspectives in the room.

“You have to reflect our markets, obtain authentic insights, and the ability to empathize with customer needs,” says Lesley Slaton Brown, HP’s chief diversity officer. “When you have diverse perspectives at the table, you generate greater creativity and innovation, which ultimately translates into profitability.” 

Diverse companies are more profitable for three main reasons: they’re more innovative, more resilient, and better at retaining talent than their counterparts. Companies whose executive teams were in the top quartile for gender diversity and for ethnic and cultural diversity were 25% and 36% more likely to have above average profitability than companies in the bottom quartile respectively. 

A new ad campaign from HP aimed at attracting new talent, called “Orchestra,” shows how individuals who contribute to a symphony of more diverse thinking leads to more thoughtful solutions.

WATCH: HP Sustainability | Orchestra

Diversity and values

In the wake of last summer’s protests, many companies promised to fight for racial justice, and some have followed through with systematic changes to their hiring and retention practices.

In May, HP announced its 2030 goals for creating a more diverse, equitable, and inclusive workforce with four key metrics: gender equality in leadership; greater than 30% technical women and women in engineering; meet or exceed the US labor market representation for racial or ethnic minorities; and reach one million people through worker empowerment programs. In addition, HP aims to double both the number of Black/African American executives at the VP level or above and in its technical representation in the US by 2025. Goals help create accountability and focus; this past year, 36% of HP’s new hires to the Board of Directors were women and 38% were minorities.

HP isn’t alone. Last fall Starbucks announced its goal to have people of color comprise at least 30% of its corporate employees and 40% of its retail and manufacturing employees in the US — and that executive compensation will be tied to these goals. Taking these steps would not only be just, but would also benefit profitability and performance.

“People are attracted to companies that care about the climate, human rights, and digital equity. I personally want to work for a brand that stands for the values that I stand for,” says HP’s Slaton Brown.

Diversity and innovation

Companies with above average total diversity have 19% higher innovation revenues — that is, revenue from enhanced or new products in a three-year period — and 70% of diverse organizations are more likely to capture new markets, according to research by BCG and the Technical University of Munich. Martin Reeves, chairman of the BCG (Boston Consulting Group) Henderson Institute and co-author of The Imagination Machine (Harvard Business Press, 2021), argues that teams with varied backgrounds and experiences have greater cognitive diversity (the ability to see the world in a different way), which enables them to be more imaginative.

Two Black designers working on a creative project in the workplace.

Stocksy United

Studies have shown that diverse companies are more innovative, resilient, and better at retaining talent.

“Diversity is the grist for evolution,” says Reeves. “[It] helps companies evolve their thinking and avoid getting stuck in the ruts created by yesterday’s business model.”

Take clothing retailer Gap’s Colour Proud Council. Formed in 2018, the product inclusion initiative quickly made an impact by launching the True Hues collection for Banana Republic, a line of basics rendered in eleven shades of nude to better match a variety of skin tones. Bodysuit sales rose to 21% higher than any previous quarter following three consecutive quarters of declining same-store sales — the result of having diverse perspectives at the table.

Then there’s the price of homogeneity. Teams that are more uniform tend to be less rigorous when making decisions, in part because people are less likely to question the majority’s opinion. On the flip side, teams with greater cognitive diversity are more likely to understand their customers. “When you know the community that you’re selling to, you can show up in a manner that’s reflective of its cultural nuances,” says Slaton Brown. 

 
READ MORE: Inclusivity is more than a seat at the table

 

Diversity not only helps companies’ better understand their customers in the moment, but also in the future. “Innovation [includes] being able to see around the corner in terms of what your future customers might want or need,” says Monne Williams, a partner at McKinsey & Company and co-author of Race in the Workplace: the Black Experience in the US Private Sector. “Having access to those types of insights in your organization and being able to have those conversations faster and earlier helps with the quality of decision making.”

Diversity and resilience

During the pandemic, companies whose boards were more than 30% female outperformed their peers in 11 of the top 15 S&P sectors, according to the 2021 report Lessons From the Pandemic: Board Diversity and Performance.

 “When you have diverse perspectives at the table, you generate greater creativity, which ultimately translates into profitability.”

— Lesley Slaton Brown, HP’s Chief Diversity Officer

According to Reeves, 14% of companies increase their top and bottom line in absolute terms during crises — they flourish while others are floundering. “If you dig into this, it’s because the flourishers are mobilizing around new sources of growth based on new patterns of need which arise during a crisis or recovery,” he says. Diversity enables these flourishers to better spot the anomalies in the marketplace that indicate emerging trends. 

There’s also the argument that underrepresented groups are often used to operating under pressure, overcoming adversity, and doing more with less, skills that come in handy during a crisis. “Underrepresented groups tend to be more resilient because they’ve dealt with hardships,” says Slaton Brown. “As a result, we bring to the table a toughness that only women and only women of color, for example, have because we’ve had to be creative and resourceful to persevere.”

The greater the breadth of experiences, the more likely it is that someone sees a path forward where others don’t. “Maybe you’re a single dad or a veteran. You might be much calmer under pressure and allow others to see a different point of view,” Emily M. Dickens, chief of staff and head of Government Affairs and Corporate Secretary for SHRM (Society for Human Resource Management). “Each [person] will be able to step up and steady the hand at different times to make crucial decisions.” 

Diversity and retention

At the current trajectory, it would take about 95 years for Black employees to reach talent parity across all levels of the private sector. Companies need to not only do a better job at hiring a more diverse workforce, but also in supporting diverse talent and providing opportunities for growth. When people don’t feel valued, they’re more likely to quit. “Our research shows that turnover due to diversity and equity issues cost U.S. organizations up to $170 billion over the past five years,” says Dickens. 

A diverse team working together in a business meeting.

Stocksy United

Diverse groups have a greater breadth of experience, making it more likely that someone will find creative solutions to the toughest of problems.

Given the clear benefits of diverse teams, why are some companies still missing out — and what can they do to change course, especially during a pandemic that has prompted many underrepresented groups to consider leaving the workforce?

Listening is critical. “We held focus groups with our diverse populations to better understand their wellbeing and what we could do to help them navigate these turbulent times,” Slaton Brown says. “We were very honest about the improvements we need to make. And we set very targeted, very ambitious goals in order to make that happen.”

It’s also important to consider how these initiatives filter down to the employee experience. “The person who impacts your day the most is your people manager,” Dickens says. “If you don’t have well-trained people managers who understand hiring, recruiting, and retention has to look at diversity of experiences and how people are made to feel in the workplace, then [leadership efforts are] going to fail.”

Here’s the good news: The way we work is changing, opening up new opportunities to foster retention. Working from home, flexible scheduling, using technology to collaborate in new ways, plus overall increased awareness around diversity are giving employees more ways to feel valued and more avenues for contributing. 

“If you have talent that sees the possibility of a future for themselves at the leadership table, then you have talent that’s committed to creating success,” says Dickens.
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Work-life / Education / Leadership / Diversity / Corporate / Life at HP
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