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The Business Case for Diversity Management

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Does having a workforce with diverse backgrounds, experiences, and ideas that is managed well have an impact on the firm's profitability? Well the answer is a resounding yes!

The financial amounts of the impact of diversity do vary somewhat between firms depending on several factors (including geographic location and who the customer is) but overall, the monetary impact of diversity is relatively easy to demonstrate. The following are the prime factors that can be used to demonstrate the impact of having a diverse workforce.

Product Sales - Sales can increase as a result of decisions made by executives with a broader and more diverse background. (A recent AMA study demonstrated a clear correlation between diversity at the executive level and an increase in sales.)

Customers Demand ItIn cases where there are a great deal of customer contact (either face-to-face or on the telephone) the number of customers and sales can increase dramatically when the customers can see that people serving them understand their unique needs. For example, a major bank found that by increasing the diversity of its counter staff it attracted a more diverse range of customers as well as increasing its overall sales at the branches that more closely "mirrored" the population of the neighbourhoods in which they were located.

Products That Meet Customer Needs  - Companies like Quantum have found that the use of cross-functional product development teams resulted in products that more closely fit the needs of their customers. In a similar light, teams with a diversity of backgrounds are more likely to understand the variations in customer needs and usage that can occur in a large customer base. By broadening the range of ideas, you can broaden the usability of your product.

Our Customers Are Changing  - As the percentage of diversity increases in the over-all population the percentage of customers that are diverse also increases. If companies are to increase their penetration into these markets they must have product development people that understand the diverse needs of this "new" market.

Advertising And Marketing Are More Effective - "Mainstream" ads don't have the same impact on diverse populations. As the diversity in the marketing and advertising staff increase, a firm's ability to design campaigns that meet the needs of our expanded customer base also increases. Our image as a firm and our ability to recruit will also improve as an indirect result of the change in our advertising.

Globalisation And Competitive Advantage Demands ItIf a corporation is to be truly global, its workforce must understand the unique needs of people from different cultures and regions. If a company's workforce does not include people that have lived, travelled, or understand the unique needs of customers in different countries then product development and sales may suffer dramatically. If we are to gain a competitive advantage, we must not only just build a diverse workforce, but also do it faster than our competitors.

Productivity - Working through diversity issues is an excellent preparation for learning how to change and innovate. Lessons learned in managing diversity can help managers and employees work through complex problems and to deal with other fast change issues that occur in an Internet economy. Also, because a large percentage of production and service workers come from the diversity population, an increase in managers that understand their needs will increase their (and our) overall productivity in these important business functions.

Loss Of Talent And Increased Recruiting Costs - Statistically speaking, the diversity population is the "majority". And as unemployment rates continue at record lows, failing to recruit from an ever-increasing segment of the population will have a direct impact on the company's level of talent. As the diversity population grows, failing to recruit from its ranks means that a corporation will miss out on a huge talent pool as well as dramatically increasing its recruiting costs as its "fights" over the increasingly smaller pool of non-diversity candidates. Eventually, as the diversity population grows, and if unemployment stays high, excellence in diversity recruiting will no longer be "optional". In a global economy companies can exploit labour surpluses in some regions by hiring "remote workers" and by importing talent. Global recruiting requires managers and recruiters with diverse perspectives and experiences.

"Why" Questions - People from diverse backgrounds and experiences (as well as those new to an organization) often "challenge" and question business processes and practices. As "outsiders" or people that think differently, they wonder why things are done "that way" as opposed to "another way" which may seem more natural to them. This questioning, if managed correctly, can lead to the dropping of antiquated processes and to the adoption of a continuous improvement mindset.

Better Decision-Making - Team members from the same backgrounds and experiences generally make decisions within their narrow range of experiences. By expanding the team to include more diversity of ideas (and more out of the mainstream ideas) and experiences, you increase the chances of getting both a broader range of ideas and criticism. Although this diversity of ideas may initially slow the decision process, the overall quality of the decisions is likely to improve and the number of times that decisions need to be revisited decreases.

Employees and Stockholders May Demand It - As a result of the current difficulty in attracting top talent, companies have been forced to do market research in order to identify what factors cause top applicants to consider a firm. What companies have found are that both applicants and current employees demand a diverse workforce, even if they themselves are not from the diverse population! In addition, companies with "liberal" or socially conscious stockholders often find that these stockholders question the firm's lack of diversity in shareholder meetings. These "activist" shareholders expect the firm to respond to their "social" agenda. Suppliers and strategic partners may also be more willing to do business with you if your workforce are as diverse as theirs are.

The Ability to Execute - The ability to execute plans in all business areas may be improved as a result of diversity efforts which teach employees how to deal with "different" people and different ideas. By learning how to work through problems and difficulties rapidly employees can then transfer that skill to a broader range of business problems.

Retention - Because diverse employees are in such high demand, programmes that are developed to successfully retain them can also be used in hard to fill/ retain jobs and to help our overall retention efforts.

Customer Service -If your corporation has a broad customer base, having diversity in your customer service workforce is likely to lead to higher customer satisfaction. This is because as the diversity of the customer service workforce increases, the likelihood that a customer will get someone who understands his or her unique needs, language, or culture also increases. Individual one-on-one interactions between diverse and non-diverse workers may also result in a better understanding of individual and cultural differences.

Adapted from Dr. John Sullivan at