Increase Employee Performance by 12% by Hiring for Diversity

Hiring a workforce that is diverse in backgrounds and perspectives isn’t just about avoiding discrimination; it’s about giving your business its best chance for success. According to Gartner, “Differences of age, ethnicity, gender and other dimensions foster high performance.”

Your company’s goal in hiring for diversity shouldn’t be to represent each age, gender, race, and ethnicity group in proportion to the general population. Instead, your aim should be for “cognitive diversity,” which is bringing people together with different styles, habits, and perspectives. People from different backgrounds tend to think differently, and the blending of perspectives creates opportunities for creative thinking, stronger problem solving, and innovation. It also helps to avoid the dangerous pitfalls of groupthink.

Hiring managers give your company the best chance for cognitive diversity when several groups are represented in your collaborative teams. The difference in employee performance between non-diverse and diverse organizations is 12%. Through 2022, Gartner predicts that 75% of companies with diverse and inclusive decision-making teams will exceed their financial targets.

Report after report shows similar business benefits:

• The World Economic Forum reports that companies with above-average diversity scores drive 45% average revenue from innovation, while companies with below-average diversity scores drive only 26%.
• A McKinsey study showed that companies in the top 25% for racial/ethnic and gender diversity were respectively 35% and 15% more likely to have superior financial returns to their national industry medians. The report also finds a linear relationship between racial and ethnic diversity and better financial performance: for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8%.
• Josh Bersin’s research reveals that companies with high levels of diversity and inclusion are exceptional businesses with 2.3 times higher cash flow per employee over a three-year period. Their futures are brighter too! They are 1.8X more likely to be change-ready and 1.7X more likely to be innovation leaders.

The bottom line: diversity boosts business performance because collaborative teams are able to leverage different perspectives and ways of thinking to enable faster, smarter decision-making and innovation. So how exactly do we arrive at this bottom line? Here, we break down the benefits that diversity can bring your small-to-midsize business:

1. Variety of Perspectives: A workforce with employees of varying gender, age, religion, race, ethnicity, cultural background, sexual orientation, languages, education, and physical and mental abilities brings different educational backgrounds, skills, and experiences to the table. Especially if your company does business in multiple market segments and/or international markets, having a team with diverse perspectives can elevate your company above less diverse competitors.
2. Talent recruitment: Once the diversity ball starts to roll, it gathers momentum. The employees you hire offer additional recruitment and referral channels through which you can find talent, because they are able to reach out to people in their networks that you might not otherwise be able to access. Companies that are late to realizing the benefits of hiring for diversity will not have the same level of access.
3. Problem-solving: Teams solve problems faster when they are more cognitively diverse, according to a Harvard study. They educate one another in new ways of thinking and approaching challenges, share problem-solving approaches, and become more flexible and adaptable individually, and as a group. When one approach fails or takes too long, another is bound to be more effective or faster.
4. Brain stimulation: Neurological research by Josh Bersin demonstrates that workers are more collaborative, productive, and innovative when they feel part of a team. This is because the human body produces hormones and energy that stimulates the brain and raises work performance, and that occurs often in diverse collaborative groups.
5. Innovation: Groups with diverse perspectives experience more creative stimulation from continual exposure to new and novel ideas. The freshness of inputs an individual receives in a diverse group, and the melting together of original outputs in a group usually results in fresh, new approaches. This benefit would be much more difficult to achieve with a cognitively similar group.
6. Smarter decision-making: A Cloverpop study found that when diverse teams of three or more people make a business decision, they outperform individual decision-makers up to 87% of the time and make decisions with a 60% improvement over non-diverse teams. This benefit is maximized with greater gender, ethnic and age diversity.
7. More employee engagement: Diverse and inclusive workplaces lead to engaged employees, according to the Society of Human Resource Management. According to a Gallup analysis, business units that scored the highest on employee engagement showed 21% higher levels of profitability than units in the lowest quartile and also scored 17% higher on productivity.

A decade ago, you may have viewed diversity in your workforce a luxury, especially for its optics. But diversity and inclusion are longer just about avoiding discrimination. The research clearly shows that employee and business performance can be dramatically boosted by hiring for diversity and developing an inclusive culture. The best run large organizations have been staunch believers in these ideas for years, and now the smartest SMBs are discovering the same truths.