Today, it is increasingly common for diversity initiatives to be called ‘diversity and inclusion’, but these terms are not interchangeable. Diversity is the representation of different social or cultural groups and other individual differences in a workforce whereas inclusion refers to the active integration of diversity into an organisation’s work processes. Studies exploring the factors that moderate the relationship between diversity and performance indicate that inclusion is a necessary precondition for leveraging the benefits of diversity. While diversity, per se, does not guarantee workgroup outperformance, diversity plus inclusion does.
In the broadest sense, diversity is simply all the visible and non-visible differences between employees:
- Diversity dimensions can originate internally such as our unique personalities or demographic differences that we share with others like race, age, or gender.
- Diversity dimensions also refer to attributes that we acquire through our life experiences and choices such as marital or parental status, geographic location, religion.
- Diversity dimensions also encompass attributes that we acquire as a member of an organisation like tenure, management status, department.
The value in diversity
Studies show a statistically significant relationship between the financial performance of a company and the extent of diversity in its leadership team. While the evidence only supports a correlation, not necessarily a causal link, the findings indicate that businesses with diverse leadership teams outperform businesses with homogenous leadership teams.
There are three main reasons why diversity is a competitive advantage. Naturally, these categories are not mutually exclusive; companies typically have multiple reasons for valuing diversity in its workforce.
- First, a diverse work increases an organisation’s chance of attracting the best global talent. Rapid economic growth globally, and particularly across the Asia Pacific, has increased the demand for skilled talent, in some cases straining the ability of the local labor market to keep up, particularly in countries with low and falling birth rates. In response, companies that widen their recruitment efforts, past talent pools they may have overlooked in the past expand and enrich the pool of talent they can recruit from. They are better positioned to build a robust pipeline of global and local talent that can support future growth.
- Second, a diverse workforce supports growth across diverse and rapidly changing markets because diverse employees can better understand and respond to the needs of varied customers or clients. Many companies hire employees from different backgrounds because they personally represent the tastes, sensibilities, and interests of a broad range of client segments. As populations become more diverse, through immigration and cultural changes, this factor becomes increasingly important. The ‘multicultural market’ in Australia has an estimated purchasing power of more than $75 billion per year, yet Deloitte reports that one in three customers from culturally and ethnically diverse backgrounds say their needs were often unmet over the past 12 months. A diverse workforce also supports market growth by increasing access to new suppliers and the formation of positive partnerships with other stakeholders such as policy-makers or investors across global markets. Further, workforce diversity is a valuable brand differentiator. Diversity contributes to a firm’s corporate social responsibility efforts by improving the workforce participation rates of traditionally marginalised groups. In many markets, workforce diversity improves the organisation’s image and is particularly important for attracting millennial, ethnic and racial minority, and female customers and talent to the organisation.
- Third, the greater variety of ideas and perspectives accompanying a diverse workforce increases the breadth of solutions available for problem-solving, promotes more critical and objective information-processing in decision-making, prevents groupthink, and challenges and changes existing business practices and assumptions to drive innovation in the firm’s practices and products and services. The key to understanding the positive influence of diversity on innovation is the concept of informational diversity, or ‘diversity of thought’. Diversity increases the breadth of information available for problem-solving. This makes obvious sense when we talk about a diversity of disciplinary backgrounds—think about the different expertise involved in building a car, for example. The same logic applies to social diversity. People who are different from one another in race, gender, culture or other social dimension bring unique knowledge, experience, and ideas that can be drawn upon when problem-solving and innovating. However, diversity is not only about bringing different perspectives and ideas to the table. Diversity also changes the way we think. Researchers have shown that diverse groups engage in higher-quality processing of available information compared to homogenous teams. Social diversity on a team prompts individuals to apply greater cognitive effort in problem-solving and improves decision-making.
With a greater focus on the strategic value of workforce diversity, organisations across all industries are setting more aggressive diversity targets and ramping up diversity efforts. Organisations make significant investments in recruiting and retaining a diverse workforce. Market leaders are also extending diversity efforts outwards, building diverse stakeholder networks. Yet, despite those efforts, many organisations fail to achieve their diversity goals. Organisations struggle to attract, retain and engage diverse employees and unlock the potential value inherent in diversity. Leadership teams remain largely homogenous. Unfortunately, building a diverse leadership team and leveraging the competitive benefits of diversity is not as simple as hiring for diversity.
In fact, when we look at the effect of diversity at the workgroup level rather than the leadership level, meta-analyses report that the mean effect of diversity on workgroup performance is nil. In other words, while some diverse workgroups outperform homogenous groups, others underperform.
Workforce diversity is a double-edged sword. Diverse groups can both enhance and detract from group performance. While diversity offers potential benefits for talent, growth and innovation, diversity also enhances the potential for language and other communication barriers. It heightens the risk of ambiguity, value conflicts, reasoning, and decision-making differences, and stereotypes and bias threaten rapport, stifle the exchange of information and ideas and contribute to workplace discrimination, harassment, and bullying. Workforce diversity is associated with poor team integration and cohesion, decreased satisfaction and commitment, and increased turnover.
Inclusion is what makes diversity work
Diversity management refers to organisational efforts to manage the complexity of workplace diversity and unlock its strategic value. Diversity practitioners and researchers refer to this as inclusion. While diversity is the passive representation of different social or cultural groups in a workforce, inclusion refers to the active integration of diversity into an organisation’s work processes.
Using an orchestra as an analogy, musicians assembled at a concert hall with their different instruments is diversity, whereas inclusion is akin to a musical score—a well-defined plan for actively combining the individual elements in such a synergistic manner that something much more powerful is created. When playing to a score, ‘the whole is greater than the sum of the parts’. That is, the interaction of elements produces a total effect that is greater than the sum of the individual elements. There is such a connection or synergy among the individual items that the outcome is better than what each one would offer individually.
Inclusion is achieved when all members of the organisation are enabled to fully participate in and contribute to an organisation’s decision-making processes and operations. Without inclusion, the challenges of a diverse workgroup can overshadow its potential benefits. Diversity may even detract from work performance. Prejudice, discrimination, stereotyping, isolation and communication and cultural barriers may prevent employees from underrepresented groups fully contributing to workplace decision-making and practices.
Inclusion versus cultural fit
Inclusion involves an organisational culture that values, embraces and celebrates individual differences. For most organisations, this involves a significant cultural shift. For decades, management theory has endorsed the notion of cultural fit. Organisations have been run on the assumption that homogeneity in a workforce is good for business because it avoids many of the challenges associated with diversity. Homogenous workplaces were espoused to be more efficient because everyone understands and plays by the same rule-book. Organisations have worked hard to embed a well-defined dominant culture—a clear and well-defined playbook for ‘the way things are done around here’. To encourage conformity, people who display the qualities and behaviours deemed to be aligned with the organisation’s values are hired and rewarded. Counter-cultural behaviour is discouraged and penalised.
- First, recruitment, selection and promotion decisions are made on assessments of cultural fit meaning individuals who are different from the dominant norm are filtered out during the recruitment process and never make it through the front door or progress through the ranks. Despite the increasing body of research supporting the value of diversity for organisational performance, cultural matching is ranked as one of the three most important criteria used by recruiters when assessing candidates—more than half of elite employers report ‘fit’ as the most important criterion, ranking over analytical thinking and communication. Practically, this emphasis on ‘mini-me’ cultural matching stifles diversity efforts and perpetuates homogeneity at higher levels of the organisation. Research supports that the notion of cultural fit is misplaced. Dissimilarity between organisational and leader culture is a better predictor of firm performance than cultural fit. Leadership is more effective when it provides resources lacking in the organisation’s culture.
- Second, employees cover, mask or downplay their individual differences to fit in and to avoid to avoid negative stereotyping, prejudice, harassment or discrimination. A study by Deloitte and Kenji Yoshino from NYU School of Law found 61 percent of employees covered in some manner. The US-based study reported eighty-three percent of LGBTI+ individuals, 79 percent of Blacks, 67 percent of women of color, 66 percent of women, and 63 percent of Hispanics cover. Covering occurred with greater frequency within groups that have been historically underrepresented, however, 45 percent of straight White men—who have not been the focus of most inclusion efforts—reported covering. In Australia, The Australian Workplace Psychological Safety Survey reported 58 percent of all respondents felt that their colleagues often reject others for being different and only 24% feel safe to take risks at work. Covering has significant costs at organisational and individual level. Thirty-two percent of employees who engage in covering report it has negatively impacted their sense of self. Further, employees that cover are less committed to the organisation, experience a lower sense of belonging to the organisation, are less likely to perceive having opportunities to advance, and are more likely to have considered leaving the organisation in the past twelve months. But as well as negatively impacting employee commitment, engagement and well-being, when employees hide or conceal their true identities at work, the workplace cannot benefit from their difference.
What needs to change for employees to bring their whole selves to work?
In contrast to organisations that endorse cultural fit, an inclusive workplace does not seek to assimilate its members to a dominant cultural norm. Rather, inclusion promotes, celebrates and rewards individual differences. Four factors are characteristic of inclusive work settings. Inclusive work settings are workplaces where;
- All employees feel respected—Respect exists when employees perceive that their uniqueness is valued by the organisation and that they can bring their whole and authentic selves to work, including those aspects of their identity that distinguish them from the majority or leadership group in an organisation.
- All employees experience a sense of belonging—Belonging is the perception that you are accepted by and connected to your workgroup and are an essential part of that group. Belonging results when an individual’s social and emotional needs for connection with others are met. Employees who experience a sense of belonging to their workgroup feel emotionally safe and supported at work. They feel that they are part of a community—a core member of a collective whole.
- All employees are empowered to contribute to work processes—Empowerment is the creation of an environment in which all employees can fully participate in an organisation’s decision-making processes and operations. Inclusive workplaces recognise the different needs of diverse employees and ensure that work premises and practices accommodate for those differences to ensure all employees can contribute fully to work practices.
- All employees have a fair chance of progressing their careers—Ultimately, the extent to which an organisation is inclusive is reflected in its development and promotion of diverse talent and the diversity of its leadership team. Inclusive workplaces recognise the role of bias in workplace inequality, scrutinise the employee life-cycle for institutionalised bias and train recruiters and managers in fair and objective selection, appraisal, and development so to ensure that members of non-dominant cultural or social groups have a fair chance of progressing in the organisation alongside members of the traditionally dominant group.
When those four factors—respect, belonging, empowerment, and fair progression—are present, employees are willing and able to share their diverse ideas, perspectives, and experiences. In inclusive work settings, diverse employees bring their whole self to work and employers can benefit from their differences. Also, workers in inclusive work settings experience higher levels of well-being, supporting employee engagement and productivity. Individuals working in inclusive teams are ten times more likely to be highly effective, nine times more likely to innovate, five times more likely to provide excellent customer/client service, three times more likely to work extra hard, nineteen times more likely to be very satisfied with their job, four times more likely to stay with their current employer, two times more likely to receive regular career development opportunities, two times more likely to have been given a pay rise in the past year, and are nearly seven times less likely than colleagues in noninclusive teams to have personally experienced harassment.
The barriers to achieving diversity and inclusion may be even more pronounced than the challenges organisations face in managing other cultural change efforts. Resistance from members of the dominant culture and unconscious bias are some of the challenges facing organisations in achieving sustained cultural change. Organisations committed to diversity must seek to understand the risks to each of the four factors of inclusion and implement interventions to manage those risks. To assist employers with their inclusion efforts, we have provided a deep-dive into each of the four factors of inclusion in a series of articles at the links below:
- Inclusion fundamentals: Fostering respect in diverse settings
- Inclusion fundamentals: Cultivating belonging in diverse settings
- Inclusion fundamentals: Empowering diverse talent
- Inclusion fundamentals: Building fair workplaces. Part 1 of 2—Risks to fair progression
- Inclusion fundamentals: Building fair workplaces. Part 2 of 2—Solutions for fair progression (scheduled for release in April 2019)
- Inclusive Leadership Training
- Peer Coaching Circles for Inclusive Leadership
- Developing Psychological Safety
- Unconscious Bias and Mindful Inclusion
- Unconscious Bias Training for Hiring Managers
- Cultural Intelligence & Inclusion
- Engaging Men in Gender Equality
- Bite-Sized Diversity and Inclusion Workshops
- Understanding the four factors of inclusion
- Inclusion infographic: The lived experience of inclusion
- Understanding diversity and inclusion and the business benefits
- How does employee well-being link to diversity and inclusion
- How to foster workplaces where employees feel respected
- Meaningful metrics for diversity and inclusion
- The SPACE2 Model of Mindful Inclusion
- Winning with inclusion: Medibank’s new parental leave policy
- Questions to ask a diversity and inclusion focus group
- Developing inclusive leadership: Helping leaders to see themselves as others see them
- Inclusive leadership: Have the courage to seek feedback
- “Just tell me what to do”: Useful frameworks for thinking about inclusive leadership
- Before sending female talent to confidence training, consider inclusive leadership
- Having trouble engaging men in gender equality? Try these tips
- Inclusion fundamentals: How to nurture psychological safety and a speak-up culture
- Mind your micro-biases: Subtle slights that exclude
- Nudging bias out of your workplace: Inclusion learnings from social psychology
- Taboos & trepidation: How to be colour brave and support cultural diversity at leadership in Australia