Finding the Business Case for Diversity

When Mary Ann Downey was researching employee diversity practices during the recession, she heard several major public corporations say they had pulled back on funding for diversity programs. During a crisis, she found, "They didn't want the perception that they were spending money frivolously." That, she says, is a telling indicator of "how far diversity has to come, that it is still perceived by the public and the investment community as a 'nice to have' or 'right thing to do' versus being a true business imperative."

But in "12 Diversity Practices of High-Performing Organizations," Downey and her colleagues at the Institute for Corporate Productivity (i4cp) found that some organizations such as Pelco, ING, Deloitte and Amway are finding a correlation between robust diversity practices and financial success.

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"Think about how someone is different than you are and how that can add to what you are doing and then reward those managers who are more inclusive."

Mary Ann Downey
For example, high-performing organizations are more likely to build the business case for diversity on the need to reflect their customer base and community demographics. Downey, i4cp's human capital management practice leader, says many companies are finding growth in nontraditional markets, whether outside the United States or in demographic groups that had previously received little attention. Attention to diversity helps companies tap wider pools of talent, reflect the demographics of the communities they serve and market more successfully to these communities.

The i4cp study also found that high-performance companies:

Place more importance on framing diversity as a business-relevant issue and on creating accountability. Higher performers were almost 26% more likely to do this than lower-performing organizations.
Are more likely to specifically budget for diversity initiatives. Some 48% of higher performers specifically budget for diversity initiatives, versus only 27% of lower performers.
Are more likely to assign responsibility for leading and executing the diversity strategy to the executive team. More than a quarter of high-performance organizations reported that the executive team is responsible, while another 24% said the head of human resources is assigned the task.

Downey said it is not untypical to find up and down cycles in diversity programs. For companies that are starting up or re-energizing their efforts, she cautions, remember that "people move slower than dollars do." She recommends companies determine where they want to be in three to five years, rather than focus solely on incremental one-year targets. Then they should consider what they want the business impact to be and how they are going to measure it.

In an increasingly global economy, says Downey, companies should "stop thinking about diversity in the traditional protected-class way and start thinking about it from a global mindset." She notes that manufacturers are increasingly reliant on networks of suppliers rather than vertically integrated operations. That means tapping the talents of a more diverse group to design, produce and deliver products. Her advice: "Think about how someone is different than you are and how that can add to what you are doing and then reward those managers who are more inclusive."