Diversity & inclusion: Driving Business Performance Human Capital Trends 2011 DOWNLOAD

One in three people in the United States is a person of color, and going forward, 85 percent of U.S. population growth will come from nonwhite ethnic groups.¹ The buying power of these groups has been growing more quickly than that of white consumers. One in two workers is a woman — and women today are making 80 percent of consumer purchasing decisions.² Is it any wonder that when a company includes team members who represent diverse perspectives, it performs better? 

The term “diversity” came to prominence in America’s workplace as an expression of the “right thing to do.” In today’s dynamic business environment — where knowing your customer is so critical to growth — diversity is also the smart thing to do. The business case for diversity is clear and compelling.

What’s driving this trend?

More and different brains deliver better results. As the majority of educated workers around the world, women represent a significant pool of brain power for companies to tap. When that happens, research indicates that company performance improves.

As one major retail executive put it, “People from different backgrounds engaged in thoughtful debate leads to groundbreaking solutions.” Innovation in today’s environment depends on bringing all kinds of minds to the table.

New markets for growth. A diverse workforce can help companies capture new and expanding markets. By 2014, women’s earning power worldwide is expected to overshadow the growth in gross domestic product of China and India — combined.3 From 1990 to 2008, the purchasing power of whites in the United States increased 139 percent — impressive. But African-Americans saw a 187 percent increase over the same period, alongside 337 percent among Asians and 349 percent among Hispanics.⁴

The need for deeper consumer insights. There was a time when male executives directed the marketing of feminine products. Today, the idea of attempting to reach an increasingly diverse population without an equally diverse corporate team is a self-defeating proposition.

Beyond stereotypes. Rejecting stereotypes should not be confused with rejecting facts. It is a fact that members of the gay and lesbian community tend to be tech-savvy early-adopters with higher brand loyalty and more discretionary spending than other consumers. And while it’s cliché to say that “women control the purse strings,” it is also a fact that their decisions control almost three-quarters of U.S. spending.⁵

Practical implications

Embracing the power of diversity for innovation and growth takes more than just changes in hiring patterns. The roles people play in an organization and the expectations they can have for influence and advancement, are just as important in unlocking their potential contributions. Diversity needs to be intentional.

Open channels for access and input. More and different kinds of personal backgrounds in an organizational culture can create a better chance for debate and synthesis. But taking advantage of that opportunity depends on the free flow of communications. It also requires going beyond one-to-one concordances such as African-Americans shaping offerings for African-American consumers. Rather, the blending of viewpoints can produce new solutions that no single culture would have thought of. None of this can happen, however, without a culture that empowers anyone in any role to speak up about anything. As a first step, find out how different groups experience your culture today.

Retain your recruits. Today, most businesses are well-versed in avoiding discrimination and recruiting across a wide number of groups. But too often, that open door becomes a revolving door. Retaining diverse talent requires fostering an environment where everyone feels they have the opportunity to reach their full potential and contribute to their fullest extent. As a first step, understand your turnover rates by group and why those groups are leaving.

Beyond employees. Vendors, affiliates, channel partners and other third parties influence a company’s outlook, too. Efforts to do business with other organizations that represent and promote diversity can have some of the same benefits that internal diversity delivers. As a first step, evaluate your procurement and supply chain spend through a diversity lens – and then identify ways to increase/use your own power of the purse to build new business connections.

Customized career paths. Maximizing the power of diversity is not just about bringing together people with different backgrounds, but giving them diverse experiences. One food company found that some entry-level positions popular among women were not the jobs that led to management promotions. Companies that are conscious of this phenomenon are turning to the “lattice” as a way to enable customized careers. As a first step, take a close look at how siloed you are and the extent to which people are making lateral moves and gaining line, staff and global experience.

Not just diversity, but inclusion. It’s possible for well-intended internal structures to blunt the effects of the diversity they are created to promote. An “Office of Diversity” that builds standalone programs for different employee groups may end up causing people to communicate more within groups than between and among them. For example, a women’s initiative becomes significantly more effective when it engages men. As a first step, make it a sign of leadership to get beyond your comfort zone and engage with people who are “not like you.”

Lessons from the front lines

Diversity can spark critical insights. One manufacturer of charcoal briquettes was facing a crippling decline in market share as gas grills became more popular. Through conversations outside the company’s normal market strategy process, Hispanic employees pointed out to the CEO that Hispanic families have a tendency to cook outdoors, with wood charcoal, in large family groups. Refocusing the company’s marketing to appeal to that group helped spark a turnaround.

Don’t translate – interpret. Translating means converting something from another culture into your own worldview; interpreting means understanding it on its own terms. The diversity chief at a nationwide retail pharmacy chain said it this way: “Many companies... don’t really approach multicultural markets from an aspect of cultural competency. In other words, they don’t really demonstrate an understanding of cultural nuances or history of multicultural markets.”

Diversity is both a means and an end. Diversity is an end because it reflects a more sustainable business model. It is a means because it fuels innovation and performance improvements. Don’t treat it as a box to check. Don’t treat it as a program. Diversity has to be mainstreamed in your culture.

Companies in tune with the people they intend to serve

The population changes that are driving diversity today form a clear and strong trend line. The way businesses approach diversity is a trend too, but a different one. Society will keep evolving under its own power, but a thoughtful strategy to derive strength from diversity takes conscious effort. You can’t stop this train, but you can miss it.

The marketplace is becoming less homogenous every day, which means it takes an ever-evolving mix of workforce perspectives to win acceptance for new products and services. When you bring diverse backgrounds together you supercharge innovation. That’s a smart way to go beyond business as usual.

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

¹ U.S. Census Bureau, ‘‘Annual Estimates of the Population by Race, Hispanic Origin, Sex and Age for the United States: April 1, 2000 to July 1, 2008 (NC-EST2008-04)’’ (released May 14, 2009). <http://www.census.gov/popest/national/asrh/NC-EST2008-asrh.html>.
² Allison Paul, Thom McElroy, and Tonie Leatherberry, “Diversity as an Engine of Innovation,” Deloitte Review: Issue 8 (2011). <http://www.deloitte.com/view/en_US/us/Insights/Browse-by-Content-Type/deloitte-review/fda8881dc918d210VgnVCM2000001b56f00aRCRD.htm>.
³ “The Female Economy,” Harvard Business Review (Sept. 2009).
⁴ Jeffrey Matthew Humphreys. The Multicultural Economy 2008 (Athens, Ga.: Selig Center for Economic Growth, Terry College of Business, University of Georgia, 2008).
⁵ U.S. Women’s Chamber of Commerce, “The Woman-Led Economy” (June 2010). <http://www.uswcc.org/>.