UPDATE: The numbers don't lie: Diverse workforces make businesses more money
By Jack Myers
Investors and company leaders should pay attention to this key profitability measure
Maintaining a diverse workforce is imperative for modern organizations to succeed. Companies with a diverse staff are better positioned to meet the needs of diverse customer bases, and the cash flows of diverse companies are 2.3 times higher (https://builtin.com/diversity-inclusion/diversity-in-the-workplace-statistics#0) than those of companies with more monolithic staff. Diverse companies are 70% more likely (https://hbr.org/2013/12/how-diversity-can-drive-innovation) to capture new markets than organizations that do not actively recruit and support talent from under-represented groups.
Not only does long-term support for employees of all educational levels and backgrounds ensure higher productivity, it also demonstrates an organization's trust in its talent while fostering business growth. Failing to properly invest in human resources not only causes employee retention and productivity to fall -- it causes entire industries to fail at achieving long-term growth.
Yet attracting diverse talent is not enough in and of itself. Diverse employees will feel unappreciated and disengaged if they feel tokenized or excluded from their coworkers and hold back from making contributions and performing as well as they could. Executing actual inclusion strategies fosters more innovation than companies that only strive for diversity from an optic or statistical level.
A lack of role models and mentors is a frequent roadblock, particularly for women and minority employees and leaders. Providing education and training that is tailored to their needs can alleviate this mentorship disparity. Industries that are facing notorious difficulties in recruitment and retention of diverse talent such as STEM fields must take extra steps to create training, mentorship, and professional opportunities that are specifically tailored to underrepresented groups.
Learning and development programs can take organizations and entire industries to new heights. Equally, the failure to implement and update a robust educational program to attract and retain quality employees, particularly access to online learning tools, can lead to business declines and failure.
This consistent availability of skills training and learning tools is inexorably linked to attracting and retaining a diverse workforce. People from marginalized groups are less likely to have had access to professional development resources and they may have been systemically excluded from them at their prior jobs. First-generation Americans and employees who were the first to go to college in their families can also face significant skills gaps based on their educational backgrounds and responsibilities that may have prevented them from accessing supplementary training in addition to a degree.
Diversity = profitability
By embedding inclusive values into corporate culture and prioritizing closing skills gaps stemming from marginalization, a positive top-down change results that can ripple across an industry and business world in general. Moreover, diverse companies are more profitable and more likely to achieve long-term growth as an entity and in their industry.
According to the McKinsey study "Why Diversity Matters (https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity)," companies in the top quartile for gender-diverse executive suites were 15% more likely to generate above-average profitability compared to the bottom quartile of companies whose executive teams were predominantly white and male. When it comes to staffing, companies that have higher degrees of racially and ethnically diverse employees have a 35% performance advantage (https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters) over companies relying on a "culture fit" that tends to trend white and monocultural.
Per the McKinsey study, companies with gender-diverse executive teams in the highest quartile outperformed male-dominated companies by 21% in terms of EBIT (earnings before interest and taxes) and 27% in terms of creating long-term value. Racially diverse executive teams provided an advantage of 35% higher EBIT and 33% more long-term value creation over the least racially diverse companies. Subsequently, companies with diverse talent and executives are more likely to retain the best talent and engage in decision-making that accounts for orienting to larger varieties of customers than companies with a more monolithic customer base.
Diverse companies attain 19% higher revenue (https://www.forbes.com/sites/annapowers/2018/06/27/a-study-finds-that-diverse-companies-produce-19-more-revenue/#53258f4a506f) than monolithic companies on account of greater innovation. Providing education and training that underrepresented groups may not have had access to in the past can foster innovation by exposing employees to new skills and ideas. With millennials and Gen-Z becoming the dominant generation in the workforce, (http://www.marketwatch.com/story/how-millennials-and-gen-zers-can-talk-about-race-and-racism-so-their-parents-and-grandparents-will-listen-2020-07-15)attracting young talent must take diversity into account given that they are the most diverse generation in American history. Per the 2018 Deloitte Millennial Survey, 74% of respondents (https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html) stated that they believe their workplaces will have greater innovation if management actively makes diversity and inclusion a key component of organizational culture.
Having diverse employees bodes well for creating value and innovation, but so does having access to quality educational resources on a regular basis. Given that there is a strong correlation between on-the-job training and education and employee retention and ongoing business growth, diversity, and inclusion measures also factor into this as far as innovation and value creation go. Organizations that do not actively make diversity and inclusion part of their values and culture are likely to begin to decline.
Read: These companies are winning the war for talented workers, and investors should pay attention (http://www.marketwatch.com/story/these-companies-are-winning-the-war-for-talented-workers-and-investors-should-pay-attention-2020-05-14)
Invest in employees
Education helps increase employee retention by providing more opportunities for upskilling in-house instead of engaging in costly talent searches. Some 74% of employees (https://www.hrexchangenetwork.com/learning/news/7-stats-that-prove-training-value) feel that they are not reaching their true potential, and 76% are seeking some type of career advancement opportunity. Learning and skills training organically allow for career advancement with the same organization or a new employer. By providing a variety of learning and professional development opportunities, employee engagement increases, and motivated employees are more likely to remain with the organization than those who feel that their needs are going unmet and accomplishments unrecognized. Given that the average annual learning and development spend per employee is $1,299 (https://www.statista.com/topics/4281/workplace-learning-and-development/), while replacing an employee can carry a significantly higher price tag, training and learning tools help save money and productivity in the long term.
Increased investment in learning and development helps close skills gaps and increase employee retention, which reduces replacement costs and increases employee engagement, which in turn increases productivity. Properly investing in learning and development programs demonstrates that managers have faith in their employees and are more likely to offer superior job security.
Secure and engaged employees are not only more productive, they also help ensure that the organization will achieve long-term growth. Education and training provide fuel for long-term growth since they are an active investment and demonstration of trust in employees. It is also important to note how entire industries tend to treat learning and development. Companies that provide learning opportunities for their employees will have competent and motivated workers who feel more secure at their jobs. When industry-wide practices lead to high attrition and lack of security, the industry itself fails to grow and innovate.
Large-scale failure to invest in employees' professional development can equate to the downfall of an entire industry, even if it does not happen overnight. When a significant number of companies value short-term cost savings and isolating from the industry to maintain operations the way they are, the industry will eventually collapse by virtue of being unable to meet modern users' needs.
It all stems from the failure to innovate by refusing to create strong diversity and inclusion initiatives and overall employee engagement, which encourages innovation. Disengaged employees who don't feel recognized for their contributions are not only more likely to quit, they will do the bare minimum while they still have their jobs. Lack of innovation and high burnout resulting from disengagement will not bode well for an industry as a whole. Investing in employees' skills motivates them to learn and do more for both their employer and their industry.
Training and education are crucial for growing a workforce's skills and putting the organization's contributions to the industry at the forefront. Online learning has evolved in recent years and has been successfully deployed in several industries and organizations. Instituting a digital learning program that employees can participate in at their own pace is a cost-effective way to make them feel valued and secure in their careers.
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August 03, 2020 23:52 ET (03:52 GMT)
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