Article by Alexa Grellet, Co-Founder & Commercial Director at HR DataHub.
Global consulting firm, McKinsey & Company, has demonstrated a direct correlation between employee diversity and financial performance. Specifically, that companies in the top quarter for racial and ethnic diversity are 35% more likely to generate higher returns. Likewise, a BCG study suggested that increasing the diversity of leadership teams leads to more and better innovation and improved financial performance. The results showed a significant correlation between the diversity of management teams and overall innovation. For instance, companies that reported above-average diversity on their management teams also reported innovation revenue that was 19% higher than that of companies with below-average leadership diversity (45% of total revenue versus just 26%.) Similarly The Boston Consulting Group and the Technical University of Munich found higher levels of diversity in management positions contributed to increased revenue from new products and services.
All these results point to the same conclusion; focusing on D&I is not only the morally right and good thing to do, rather it’s a business imperative.
But is getting D&I right merely the reserve of big business, or is it something that businesses of all sizes, should be thinking about?
Well interestingly smaller businesses stand to gain from diversity and inclusion initiatives just as much as large companies do. Not only does D&I incorporate the knowledge and experience of more demographics, but it also leads to more creative thinking, stronger innovative ideas internally and better decision making. It is also proven to aid recruitment and retention too. For instance, Glassdoor found that workplace diversity is an important factor for 76% of job seekers when evaluating employment opportunities.
Data aside, you can see why D&I initiatives tended to have been the focus of big business in the main. Larger businesses (in general) have bigger budgets, bigger HR teams, dedicated D&I experts, and of course they also feel those pressures from their boards, stakeholders and their customers to deliver on their ESG agenda.
Smaller companies, on the other hand, tend to be focused on scaling their journey, with some only concentrating on the here and now and a fair few, quite understandably, struggling to survive as a result of the pandemic. As such, it is often the case that early-stage founders have neither the budget, nor the people power to put their time and effort into thinking about D&I with so many other considerations competing for attention.
However, I believe that early-stage founders hold a unique position as change agents. They are innovative, agile, and they have the mindset to change the world too. They can change the workplace for the better, adapt working cultures to become more inclusive, and change the world we live in, in a truly profound way.
We believe that early-stage founders can build diversity and inclusion into their company from the ground up. Key to doing this though will be them understanding why diversity and inclusion is actually important to their business. It may be that they believe that having a diverse and inclusive workforce will help them to better understand their customers for instance; or it could be that they believe diverse and inclusive teams work better together; it may be that they believe that diverse teams are better at team problem-solving; or because it will ensure a stronger culture, so people stay with the business long term; or it could be because they want to attract more diverse candidates. In all likelihood, though, it will be all of these things.
Of course, we know early-stage founders have so many aspects competing for their attention, but putting the time and energy upfront into building D&I into the very fabric of their being will pay dividends long term and will ultimately give them a competitive advantage.
Alexa Grellet is co-founder and commercial director at HR DataHub. As an experienced commercial leader, Alexa has worked in tech her entire career, from enterprises to scaling start-ups, all over the world. Alexa is passionate about using tech for good and has a talent for building strong inclusive cultures which is why she joined HR DataHub in January 2021. HR DataHub is an intelligence platform for HR teams and provides technology-powered objective insights. The Tech for Good company, which works for clients like M&S, DHL, Asda and EDF Energy, amongst many others, helps organisations make data-led people decisions by collecting reliable, wide ranging D&I data and combining it with cutting edge technology to provide actionable insights for organisations no matter the size or industry they operate in. Alexa is passionate about social justice and believes that improving the way we employ people is one of the most powerful ways to uplift society.