The significant benefits of diversity and inclusion in the workplace

Different coloured pegs on a light blue background.

In an increasingly globalised world with a mix of cultural and ethnic backgrounds – as well as five different generations in the workforce, workplaces are now more diverse, rich and complex environments than ever.

Consequently, companies are recognising the huge importance and value of diverse and inclusive cultures to bring out the best in their people and performance.

Through our experiences and research at Inkling, we know that when leaders prioritise diversity, and everyone feels psychologically safe to contribute with their unique strengths, teams and organisations truly thrive.

Inkling insight: Teams need psychological safety – environments in which people believe they can speak up candidly with ideas, questions, concerns, and even mistakes. Psychological safety is vital to leveraging the benefits of diversity, because it helps make inclusion a reality.

Want to find out the specific benefits of diversity and inclusion in the workplace and the ways organisations can create a diverse and inclusive workplace?

In this article, we’ll define what diversity means, explore its most significant benefits and provide tips for leaders.

What does diversity in the workplace mean?

It’s widely accepted that workplace diversity refers to organisations that intentionally hire and are welcoming to employees with a variety of different characteristics and backgrounds like gender, age, religion, race, ethnicity, culture, sexual orientation and identity, education, and disability.

So, a diverse workplace is a company made up of employees that have a wide variety of different characteristics and experiences.

Inkling insight: Diversity is more than age, gender, cultural background, religion, sexual orientation/identity, and disability (what we call the ‘big six’ characteristics that can often be seen or learned quickly). It is also about personality, strengths, preferences, values, motives, and skillsets (what we can’t see or learn without really knowing someone). We need to move beyond the big six to see and use elements like personality and strengths, to maximise the potential of diverse workplaces.

The 7 benefits of diversity and inclusion in the workplace

Research shows that diversity at work results in a host of benefits to companies both at macro and micro levels. Some of these benefits include:

1. Enhanced problem-solving capabilities

Research by Harvard Business Review found that cognitively diverse teams (groups where individuals have differences in perspective or information processing styles) can solve problems much faster than teams made up of cognitively similar people.

This makes sense in a business environment where new challenges require teams to work together applying what they know, but also to discover what they don’t know from each other to come up with a solution.

Leaders can apply these findings to the recruitment process and take steps to identify cognitive diversity in job applicants. Hiring people with different perspectives and information processing styles to their current team members can result in faster problem-solving.

Inkling insight: Diversity is the mix of people. Inclusion is making the mix work. Inclusion is what unlocks the power of diversity. You can have diversity but without inclusion, division can occur, and you can be worse off than having a group of very similar people.

Catalyst’s ‘Getting Real About Inclusive Leadership’ report showed that staff experiences of inclusion generate many benefits for employees and employers. Such as employees’ experience of inclusion results in a 49% increase in team problem-solving.

2. Boosted work engagement

Deloitte’s ‘Diversity, Inclusion and Business Performance’ survey of 1,550 employees from three diverse Australian businesses revealed that better engagement is an outcome of diversity and inclusion.

The Deloitte survey showed a combined focus on diversity and inclusion delivers the highest levels of employee engagement (101%). Whilst those who feel highly included in a workplace with a low commitment to diversity are less engaged (67%), and those in a workplace with high diversity and low levels of inclusion were least engaged (20%).

Similarly, the Catalyst report found experiences of inclusion increased work engagement (an employees’ emotional investment in their work and the company’s mission) by 35%.

These results don’t come as too much of a surprise – when employees feel included and valued in a diverse workplace, they will be more engaged.

3. Improved retention of employees

Diversity is a vital asset for companies today in terms of employee loyalty, engagement and retention.

Catalyst’s report showed that an employee’s intention to stay with an organisation increased by 20% when they experienced inclusion.

Naturally, companies dedicated to building and promoting inclusion and diversity are more likely to have employees that stick around because they feel engaged, accepted, and valued.

Further reading: How to build an inclusive organisational culture in the workplace

4. Attract better talent

In a Glassdoor survey, 76% of job seekers reported that a diverse workforce is an important factor when evaluating job offers and companies in general.

Meaning whether your organisation is interested in increasing its diversity or not, a majority of candidates desire diversity and look for it while being interviewed, as well as researching the role and company.

Organisations can potentially miss out on the best talent and narrow their candidate pool when hiring if diversity isn’t a priority.

5. Increased innovation

Numerous studies show that one of the most powerful outcomes of diverse teams is more creativity and innovation.

Research by University of Illinois Professor of Sociology and Public Policy, Cedric Herring, featured in the American Sociological Review said, “Diversity yields superior outcomes over homogeneity because progress and innovation depend less on lone thinkers with high intelligence than on diverse groups working together and capitalising on their individuality.”

Research by leading HR Advisory expert Josh Bersin revealed that inclusive companies are 1.7 times more likely to be innovation leaders in their market.

The Catalyst report found employee innovation (their ability to generate new ideas, processes, and approaches to achieving goals) increased by 18% in an inclusive workplace.

Another study found that companies with pro-diversity policies were demonstrably more innovative.

The fact that diversity sparks innovation demonstrates how employees in diverse teams are exposed to new and different perspectives, experiences, skills and constructive conflicts, prompting them to come up with more novel ideas and creative solutions.

6. Better decision-making

Inkling insight: A diverse mix of voices leads to better discussions, decisions, and outcomes for everyone.

Studies suggest companies can capitalise on the diversity they have via the inclusion of more diverse employees in decision making at all levels of the organisation.

Cloverpop research found a direct link between inclusive decision making and better business performance. Analysis of 600 business decisions from 200 different business teams over two years found that:

  • inclusive teams make better decisions up to 87% of the time teams with an inclusive process make decisions twice as fast with half the number of meetings decisions made and executed by diverse teams delivered 60% better results.

With less time in meetings, faster and better decisions, and better outcomes, companies cannot afford to miss out on the amazing productivity and performance gains linked to diverse teams.

7. Increased profits for the company

With enhanced team performance being closely related to workplace diversity, it’s not surprising that many studies show that diversity pays off, where diverse organisations experience improved financial performance.

A BCG study found that companies with higher levels of diversity get more revenue from new products and services. Companies with below-average diversity scores reported 26% innovation revenue where companies with above-average diversity scores reported 45% innovation revenue.

Josh Bersin’s research revealed that inclusive companies have 2.3 times higher cash flow per employee over a three-year period.

McKinsey research found that ethnically and racially diverse companies were 36% more likely to have financial returns above the national industry median. McKinsey also found that companies in the top quartile for gender diversity were 25% more likely to have financial returns above their respective national industry medians.

Inkling insight: There is a strong business case for both gender diversity and ethnic and cultural diversity in corporate leadership. The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.

How can leaders and companies prioritise an inclusive and diverse workplace?

Inkling insight: The ability to prevent, analyse, and resolve workplace diversity problems is a critical skill for leadership success. We need to be braver. We need to be courageous. We need to take action in areas where we are not performing.

With a recent Glassdoor survey revealing over half of employees believe their company should be doing more to increase diversity among its workforce, leaders and companies need to develop a diversity plan of action.

Josh Bersin suggests building a diverse and inclusive workplace requires “a systemic and top-down approach (embedding diversity and inclusion into hiring, leadership assessment, development, and performance management).”

Worthwhile diversity strategies for a more inclusive workplace

Here are some of the best ways for executives and managers to work towards a more diverse and inclusive workplace:

  • Include diversity and inclusion-related questions in your engagement and culture surveys. Run targeted focus groups or one-on-ones to understand the drivers behind any gaps, and identify areas that are most in need of improvement. Tangible data helps to avoid acting on unproven assumptions, focuses your efforts on initiatives that’ll have the greatest positive impact, and results in your people feeling heard and appreciated.
  • Appoint a Diversity and Inclusion Leader to drive activities and initiatives and hold your organisation accountable for all diversity goals and outcomes.
  • Recruit from diverse talent pools, carry out the recruitment process with a diverse panel of interviewers, ensuring you support them with tools and practices.
  • Invest in Inclusive Leadership development. Leaders need support to develop the mindsets and skills to create psychological safety, decrease bias in themselves and others, and actively sponsor individuals belonging to underrepresented groups; all of which we know create inclusive and diverse cultures. It’s so crucial that Leaders see the value in, and demonstrate their personal commitment to the organisation’s diversity goals.
  • Make the effort to continuously educate your organisation’s people about the ‘why’ behind your diversity goals and practices. We know that effective diversity interventions can’t just be a series of one-off events. Businesses must consider intersectionality (how different elements of a person’s identity can be discriminated against – with negative outcomes) in their diversity and inclusion initiatives. Development and skill-building are key to sustaining changed mindsets and behaviours.

Inkling insight: Diversity and inclusion is a complicated area; there is no silver bullet strategy. We know from our experience and research that an effective approach needs to include targeted, nuanced and broad-reaching initiatives, both for specific underrepresented groups and the broader organisation culture they operate within.

Further reading: Why set up a shadow board and Why your organisation needs a reverse mentoring program

The way forward

You may be wondering where to start to tap into the many proven advantages of diversity and inclusion in the workplace. At Inkling, we partner with you to build out learning experiences that drive mindset and behaviour change. We measure and benchmark inclusion, belonging and psychological safety so you can see the direct impacts of capability development and can see the progress you’re making towards developing a more diverse high-performing team.

Get in touch with the Inkling team if you want to find out more about diversity and inclusion solutions.


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