Why the C-suite Should Be Concerned About Diversity

It is no secret that diversity is a hot-button issue in today's business environment. Recently, numerous companies, including Uber, Twitter, and others, have come under fire for what observers believe are lackluster efforts toward fostering a diverse, inclusive workplace environment. While some of this criticism claims that initiatives to increase diversity are cosmetic actions devoid of meaning, studies show an inclusive workforce brings measurable, positive results. Therefore, this concept should become a focus of every executive wanting his or her company to prosper now and in the future.

Accordingly, current online Executive Master of Business Administration students with their eyes on the C-suite should take note of the importance of diversity and prepare to make it one of their top priorities once they reach the executive level. Below are 3 reasons, explained in detail, why executives should be concerned about diversity, which students should keep in mind as they achieve their degrees:

Increased Diversity Reduces Employee Perception of Bias

Employees need a supportive environment to perform to the best of their abilities. However, when employees believe their employers show bias, whether to themselves or others, they do not feel a part of that supportive atmosphere. These employees begin to see the businesses less favorably, and their engagement suffers.

This notion is evidenced in research from the Center for Talent Innovation. The organization conducted a study titled Disrupt Bias, Drive Value, which collected answers about bias from 3,570 full-time, college-educated professionals in white-collar positions. The findings were revelatory; compared to employees who don't perceive bias, those who do:

• Are 5 times as likely to speak against their employer on social media
• Are 3 times as likely to plan to leave their employers in a year or less
• Are nearly 3 times as likely to withhold ideas

This data on engagement and diversity lines up with research from other institutions. For example, Deloitte found that millennials prefer working at companies that are more inclusive, perceiving this trait to be an indication of how well they will be respected.

The Deloitte study also identified 3 elements of businesses that correlated with low levels of perceived bias:
• Diversity in senior leadership positions
• Diversity-focused team leaders
• Leaders who sponsor talented people who are different from themselves

Therefore, one way for executives to commit to diversity initiatives and maintain employee engagement is to appoint team leaders who share this priority, create employee development plans that ensure staff of all backgrounds are included, and promote qualified women and ethnic minorities to senior leadership positions.

Employees in diverse companies perceive less bias.

Diversity Improves Financial Performance

Because a diverse workforce is typically more engaged, it stands to reason that workforce would also be more productive and therefore lead to greater revenue. In fact, research shows diverse offices tend to perform better financially than more homogenous ones.

According to McKinsey & Company, the top 25 percent most gender- or ethnically diverse companies usually financially outperform those in the bottom quartile. Specifically, racially diverse companies are 35 percent more likely to outperform, while gender-diverse ones are 15 percent more so.

The results of this study, released in 2015, were neither the first nor the last of their kind to show the financial benefits of diversity. Sociologists have observed this correlation since at least 2009, when a study published in the American Sociological Review portrayed similar results. In his research, Cedric Herring, professor of sociology at the University of Illinois at Chicago, tested 8 diversity-focused hypotheses split among 2 categories.

The first 4 of these hypotheses concerned racial diversity, suggesting that companies with a greater mix of ethnicities:
• Saw increased sales revenue
• Had more customers
• Achieved a greater market share
• Saw higher relative profits

The second 4 hypotheses focused on gender diversity, implying the same theories about businesses with more women. Of the 8 hypotheses in total, only 1 (greater gender diversity correlates to greater market share) was unsupported by Herring's research.

Furthermore, as described in a 2016 working paper from the Peterson Institute for International Economics, an analysis of 21,980 firms across the world found a positive correlation between the number of women leaders and company performance.

In summary, executives may improve their companies' finances if their workforces are diverse.

Diverse companies tend to be more profitable than others.

Diversity Helps a Company's Public Standing

Several news stories over the past few years have made clear that the public has strong opinions about diversity. As the world in general becomes more focused on inclusion, people expect such values upheld in the companies they do business with. As such, consumers are more than willing to retaliate against brands that do not adhere to their standards, and the negative press can severely damage a business's reputation.

In addition to the enhanced public perception, a diverse workforce also allows businesses to more accurately provide for their target markets.

"It makes good business sense to have an employee base that looks like our customer base," Cynthia Marshall, senior vice president of human resources and chief diversity officer at AT&T, told the Society for Human Resource Management. "To truly serve the populations we want to serve, we need diverse groups of employees, suppliers, and vendors."

Employees with backgrounds that reflect a company's customer base can more accurately anticipate its needs, pain points, and desires. They can also be more receptive to these customers’ suggestions, which can be integral to helping businesses develop products and services that best serve their audiences, giving them an advantage over the competition.

Peter Fasolo, chief human resources officer at Johnson & Johnson, reiterated this idea to the Society for Human Resource Management.

"Because [Johnson & Johnson is] an innovation company, we need a global workforce that not only represents our customers and patients but also constantly brings in new insights," he told the HR organization.

Furthermore, even shareholders are pushing for the companies they invest in to increase diversity, particularly among the C-suite. As Bloomberg reported, shareholders are increasingly holding votes on diversity proposals. While many of these initiatives ultimately do not pass, the fact that investors are bringing diversity to the table in increasing numbers signals a shift in their priorities. If this trend continues and more shareholders force businesses to confront diversity, it stands to reason that a non-inclusive company could lose investors in the future.

Understanding Executive Priorities as a Student at the Carson College of Business

During students' studies, it can be helpful for them to understand the concepts they will need to prioritize in their future positions. In addition to ideas like financial management and information systems analysis, students can benefit by studying the social issues that face corporations now and in the future. Diversity is one such issue, and its impact is too great for executives to ignore.

With these priorities in mind, students enrolled in the Washington State University Carson College of Business's online EMBA program can tailor their education specifically to achieve a C-suite position. The curriculum is designed to go beyond a traditional MBA and can equip students with the knowledge and skills they need to succeed as executives.