Industry inclusion isn’t for CSR… it’s for GDP
Since the launch of a report in the Harvard Business Review in 2016 that showed the ways in which some diversity programmes have failed at increasing the actual numbers of successful hires from diverse backgrounds, there has been an ongoing debate regarding whether corporates need to rethink their approach to inclusion altogether and if so, how.
While this is deeply concerning, it is easy to see how this happens; a change management effort of this nature involves a structural changes to a company’s way of working, consistently and over the long term. However, it’s not inclusion programmes overall that don’t work, it’s programmes that use ineffective metrics that fail, like motivating employees based on consequences, rooting the initiative in CSR, or deploying short term approaches. In increasingly lean economic times when there is a strain on company resources, if inclusion is seen as part of a company’s corporate social responsibility (CSR) programme rather than something that directly impacts the bottom line, it’s at risk of being de-prioritised.
However, companies that do are making a vastly unprofitable mistake; from creative agencies through to law firms and the financial sector, businesses are beginning to realise that inclusive workforces achieve broader reach and deeper connections with their customers, make better decisions and are ultimately smarter as a unit.
McKinsey research (published in 2015) on impact of inclusion analysed US-based 366 public companies from a broad range of sectors — it found that those in the top quartile for ethnic and racial diversity in management were actually 35% more likely to have financial returns above their industry average. Those in the top quartile for gender diversity were 15% more likely to outperform industry averages for profitability. An even more comprehensive study in 2016 of 21,980 firms from 91 countries saw the same pattern. More recently, the Financial Times also published an article in 2016 on firms who found that inclusion led to better work and therefore better results.
What’s more the value driver of inclusion doesn’t just end with businesses’ balance sheets — according to findings from the government-backed McGregor-Smith review released earlier in March, building a more inclusive business environment in which everyone gets the opportunity to participate fully could boost the UK’s gross domestic product GDP by 24 billion each year. In the wake of the announcement, Director of people and skills policy at the Confederation of British Industry Neil Carberry, said:
Creating inclusive workplaces where employees are able fulfil their potential regardless of their ethnicity is not only the right thing to do, these businesses are more productive and innovative too… Greater transparency is a key part of this but it’s important that that we take a business-led approach to plans, targets and reporting systems, rather than a regulatory one.”
Ultimately the UK needs to develop its knowledge economy to compete on the global playing field — it will only achieve this if it brings the full team together. We are already paying the price of economic exclusion with the rise in populist movements and civil unrest — it’s time to see the inclusion imperative for what it is: a triple win for individuals, our economy and for public policy.
Originally published at LearningState.