Diversity as a Competitive Advantage
By: Marisa Lauri
Ride the subway, walk down a busy downtown street, or attend a lecture at a local university. If you take a moment to look around, you will notice the rich cultural diversity of our cities. If you’re middle-aged and grew up in Canada, you may also realize that the face of our cities has changed dramatically since your youth, and the pace of that change has been accelerating.
Evolving social, cultural, and political norms, as well as changing demographic and immigration patterns, have had an impact on the composition of our population. Not surprisingly, our business practices have had to keep pace with the changing needs of our markets and the workers who contribute to the success of our organizations. When you consider the proliferation of service-oriented businesses, reflecting our diverse workforce is even more important because customers feel more comfortable doing business with people to whom they can relate. They want to see people who reflect their own communities and their particular tastes and needs- people who make them feel that their needs will be understood and addressed appropriately.
What is Diversity?
Diversity is any characteristic, perspective, or approach to work, that different individuals bring to the workplace. It includes visible and non-visible characteristics such as:
- Physical: age, gender, race, colour, abilities, appearance, cognitive style, personality
- Cultural: ethnic or national origin, sexual orientation, lifestyle, marital/family status, religion, language
- Socio-economic: education, profession, job function, social class
These characteristics contribute to “cultural identity” which shapes the values, attitudes, and behaviours shared by most (but not all!) people within a particular group.
Changing workforce demographics, client composition and globalization have created a powerful impetus for change in the traditional workplace. In order to gain and maintain a competitive edge, organizations need people who can best serve their clients. This will be a diverse group of people who are selected, developed and treated on the basis of merit and fairness.
Why is Diversity Important?
Diversity in the workplace is important to our future business success because the world as we’ve known it has changed and will continue to do so. Global demographic patterns and trends as well as social and cultural shifts are putting increased pressure on our business practices here in North America.
Global Demographic Trends
As a result of advances in health care in industrialized countries in the past 50 years and foreign aid programs in developing countries, the world’s population is growing exponentially. The working age population is growing most dramatically in developing countries; in 2000 more than 60% of the world’s population under the age of 40 was Asian, whereas only 4% was North American. Meanwhile, in developed nations, life expectancy has been increasing rapidly, while fertility rates have declined, creating challenges in replacing the workforce. This pressure is causing us to look elsewhere for labour resources. It appears that Asia, followed by Africa, will likely provide the greatest source of new workforce entrants over the next few decades.
This is not surprising; in fact, we’ve seen a transition occurring over the past 50 years. Since the 1960s, migration flows from developing countries to both developed and other developing nations have replaced the outflows of Europeans. In Canada, in 1998, almost 20% of our labour force was foreign-born, and these numbers have been increasing.
Changing social roles around the world, particularly for women, as well as international support for human rights, are also challenging previously accepted patterns of discrimination on the basis of religion, social class, ethnic origin, disability, and sexual orientation, as well as age and gender.
The increasing participation of women in the labour force has been one of the most important aspects of workplace diversity in North America. Women’s participation in the labour force has increased as a result of economic and social changes. For example, birth control has allowed women greater control over their lives and opened up opportunities for education and employment.
In addition to control over their reproduction, women have gained access to a broader range of jobs due to the changing nature of work. Automation and technological advances have enabled women to perform many jobs that previously were more physically demanding, dangerous, or required exposure to environments unwelcome to women. A century ago, the workplace was predominantly male and produced mainly agricultural and manufactured goods. Throughout the 20th century, particularly the latter half, our economy in North America has shifted from the production of goods to services. And, automation has replaced manual labour in agriculture and industry, placing less emphasis on physical strength and endurance.
During WWII, while men were away at war, women took over factory work in support of the defence industry. They demonstrated their aptitude and willingness to participate as equals in the workforce, and challenged existing gender barriers. In 1997, 60% of American women were in the labour force (up from 33% in 1950) while participation of US men dropped from 88% to 75% in the same period.
As our service economy continues to expand, greater numbers of women will occupy professional roles in the service industries in the 21st century. And, they will be well prepared. Women in America are now earning 55% of bachelor’s degrees, 53% of master’s degrees and nearly 40% of doctorates.
This influx of women workers has brought about significant social change. Men are no longer the primary bread-winners in America. Of families maintained by a sole earner, almost two-thirds of the breadwinners are women. Two-earner families have increased to 55% of all married couples, and 64% of mothers with pre-school age children are in the workforce. This shift has resulted in more demand for flexible hours, tele-commuting and family leave, changes which are becoming increasingly attractive to both women and men. In fact, “baby boomers” (born between 1946 and 1964) are finding themselves often struggling to care for children and aging parents at the same time. This “sandwich generation” needs some flexibility in order to help them balance their personal and professional responsibilities during periods of stress. Such accommodation allows them to continue to contribute their skills and keep their careers on track while managing important personal obligations. The employer benefits by retaining the talent and commitment of the individual and their clients benefit from the continued relationship.
Accommodation in the workplace is also important in allowing people with disabilities to contribute their talents to the workforce. Often, very simple, inexpensive changes, such as using enlarged text or improved lighting, can make a work environment much more accessible, comfortable, and effective for all workers. In the 21st century, employers who wish to recruit and retain highly skilled and well-educated workers need to offer such benefits to be competitive.
What are the Benefits of Diversity?
When people feel respected and their differences are accommodated rather than ostracized, they are better able to realize their full potential and make a meaningful contribution to their workplace. An environment that is positive and motivating for its people increases worker satisfaction, productivity and retention. In addition, the broader perspective of diverse teams facilitates innovation and provides clients and customers with increased value.
Diversity in the workplace simply makes good business sense, and can bring about many benefits, including the following:
- Improved marketing and customer service through better understanding and accommodation of diverse customer groups and their needs
- Improved employee morale, performance, and productivity through equitable workplace practices that select, develop, and treat people based on merit and fairness
- Improved retention and cost reductions due to lower absenteeism and turnover
- Improved ability to attract and recruit top talent
- Reduced risk of discrimination lawsuits as a result of more just and nondiscriminatory environment
- Eligibility for government contracts for which minority or gender-balanced businesses are given preference
- Improved corporate image, which generates public goodwill
- Improved employee creativity, problem-solving and decision-making through effective management of diverse perspectives and “creative conflict”
Challenge of Diversity:
Despite the potential benefits of diversity, many competitive advantages may not be fully realized if diversity in the workplace is not managed. How often have you heard news reports and read articles concerning diversity-related conflicts in the workplace? Media attention devoted to diversity and harassment issues is an indication of the impact of these important matters in today’s business.
Naturally, diverse opinions, perspectives and values can contribute to increased conflict; however, if managed effectively, that conflict can yield organizational benefits and personal growth. It is this breadth of diverse perspective that adds richness and robustness to business analyses and contributes to the achievement of optimal decisions.
Diversity management is a systematic effort across the organization. In such a culture, that promotes equity and inclusiveness, diverse perspectives are valued and integrated in to the core business practices.
Diversity management has three components. First, it is voluntary. Unlike Employment Equity legislation which is enforced by law, diversity management is self-initiated by the company and typically goes beyond the minimal standards. It also goes well beyond the EE legislation in its definition of diversity, which is based on inclusiveness for all workers, rather than just “designated groups”. Finally, diversity management is a business strategy aimed at tapping the full potential of all employees in the organization with the goal of achieving competitive advantage.
Diversity Return on Investment (ROI)
What is the financial impact of diversity initiatives? Of the 2006 DiversityInc Top 50 Companies for Diversity, 42 were publicly traded, and had a 24.8% higher return than the Standard & Poor’s 500 when measured over 10 years with dividends reinvested. Similarly, in a 2004 study , Catalyst Inc. found that of the 353 companies that were included among the Fortune 500 for four out of five years between 1996 and 2000, Return-on-Equity was 35% higher and Total Return to Shareholders was 34% higher for companies with the strongest representation of women on executive-leadership teams, compared to companies with the lowest representation. A 2003 study , found that Nextel Communications Inc. was able to achieve an ROI of 163% on their diversity training investment as a result of improved retention and employee performance.
Clearly, strong diversity management has a positive impact on corporate performance and shareholder value, which are directly linked to competitive advantage.
Marisa Lauri, MBA
New Perspectives Consulting Inc.
New Perspectives Consulting Inc. provides services and training in human resources, strategic communications and marketing to corporate and entrepreneurial organizations. The goal of New Perspectives is to nurture the development of organizational cultures that encourage employee engagement, innovation, and productivity, thereby improving overall business performance.
Marisa Lauri, Principal, has 25 years of experience in human resources strategy, marketing, communications and program implementation for corporate and entrepreneurial clients. Marisa holds a Master’s Degree in Business Administration (Dean’s List) from the University of Toronto where her studies were focused on marketing, strategic planning and organizational transformation.
- Managing Diversity: Toward a Globally Inclusive Workplace, Michàlle E. Mor Barak, Sage Publications, Thousand Oaks, California, 2005.
- Workforce 2020: Work and Workers in the 21st Century, Richard W, Judy, Hudson Institute, 1997.
- Diversity: A Business Advantage, Dr. Phebe-Jane Poole, Poole Publishing Company, Ajax, Ontario, 1997.
- Diversity at Work: The Business Case for Equity, Trevor Wilson, John Wiley & Sons, Etobicoke, Ontario, 1997.
Creates a wider pool of skills, knowledge and experiences: A diverse workforce brings different perspectives, ideas, and approaches to problem-solving, which can lead to innovative solutions and improved performance.
Improves market insights: A diverse workforce can help companies better understand and connect with diverse customer groups, leading to improved customer satisfaction and increased market share.
Enhances teamwork: Diverse teams are often more collaborative and can improve communication and reduce conflict. This can lead to increased productivity and improved overall performance.
Increases employee morale and retention: Companies with a diverse and inclusive culture often have higher levels of employee satisfaction, which can result in reduced turnover and increased employee engagement.
Supports a positive reputation: Companies with a commitment to diversity and inclusiveness are often viewed more favorably by customers, employees, and investors. This can result in improved brand recognition and reputation, leading to increased market share and profitability.
Overall, diversity can bring a competitive advantage by improving a company's ability to innovate, connect with customers, and attract and retain top talent. By leveraging the strengths and perspectives of a diverse workforce, companies can stay ahead of the competition and achieve long-term success.
The competitive advantage of a diverse workforce can include the following:
Innovation: A diverse workforce can bring a wider range of ideas, perspectives and problem-solving approaches to the table, leading to increased creativity and innovation.
Market knowledge: Companies with a diverse workforce can better understand and connect with different customer groups, leading to improved customer satisfaction and increased market share.
Improved team dynamics: A diverse team is often more collaborative and can improve communication and reduce conflict, leading to increased productivity and improved overall performance.
Talent attraction and retention: Companies with a commitment to diversity and inclusiveness are often viewed more favorably by potential employees and can attract a wider pool of top talent. Additionally, a diverse and inclusive culture can lead to improved employee morale and reduced turnover.
Reputation and brand recognition: Companies that are seen as diverse and inclusive are often viewed more favorably by customers, employees, and investors, leading to improved brand recognition and reputation, and increased market share and profitability.
In summary, the competitive advantage of a diverse workforce can result in improved innovation, market knowledge, team dynamics, talent attraction and retention, and reputation and brand recognition. Companies that embrace diversity and inclusiveness can stay ahead of the competition and achieve long-term success.
Yes, cultural diversity can influence competitive advantage. Cultural diversity refers to the differences in values, beliefs, attitudes, and behaviors that exist among individuals from different cultural backgrounds. A diverse workforce brings different perspectives, ideas, and approaches to problem-solving, which can lead to increased innovation and improved performance. Companies with a diverse workforce can also better understand and connect with different customer groups, leading to improved customer satisfaction and increased market share. Additionally, a diverse and inclusive culture can lead to improved employee morale and reduced turnover, attracting and retaining top talent. Cultural diversity can also improve a company's reputation and brand recognition, making it more attractive to customers, employees, and investors. In conclusion, cultural diversity can be a key factor in achieving a competitive advantage by bringing new ideas and perspectives, improved market knowledge, improved team dynamics, talent attraction and retention, and improved reputation and brand recognition.
Companies with a diverse workforce are stronger and more competitive because they bring together different perspectives, ideas, and approaches to problem-solving. This leads to increased innovation and improved performance. A diverse workforce can also better understand and connect with different customer groups, resulting in improved customer satisfaction and increased market share. Additionally, a diverse and inclusive culture can lead to improved employee morale and reduced turnover, attracting and retaining top talent. A commitment to diversity and inclusiveness can also result in improved brand recognition and reputation, making the company more attractive to customers, employees, and investors. In conclusion, companies with a diverse workforce are stronger and more competitive because they benefit from increased innovation, improved market knowledge, improved team dynamics, talent attraction and retention, and improved reputation and brand recognition.
Diversity and competitiveness are closely related in today's business world. A diverse workforce that represents different backgrounds, perspectives, and ideas can provide a competitive advantage for companies. A diverse workforce can lead to increased innovation and improved problem-solving, as individuals bring their unique experiences and perspectives to the table. This can result in new and innovative solutions to business challenges, giving companies a competitive edge in the market.
Additionally, companies with a diverse workforce can better understand and connect with a wide range of customers, leading to improved customer satisfaction and increased market share. A diverse and inclusive culture can also attract and retain top talent, as employees are more likely to stay with a company that values and respects their differences. This can result in increased employee morale, reduced turnover, and improved team dynamics, all of which can contribute to a company's competitiveness.
Finally, companies that are seen as diverse and inclusive are often viewed more favorably by customers, employees, and investors. This can result in improved brand recognition and reputation, leading to increased market share and profitability.
In conclusion, diversity and competitiveness are related because a diverse workforce can bring new ideas, improved market knowledge, better team dynamics, talent attraction and retention, and improved reputation and brand recognition, all of which can contribute to a company's competitiveness. Companies that embrace diversity and inclusiveness are more likely to stay ahead of the competition and achieve long-term success.
Diversity can create a competitive advantage for a firm in several ways. A diverse workforce can bring new perspectives and ideas, leading to increased innovation and improved problem-solving. Companies with a diverse workforce can also better understand and connect with different customer groups, resulting in improved customer satisfaction and increased market share. Additionally, a diverse and inclusive culture can attract and retain top talent, improve employee morale, and reduce turnover, leading to improved team dynamics. Companies that embrace diversity and inclusiveness are also often viewed more favorably by customers, employees, and investors, resulting in improved brand recognition and reputation. In summary, diversity can create a competitive advantage by driving innovation, improving market knowledge, enhancing team dynamics, attracting and retaining top talent, and improving reputation and brand recognition.
 Managing Diversity: Toward a Globally Inclusive Workplace, Michalle E. Mor Barak, Sage Publications, Thousand Oaks, California, 2005, p. 75.
 Ibid, p. 81.
 Workforce 2020: Work and Workers in the 21st Century, Richard W, Judy, Hudson Institute, 1997, p. 53.
 Managing Diversity: Toward a Globally Inclusive Workplace, Michalle E. Mor Barak, Sage Publications, Thousand Oaks, California, 2005, p. 220.
 The Business Case for Diversity, DiversityInc, 5th edition, August 2006.
 The Bottom Line: Connecting Corporate Performance and Gender Diversity, Catalyst Inc., January 2004.
 Getting results from diversity training: in dollars and cents, D. Kirkpatrick, J.J. Phillips, & P.P. Phillips, (October 2003). HR Focus, 80, 10-13.