The Business Case for Gender Diversity

Creating an inclusive culture is great for those who would otherwise feel less included. Supporting the advancement of women in business is great for women. But these aren't the ultimate goals; and they won't inspire action.
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I periodically update the research that forms the business case for gender balance at the leadership level. Here is my latest update:

Most people don't change, or willingly go along with change, because the change is "the right thing to do." They do it if there is an important reason to change. Businesses don't generally change their corporate cultures so that they retain women because doing so is nice for women. They do it if there is a compelling business reason to do so. The bottom line reasons to achieve gender diversity in leadership are exactly that -- compelling.

First, diversity and inclusion generally are good for business:

•Engagement has been convincingly linked with productivity, profitability, employee commitment and retention. Diversity can help the bottom line, and diversity is sustainable only in an inclusive culture. An inclusive workplace is one where more of today's diverse workforce is engaged. According to studies cited by Scientific American, organizations with inclusive cultures have greater innovation, creativity and bottom line results.

•Turnover has significant direct and indirect costs. Companies with inclusive cultures have lower turnover. In a recovering economy, turnover is becoming more front-of-mind for business leaders. Studies during the recession showed a staggering percentage of employed Americans (particularly Millennials) had the intent to look for a new job when the economy improved.

•An organization with a reputation for being a good place to work for diverse groups has an easier time recruiting talent from today's diverse hiring pool. That saves money and time.

•Many people have experienced that decisions are better when they come from a group with diverse backgrounds and perspectives. A study from the Kellogg School of Management concludes that heterogeneous groups get better results than homogeneous groups because the resulting tension or discomfort leads to more careful processing of information.

•A diverse culture that mirrors its markets tends to do better than its homogeneous competitors. The buying power and influence of "minority" groups are large and growing according to buying power studies.

The case for a gender-inclusive workplace includes all of these benefits and more:

Returns: Catalyst found significantly higher returns in Fortune 500 companies with more women at the top and on their boards of directors. McKinsey found that, in a group of publicly traded European companies, those with gender diversity in leadership experienced higher return on equity, operating profit, and stock price. While a few studies question these results, or the causal relationship between gender diversity and financial results, additional studies continue to show that having both men and women in leadership is good for the bottom line.

Talent Pool: According to Catalyst, women are nearly half of the workforce and hiring pool. According to the U.S. Department of Education, women earn more undergraduate and graduate degrees than men. The pool of educated workers has and will continue to have lots of women. It's simple: To have the most skilled and talented workforce, a business must attract and retain women as well as men.

Women's Market: The women's market is key to many industries. Women make 41% of purchasing decisions. Women-owned businesses have a huge impact on our economy. Women control trillions of dollars of wealth and influence more than 85% of retail decisions.

Bang for the Buck: If a business wants to increase engagement and retention from any "diverse" group (those that are not white, male, heterosexual, Christian), the greatest return may be in increasing engagement in the largest such group -- women. And there is more bang for the buck. Women's needs and approaches to work are shared by other growing sectors of the workforce. Members of Generation X and Millennials share women's need for flexibility, desire for closer workplace relationships and preference for less hierarchical structures. Steps to make a culture work better for women will also increase engagement within these critical workforce sectors.

Creating an inclusive culture is great for those who would otherwise feel less included. Supporting the advancement of women in business is great for women. But these aren't the ultimate goals; and they won't inspire action. Inclusive cultures and organizations with gender-diversity achieve superior business outcomes -- retention, productivity and profitability. That's what can drive action and culture change.

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