In the past several months, there has been a lot of pushback on DE&I training, the value of having a DE&I focus in a company, and those delivering on these programs and initiatives. Clearly, the biggest challenge for any organization is making sure the most qualified candidates are applying for positions and are being hired.
The recent arguments have included several issues companies should be considering. If you have a DE&I focus at your organization, does it encompass a wide variety of diversity areas or was it more focused on a particular area? Was there a focus on the business case for having diverse teams and the data showing diverse teams handle crises and change more effectively? Does your workforce feel that DE&I initiatives were helpful, informative, and enhanced the working environment?
Research points to the financial benefits of having diverse teams. The Harvard Business Review published an article in 2018 examining the measurable benefits of diversity in the VC investment world. Because investors often take seats on the boards of the companies they are investing in, it makes it possible to determine the differences like ethnic background or gender and those traits related to where someone attended college or an MBA program. It also means access to their work history.
The goal of any VC investor and their company is to identify a company that can become very profitable. Research has demonstrated that having VC investors from a wide range of backgrounds and experiences significantly improves financial performance.
Like it or not, we all feel more comfortable spending time and working with people that we feel can identify with our own culture and background. If you belong to the same racial group, the chances of you working with that person go up by 39%+. If you have a degree from the same school as someone you may be interviewing or working with, the chances you’ll work together go up by 34%+. But that can lead to poorer financial decisions and poorer financial returns.
“The success rate of acquisitions and IPOs was 11.5% lower, on average, for investments by partners with shared school backgrounds than for those by partners from different schools. The effect of shared ethnicity was ever strong, reducing an investment’s comparative success rate by 26.4% to 32.2%.” Harvard Business Review, July-August, 2018
Forbes published information back in 2017 that was updated in December of 2021 showing that when there is more inclusion in a company and on teams, the teams make better business decisions up to 87% of the time. This data was based on reviewing 600 business decisions made by over 200 teams in different industries. These decisions were studied over a two-year period.
“Compared to individual decision makers, all-male teams make better business decisions 58% of the time, while gender-diverse teams do so 73% of the time. Teams that also include a wide range of ages and different geographic locations make better business decisions 87% of the time.” Forbes
The conversations around DE&I have changed dramatically over the past year. However, the data about the business case is no less valid than it was several years ago. The big message is that having a diversity of thought, background, experiences, and education enhances the overall team performance.
There are more than enough talented, qualified individuals that come from many different experiences. We all need to be aware of our own biases, so they don’t get in the way of a good hire. We need to teach managers and leaders to better understand how looking for diversity can help provide better financial results.