A 2018 report titled “Delivering through Diversity” by McKinsey & Company took a deep dive into the subject of diversity at the workplace and came out with many eye-opening insights. For one, companies in the top quartile of gender diversity were 21% more likely to achieve above-average profitability. Conversely, companies in the lower quartile were 29% less likely to realize above-average profitability.
The company’s follow-up report for 2019 only reaffirms the growing impact of inclusion & diversity on profitability. And then the pandemic hit!
Do companies still care enough to champion diversity in the workplace in 2021? If not, are they justified in letting it slide down their priority list? Let’s find out.
Understanding the Post-COVID Business Landscape
The pandemic and the uncertainty surrounding it have put companies in a tough spot. Businesses are responding to the crisis differently. Some companies consider diversity & inclusion a part of their organization’s culture; others look at it as just another compliance task. Usually, the differences in intent are not apparent under normal circumstances; however, a crisis situation like a pandemic makes them conspicuous.
How COVID-19 is Changing the Job Opportunities?
Most organizations have frozen hiring and are now looking for talent inwards to fill up the roles. A report by Linkedin has detailed the stark change in HR’s role, whose focus has now shifted from enriching the diversity to “right-sizing” the talent pool.
Internal recruiting does not improve the diversity within teams; it only reshuffles the same people around the company. Consequently, there is no need for add-on programs on inclusion in the company calendar either.
In a nutshell, the pandemic has directly and negatively impacted diversity- and inclusion-related hiring. According to Washington Post, these openings fell twice as fast as other job openings since March.
As diversity takes a back seat in 2020 and 2021 hiring processes, the consequences will only become apparent in the coming years.
How COVID-19 is Affecting the Talent Pool?
In the wake of the pandemic, automation adoption has soared among businesses. Preliminary analyses indicate that workforce diversity will be under fire as minorities and women will bear this move's maximum brunt.
Forbes reported that automation would disproportionately affect Black Americans, taking away jobs and displacing as many as 4.6 million individuals by 2030. The report states that Blacks are heavily employed in manufacturing, food service, administrative support, and other such professions that will be most affected by automation. Latinos are predicted to lose even more jobs.
Furthermore, World Economic Forum forecasts that women will lose more jobs compared to men due to automation.
It is now evident that the increasing penetration of automation is affecting the most disadvantaged sections of society. The pandemic has only exacerbated the situation. COVID-19 has not only given companies a strong reason to opt for automation but has also taken away the luxury of time from companies to do it in a more thoughtful and inclusive fashion.
According to a McKinsey report, despite a 10-year economic expansion in the aftermath of the recent recession, there still exists a labor-force disparity that harms Black workers. Thanks to the pandemic, the decade-long efforts to bridge the pay gap stand nullified. So, inclusion is at risk.
Besides the automation and increasing wage gap, people coming from disadvantaged economic and social backgrounds have yet another challenge to face. Due to intermittent lockdowns and suspension of public transport, they are finding it difficult to move for employment. The immobility of talent comes as a severe blow to diversity and inclusion efforts.
Learning from the Past
The current generation of working professionals has already faced two “once-in-a-lifetime” economic disasters – the 2008 global financial crisis and the 2020 COVID-19 global pandemic.
While businesses may not be elated about the economic downturns, they did get an opportunity to learn from one devastating event to apply their learnings in the next. One of the biggest learnings from the 2008 global financial crisis was that the organizations which prioritized diversity performed better during an economic setback.
A peer-reviewed study published in the Journal of Business Ethics found that female bank CEOs performed better to offset the assault of the recession better and reduced the chances of a bank failure under the market stress.
In 2019, Fortune Magazine called diversity the key to fighting and beating recessions. They cited a report by the experts on workplace culture, Great Places to Work. Their report found out that after the Great Recession, public companies with highly inclusive workplaces thrived. In fact, they amassed 4X the stock return than the S&P 500.
Even during the current pandemic, companies with an inclusive culture could adapt quickly and mount seismic workplace transformation. They already had established protocols for employees to work from home, punch in flexible hours, and work in a more nurturing environment. They also had systems to help remote workers feel included and offer them help during a stressful time like a global pandemic.
These and many more peer-reviewed studies, surveys, and news reports suggest that diversity and an inclusive workforce have always proven to be an asset, and not a liability, to companies emerging out of recession. Companies that champion diversity in the workplace come out winners in a lousy economy.
Why is Diversity So Important for Recovering Businesses?
The business case for diversity is more compelling than ever. However, it is possible to see how a resource-strained business may want to chop out an inclusive workforce and stop investing in a diversity initiative when faced with debilitating challenges. After all, it does seem like an obvious quick-fix at the time.
However, doing so would be a mistake. Here is how diversity contributes to the growth of an emerging business and fuels its success.
Churn Out Innovative Solutions
A Boston Consulting Group study found that diversity improves the bottom line for companies. With the amalgamation of diverse experiences, ideas, and approaches, companies with diverse workforces are better placed to find an innovative solution.
Team members from unique backgrounds bring unique perspectives, and when all of them cook together, it is more likely that the team will land an innovative solution. In a market stressed for resources, innovative solutions that can save money, time, and effort can mean the difference between success and bankruptcy.
Attract Better Talent
A diverse workforce helps companies to create an inclusive and welcoming culture. Such a culture attracts better talent who want to work in a flourishing and dynamic environment.
Every organization creates incentives to hire and retain superior talent. A study of 600,000 researchers found that high performers prove to be an incredible 400% more productive than average workers. In a tough market, such super employees prove to be saviors. These high-performing job seekers are not looking for merely higher compensation. Diversity is an important factor for them while evaluating job offers.
More Diverse, More Driven
In her recent Scientific American article titled, “How Diversity Makes Us Smarter”, Professor Katherine Phillips rightly remarked, “Diversity jolts us into cognitive action in ways that homogeneity simply does not.” According to her, people tend to work harder and prepare better for discussions with “socially different” people. So, diverse teams are more driven, better prepared, and more likely to accomplish a task than homogenous groups.
Diversity demands team members to expect varied viewpoints and prepare themselves to counter them. Within such teams, a consensus is usually reached after rich and dedicated discussions. It is obvious which teams will come out with better solutions to problems facing them during a crisis.
Better Understanding of Customer Needs
In a globalized economy, whether you are a local or an international business, you have customers belonging to different regions, races, and nationalities. By hiring a diverse pool of employees, you are better suited to serve a diverse pool of customers. Research published in the Harvard Business Review found that “A team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client.”
When employees understand the clients’ needs better, they can bring in more business. So, in effect, diverse teams offer businesses an invisible advantage without any additional investment.
Pandemics, recessions, and market crashes are an eventuality. They have challenged businesses in the past, and they will continue to do so in the future. What businesses can do is prepare themselves better for these eventualities. With more research, it is becoming easier for businesses to pinpoint the areas they need to work on to become more resilient against business shocks. A diversified and inclusive workforce is one such area. It has vast socio-economic implications, but at the same time, it also contributes to improving the performance of your company.
The COVID-19 pandemic may not be over, but its paralyzing effects are finally starting to fade, and the economy has started to move again. As the economy recovers, companies that maintained a diverse and inclusive environment would benefit the most.
With a stronger bond of trust among the employees and the company, there will be a renewed sense of loyalty that is bound to translate into lower attrition and better performance from the employees. Employees will appreciate a company that took care of them during a stressful time and will help them rebuild faster. So, their recovery won’t be marked by the chaos of finding new employees to drive their growth, but instead by a dedicated workforce striving as a single organism towards success.
It's high time that businesses understand the significance of a diverse workforce and invest in inclusive programs now more than ever, as the world recovers from the clutches of COVID.