Why Does Diversity in Leadership Matter?

Having a diverse organization directly contributes to the company’s overall success. 

To build a truly diverse company, diversity doesn’t stop at the front lines. Or even in middle management. For organizations to see the maximum benefit of DEIB, diversity must permeate leadership – from the top down.

In a 2020 US study of equality in the workplace, Mercer found that 85 percent of executives and 83 percent of senior managers are white. Further, 77 percent of executives are male, representing 71 percent of all senior managers. Compare these diversity numbers to those of support staff and operations staff, where 64 percent are white. Further, in support staff, 53 percent are male. 

From these numbers alone, it appears we’re bottom-heavy when it comes to diversity. So let’s look at why diversity in leadership matters and what you should do about it.

How Does Diversity in Leadership Benefit Your Organization?

Diversity in leadership increases awareness and perspective of customers’ expectations, employee needs, market opportunities, and innovation. Not only does diversity promote a growth mindset, but it also helps organizations attract and retain top talent, showing prospective and current employees that someone looks like them at the top.

The business case for diversity in leadership has always been strong.  But it continues to build steam as the more diverse a company is, the more likely it will outperform its less diverse peers, driving (you guessed it) profit. 

According to Deloitte, diverse teams demonstrate a 20 percent increase in innovation, while reducing risk by 30 percent. And, by adding inclusion to your diversity efforts, companies are twice as likely to meet or exceed financial goals, three times as likely to be high-performing, six times more likely to be agile and innovative, and eight times more likely to achieve improved outcomes. 

But let’s look specifically at leadership. According to McKinsey, when organizations were in the top 25 percent of gender diversity among leadership, they were 21 percent more likely to outperform less diverse companies on profitability while boosting a 27 percent increase in “superior value creation.” 

Additionally, when companies fall into the top quartile for both ethnic and cultural diversity, they are 33 percent more likely to experience “industry-leading profitability.” Simply put, when diversity flows from the top of an organization, employees perform better, buying into the diverse culture.

How Can You Build a More Diverse Leadership Team?

The need for diverse organizations demands more than a nod of the head. Leaders must build a diverse team at every level of the company, or else they may be left behind. Organizational leaders must “close the gap between aspiration and reality.” 

Read on to learn three actionable steps companies can take to build a more diverse leadership team,  critical to your overall success. 

Tip #1: Redefine and Update Your Hiring Practices

Embracing diversity starts before a job candidate accepts a job. Knowing this, companies should examine their recruiting, interviewing, hiring, and onboarding strategies, identifying diversity blocks in each step. Encourage employee referrals from underrepresented populations. And, recruit from networks whose membership primarily includes women, LGBTQ+, or minorities. 

Review your hiring data, looking for percentages of hires coming from underrepresented groups. Also, identify any bias – intentional or implicit – that may exist in your recruiting or interviewing stages. Then, use standardized interview questions to reduce or eliminate these biases, increasing your opportunities to hire diverse candidates.

Tip #2: Make Your Diversity Goals Known

Organizational leaders can’t simply wish for a diverse workforce – leaders and management included. You need to publicize your aspirations and benchmarks so that recruiting professionals can deliver your desired results. Create benchmarks and metrics, such as an annual goal to conduct a certain percentage of interviews for senior positions from underrepresented populations. This way, you can also measure against these metrics to see if you’re meeting or exceeding them as you continue to build diverse leadership teams. 

Tip #3: Continually Check Your Leadership Impact

Leaders often cast a long shadow over the company’s culture, whether they realize it or not. Because of this impact, leaders need to check in with their own understanding and interactions. For example, how much do you understand about other cultures? Have you taken the time to learn the similarities and differences between your culture and another?

How about your interactions? According to Harvard Business Review, “[s]ublte works and acts of exclusion by leaders, or overlooking the exclusive behaviors of others, easily reinforces the status quo.” Continued learning and development in diversity and inclusion can help leaders understand unintended slights while encouraging their employees to bring their whole selves to work. Regular trainings can help leaders and mid-level managers understand how to build a culture around diversity while developing their ability to identify areas of improvement. See how Cangrade can support your quest for increased diversity in leadership. Find out more today.