Why Diversity Matters, Even in the Smallest Teams

Companies that focus on building diversity, equity, and inclusion (DE&I) into their culture perform better than those that don't. This isn't just an anecdotal observation – that data backs it up.

June 28, 2021

Companies that focus on building diversity, equity, and inclusion (DE&I) into their culture perform better than those that don't. This isn't just an anecdotal observation – that data backs it up. According to a recent report from BCG, companies with a diverse team reported an average 19% increase in revenue compared to their competitors with less diverse teams.

Diversity goes beyond your team too. In a recent study from McKinsey, companies with more diverse boards reported a 43% increase in profits than companies with less diverse boards.

Building diversity, equity, and inclusion into your culture are critical to creating a business that can not only survive but thrive in an increasingly competitive global market. Companies with a strong focus on diversity, equity, and inclusion do more than perform better. They attract better talent and help create an environment that retains the great people you've hired to build your company.

In this post, we're going to dive into defining what these terms mean, the benefits of diverse teams, and how you can build a culture that attracts and retains great talent.

The difference between diversity, equity, and inclusion

Diversity, equity, and inclusion are three separate components that have to be worked on together. Making improvements to one area without the others won’t lead to sustainable or meaningful change.

Diversity means having a range of different identity groups represented, including race, ethnicity, Indigeneity,, gender expression, gender identity, sexual orientation, socio-economic status, language, location, national origin, religion/spirituality, age, (dis)ability, and more.

Inclusion means creating a workplace culture where all people can both be themselves and feel as though they belong.

Equity is removing barriers that prevent people from entering into, advancing, and thriving within the workplace. It’s about being fair and ethical in the way we make decisions and treat people.

To better understand the differences between diversity, equity, and inclusion, we spoke with Michelle Grocholsky, founder and principal of Empowered EDI, a boutique consulting firm specializing in EDI strategy, design, and implementation.

"It’s critical that organizations of all sizes begin their DEI journey by looking inward. That involves asking and deeply listening to the experiences and insights of our people, and using an evidence-based approach to take stock of where we have gaps in our representation, inclusivity and equity across our workplace,” said Grocholsky. “That is the essential foundation of an impactful and sustainable DEI strategy – it must both center lived experiences and voices and be measurable and quantifiable.”

Grocholsky used a dinner party as an analogy for understanding diversity, equity, and inclusion.

Imagine that you're invited to share a meal with a group of people. When you get there, you realize that there's a huge range of the kinds of people who've been invited. There are different age ranges, different religious beliefs, different cultural backgrounds, different abilities and disabilities, and different educational experiences. Grocholsky said that is diversity. "Diversity is who is at the table," she added. "It's who did you invite to be a part of your organization?"

The dinner party host asking you about dietary restrictions before you arrive is an example of inclusion. "It's asking what would help them to feel included here," said Grocholsky. "It's asking people what can I do to create a warm or welcoming environment for you where you feel like you can be yourself and that you matter."

Equity is ensuring people have the proper access and resources to participate fully. In the dinner party analogy, it's making sure everyone has the right chair type. "You're not putting an adult in a high chair and expecting them to be able to reach the table," said Grocholsky. "You're giving them the appropriate chair that would enable them to have the same access as everybody else."

Grocholsky said that understanding how those three parts work together is what sets you on the right path to build them into your culture. It's something we're seeing more and more of with Accelerator Centre clients. "What I'm noticing is there is more social responsibility and belief in the importance of diversity in ways that my generation did not have," said Accelerator Centre mentor Jackie Lauer. "That is very inspiring."

With the impacts of the pandemic and movements including Black Lives Matter and #MeToo, Lauer said that every leader, regardless of the stage of the company, needs to focus on what they're doing to build diversity, equity, and inclusion into their organizations. "Having this kind of culture and this kind of leadership is no longer just a perk anymore. It's a requirement," she added.

Driving innovation with diverse teams

We know businesses that put the work in on diversity, equity, and inclusion are more profitable – but there are more benefits beyond the bottom line. Having this type of culture ensures you're building the right products and services for your customers.

"Make sure that the people on your team represent the clients that you're serving," said Lauer. "You think about the mistakes in product development when you don't have people that understand your target market. How can you design the right product for them?

Diverse teams are more innovative too. A recent Forbes article detailed how companies with a more diverse team generated more from innovation than companies with lower diversity – 45% of total revenue versus just 26%.

When mentoring clients, Lauer uses neuroscience research that shows how the highest performing teams are diverse teams. "Teams with higher diversity are more innovative and more creativity comes out of them," said Lauer. "If there isn't inclusion and belonging, let alone diversity, people do not feel safe to contribute. You're shutting down innovation. That alone should be enough for people to want to welcome a diverse environment that is inclusive and makes people feel like they belong."

How to attract diverse talent

Attracting and hiring diverse talent means looking at how you interview and where you're sourcing potential hires from.

Grocholsky said that research has shown that interviewers decide whether they're going to offer a candidate the role within the first five to ten seconds of the interview. "It's based on things like nonverbals and small talk. For example, you meet someone and think that you have so much in common. You're more likely to set the tone with a very welcoming conversation that puts the candidate at ease – and that enables them to perform better," added Grocholsky.

The opposite situation is when the interviewer doesn't feel like they have much in common with the candidate. "The interviewer doesn't want to say the wrong thing, they don't want to offend them. And they come across as being so much more rigid."

Grocholsky said that it is critical to recognize we all have these inclinations to gravitate towards certain people over others. "But if we act on them, if we allow them to change our behavior – that can completely change another person's trajectory."

When it comes to the talent pipeline, both Lauer and Grocholsky said they continue to hear leaders say they're having trouble finding more diverse talent. They use that as a prompt to ask their clients where they are looking for talent. Lauer said many of her clients continue to rely on their networks to find talent – a tactic that doesn't work if their networks look like them.

"They'll say this has always worked for us – going to their network and asking for referrals. So I put them through an exercise called the trusted ten. I ask them to think of the ten closest people to them. How many are the same gender? How many of the closest people have the same education? How many of your close and trusted ten grew up in your neighborhood. They start realizing that their network is a group of people who look just like them."

The pipeline myth is one Grocholsky work to correct with her clients. She said that many businesses who use data for so much of their decision-making process don't use data for their hiring – and they miss out on the root causes of the lack of diversity in their candidate pool.

"We're still seeing that Indigenous people are not being hired into organizations," said Grocholsky. "Often, the explanations are they're not qualified or they're not in the talent pool. But very few organizations are even measuring within their pipeline how many indigenous people applied, how many they interviewed, and how many they extended an offer to. They're drawing conclusions that place the blame on the individual of the underrepresented group as opposed to saying to themselves – there might be systemic barriers that actually prevent us from bringing in that talent in the first place."

How to keep diverse talent

Grocholsky noted that many companies use diversity in their employer branding and marketing but forget to build inclusion and equity into their policies and procedures. "All of these companies were clamoring to hire Black talent and are now seeing a mass exodus of Black talent because they said they care about inclusion and fairness, and then people came into an organization that was not prepared to uproot and fix deeply racist processes and systems."

Businesses can't expect to say they're inclusive and committed to equity and not back it up with fair and equitable practices, policies, and ways of doing things.

Grocholsky said that having a diverse team won't make a difference to how an organization functions without these changes. "When you ask where highly diverse teams fall on the performance curve, people say that they're higher performing. But the research shows that they are either very high performing or the lowest performing teams in your organization." Highly diverse teams fail when there's no foundation of inclusion and equity to help the team innovate and problem solve.

"If you don't feel comfortable dissenting with one another, if you're not open to listening to one another, to changing your opinions, you're never going to get to a place of high performance," Grocholsky said.

What should you do next?

"The number one thing that any company can start doing is to start measuring," said Grocholsky. "Look at your pay and see if there's meaningful differences between members of different groups. You can't say you're equitable unless you actually dig into the data."

Grocholsky gave an example where a client started tracking performance reviews. They noticed that men had a 10% higher average performance evaluation than women for the same job. "We started asking for objective evidence that men are performing better than women. Just by doing that exercise, we brought the gap completely down and now there's zero pay disparity between men and women."

When looking at what to measure, Grocholsky said to look beyond just diversity-related questions. "You also need to capture data around equity and inclusion. Ask people questions about whether they feel safe to be their authentic selves at your company. Do they feel safe to speak up against matters of harassment and discrimination if they're happening?"

The key is to understand what needs to be fixed to have the most meaningful impact on your culture. "By asking people about their experiences and by measuring and collecting data, you can have a strategy that is based on the reality of your culture."

Understanding is just the beginning

Joining The Accelerator Program® provides you access to mentors like Lauer and connections to clients, including Empowered that can help you create the diverse, inclusive, and equitable culture your company needs to attract talent, create innovative products, and scale to new markets.

The proof is in our network. Accelerator Centre clients and alumni represent some of Canada's and the world's biggest startup brands – we're ready to help you. Apply today!

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