Measuring the benefits of diversity

Client organisations often ask me to run workshops for them on the topic of diversity, equity and inclusion (DEI). Yet critics claim that DEI policies are harmful to organisations and employees. So where does the truth lie?

Types of diversity

In seeking answers, we first need to define diversity. Often, the word is used to describe surface-level or readily observable demographic differences such as sex, race and age. Data indicates that the relationship between surface-level diversity and team performance is typically very small and close to zero.

Job-related diversity refers to differences in education, functional background and work experience. Studies find that the relationship between job-related differences and team performance is positive but small (as opposed to very small).

Another way of looking at differences is to consider so-called deep-level diversity. This includes dimensions such as values (eg belief in individual versus societal rights), personality (eg levels of extraversion) and culture (eg variations between countries). Research analysis led by María del Carmen Triana at Vanderbilt University found that deep-level diversity affects team performance far more than surface-level diversity. In other words, conflicting values, incompatible personalities or dissimilar cultural backgrounds impact team performance much more than the proportion of minority or underrepresented groups.

Simply hiring more diverse employees does not always lead to improvements in either team or organisational performance. Instead, a leadership style that promotes the inclusion of diverse individuals is likely crucial for the accrual of business benefits.

Inclusive leadership

Inclusive leadership involves supporting and engaging all employees to achieve business objectives irrespective of their backgrounds or other differences. Included employees feel a sense of belonging, of being not just tolerated but valued. They also feel their unique differences are respected, so they do not have to conform excessively or hide from the majority the ways in which they differ.

Lisa Nishii at Cornell University has gathered data showing that inclusive leadership comprises at least three categories of behaviour. One category concerns the establishment of equitable employment practices, as measured by employees’ agreement with questionnaire statements such as ‘this team has a fair promotion process’ and ‘this team invests in the development of all employees’.

Another category measures the extent to which leaders involve employees in decision-making. Employees who feel sufficiently included typically agree more strongly with statements such as ‘everyone’s ideas for doing things better are given serious consideration’ and ‘employees’ insights are used to rethink or redefine work practices’.

The third category of inclusive leadership behaviour refers to dealing successfully with differences of opinion. Employees who believe that conflicts and disagreements are dealt with in a supportive yet fair fashion typically agree with statements such as ‘this leader commits resources to ensuring that employees can resolve conflicts effectively’ and ‘people in this team take time to share and learn about one another as people’.

The challenge

Data supports the idea that it is inclusive leadership rather than the mere presence of diversity that leads to beneficial business outcomes. Strikingly, several studies have found a causal relationship between inclusive leadership and employees’ levels of innovation. The link has been found in countries including China, Canada, Vietnam and the UK, suggesting that employees’ experience of inclusive leadership may meet fundamental human psychological needs as opposed to needs within certain cultures only.

Unfortunately, surveys show that many employees still report feeling marginalised, disrespected or otherwise treated inequitably. In my own experience, the challenge is less about convincing leaders of the need for inclusive leadership and more about helping them to change their behaviour.

I use the analogy that losing weight comes not from understanding principles but putting them into practice – for example, by actually cooking healthier meals and engaging in physical exercise. Likewise, developing a more inclusive climate within a team – and therefore helping the team to become more innovative – will come not from merely reading articles such as this but by taking action.

The leaders I have seen who most successfully create inclusive teams treat the topic of DEI seriously. They seek feedback on the extent to which they are perceived as inclusive. They make plans and share them with mentors, coaches or stakeholders who can hold them accountable. They allocate proper resources to such projects and review their progress regularly. Ultimately, they understand that mere insight is not enough, and that it is action that delivers results.