It can be tiring at times having to explain the business case for D&I again and again – and yet again. Once the initial, fundamental questions ‘Why do we (as a successful company) need D&I at all?’ or ‘Do we really need to focus on D&I urgently NOW?’ are cleared, one other element becomes key: Solidify or quantify the improvements that D&I will cause. Are we fully on top of the ROI (return on investment) of D&I?
When prompted to do so, random groups of managers (or D&I experts) will come up with lists of business benefits that – they think – D&I can bring. Some lists will be longer, others might be shorter, depending on background and context. Most lists will include the more obvious elements of increased engagement, motivation and productivity. The case for D&I in employer branding and hence talent attraction is also widely accepted. Innovation or compliance get mentioned a lot as well, and some people will additionally state high-level benefits such as ‘success’ or ‘performance’. However, when we discuss the possible proof of these bespoken advantages or the conditions under which they will occur, the answers become vaguer and sometimes include doubts. For people also see the risks, difficulties or efforts that (more) diversity and (active) inclusion can cause.
Categories of the business case for D&I
Beyond anecdotal examples of concrete improvements created by proactive Diversity Management, a consistent set of categories showing the benefits of well-managed differences emerged. It provides a framework to map the (potential) business case for Diversity.
Internal benefits of D&I are grouped according to the level on which they unfold:
- Individual / personal level encompassing increasing productivity, engagement, loyalty etc.
- Team level encompassing improved collaboration, solution quality, speed etc.
- Organisational level encompassing enhanced organisational effectiveness, adaptability etc.
External benefits of D&I are were grouped by stakeholders:
- Customers & Markets: market share, customer intimacy, sales by market segment etc.
- Financial Markets: stock price, financial KPIs etc.
- Labour markets: candidates, employer image etc.
- Corporate image: public perception, corporate citizenship
This category model enabled grouping and comparing business case studies and to identify research foci at different points in time.
Selecting robust studies from a vast body of research
However, at all times, business case research varied a lot, depending on the context of a given study. Universities will typically apply a more scientific approach, often focusing on one specific aspect or a clearly defined area, e.g. ‘The impact of the availability of part-time work on absenteeism in the textile industry on the Philippines’. At the other end of the spectrum, think tanks, special interest NGOs or consultants carried out surveys that asked random (but not randomised) groups of people about the (perceived!) business case for Diversity. The latter type of studies was widespread in the early years of D&I. However, we had and have to admit that the results of such aggregated personal observations, experiences or opinions are not adding evidence to the business case for D&I.
Instead, valid and reliable studies usually apply methodologies that minimise bias or that allow to calculate significance levels or run checks for statistical biases. The most common methodologies in the area of D&I are large data analysis and experimental settings. Many of these studies originally did not aim at examining the business case for D&I – they simply checked hypothesis, mainly from social sciences, psychology or business studies.
Wide landscape – and long history – of D&I business case research
The first empirical studies that we today consider relevant for the business case investigated the effects of team composition, e.g. on solution quality or innovation. The ten oldest studies, published from the mid-1980s to the mid-1990s, already covered an array of topics (gender, ethnicity, LGBT) and areas (individual, team, stock market). From the mid-2000s, the body of research grew a lot outside of the US, where the majority of studies had been produced before. 2008 was the year when by far the highest number of studies were published, including many on gender or racial diversity.
From 2006 to 2016, some 80% of the robust business case studies that we know today, were published, while a good 20 % were published in the 20 years prior.
205 studies selected from hundreds that were evaluated
In a series of so-called meta-analysis research, hundreds of studies that explore the value that D&I can add, were evaluated for validity, reliability and – if applicability – the absence of statistical bias. The so-called Business Case Reports were produced in 2007, 2009, 2012, 2014 and 2016. The latest edition includes 205 studies were included in the report as a result of a positive evaluation, i.e. they met all the criteria for robustness set. 178 studies and publications are mentioned additionally in the annex as they are considered important contributions to the business case discussion.
Interestingly, the most prevalent topical approach among the 205 robust studies is not a gender focus, but a cross-over approach that typically included several dimension. The second most frequent topic is race/ethnicity or cultural differences (the wording depends on the region where the study was carried out). 48 gender-specific studies represent 23 percent of the body of research while they have higher shares in the organisational effectiveness and financial market categories. Race/ethnicity is particularly prevalent in the customer and labour market categories.
The geographical split also holds a surprise. Unlike in the first editions, the US is no longer the predominant producing region of business case research. In 2012 it was at par with Europe, which is now leading with 76 studies. One reason for this will be that individual countries are running individual research programs. Overall, the 205 studies were published in 36 countries.
High quality evidence about the business case for Diversity & Inclusion
Over decades, an impressive level of evidence for the business case of D&I has accumulated. A large number of individual findings prove the value added by Diversity Management in specific areas. Macro-economic studies show that such individual effects add up in bigger systems. In recent years, new quality insight was produced, including studies that emphasize the need for healthy conflict or for diversity of thought in addition to or in combination with demographic diversity.
In addition, recent research provides renewed evidence for the importance of a ‘diversity climate’ or supportive team learning attitudes. Other studies identify inclusiveness as a critical factor to increase satisfaction or engagement. In other words: Corporate culture is of paramount importance when aiming at business benefits from Diversity.
In the current political environment, it must be also noted that some studies investigated – and confirmed – that positive effects of D&I are observed for both majority and minority groups.
Another comprehensive look at building your business case and stay relevant to be business can be found here.
More information about the current edition of the International Business Case report is available online at: http://www.european-diversity.com/resources/surveys/ibcr/
