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Diversity: The Modern Business Risk That No One Sees

In this blog post, Diversity and Inclusivity expert (and 2019 MBE) Joanna Abeyie explores how a lack of diversity in the workplace presents a serious business risk. From knowing your customer to reducing business risk by 30%, the case is compelling. So why is no one talking about it?

We say that diversity is a hidden risk as it isn’t always immediately obvious at first glance. Processes that have existed and have seemingly been effective for a long time may seem fine. But the reality is that until they’re tested to see how inclusive they are, you won’t know.

We often see this manifesting itself in a gap between the diversity and make-up of an organization and its customers. A great starting point for reflecting on your own organization’s diversity is to consider whether the viewpoints, backgrounds and opinions of your target markets would be reflected in the decision-making process.

How Equality, Diversity & Inclusion Help You Know Your Audience

As any business knows, understanding your customer is hugely important. It’s key to making sure products and services reflect the tastes and desires of your target market.

The drive for a diverse workforce is often with the end-goal to reflect an organization’s audience or market. The best way to understand how to communicate with different people is to incorporate their voice into the decision-making processes. You can’t serve the incredible diversity of society if you keep your exposure limited to people with similar backgrounds and experiences.

Understanding the diversity of your customers can help you consider who they are and who you need to represent. It makes you analyze their buying habits, and helps you understand how to serve them. Without engaging your audience, how do you know that they feel represented and understood?

Diversity in Practice

Take, for example, my time working on a gardening magazine. It was apparent that the publication’s content was targeting people with large properties and large gardens. It wasn’t a coincidence that the people who wrote for the magazine were the same profile of the readers they were addressing.

Yet, there’s a whole market of readers who aren’t yet at the point in their lives where they own a large property. Conversely, not everyone who owns a large garden has an interest in gardening. By exploring the market further, the magazine realized that its viewpoint had been too narrow and that it had been missing a large demographic who love gardening, but have limited space.

Based on this, the magazine sought to target this previously ‘missing’ segment of the market. So it started catering for people with limited outdoor space by serving up content specifically for readers with balconies, large bay windows or an interest in hanging baskets. This had tangible benefits too. By appealing to a much larger demographic of readers, the publication had broader appeal and, therefore, larger bargaining power when negotiating with brands regarding its advertising.

The bigger picture was that many gardening enthusiasts have limited outdoor space, and this opportunity was missed because that background wasn’t reflected in the decision-making processes. The market for houseplants, window displays, hanging baskets and smaller spaces was being excluded.

The example with the gardening magazine shows the power of inclusion, and also how easy it is to unwittingly exclude. By realizing the need to focus on diversity and inclusion, it highlighted exclusion, but also created a massive opportunity. It’s worth noting that the magazine continues to reflect its diverse audience requirements to this day.

This example can be extrapolated across decision-making processes and organizations of all sizes. From small-to-medium enterprises (SMEs), through to FTSE 100 and government institutions, the same lessons can be learned.

Diversity Impacts Business Performance

The hidden risks of institutional blindness—of having limited perspectives and backgrounds representing large groups of people—is starting to be recognized on a larger scale.

“We need varied life experiences—race, age, social background, sexual orientation, education… the list goes on. True diversity comes when you’re open to—and make space for—them all,” said Christopher Woolard, Executive Director of Strategy and Competition at the FCA in a 2018 speech.

And the research backs up Woolard’s message:

A 2018 report by the Centre for Economics and Business Research (CEBR) analyzed 500 UK workplaces to understand the relationship between diversity and inclusion and business performance.

The results are hard to ignore:

  • 12% - The UK’s most ethnically diverse workplaces are 12 percentage points more likely to financially outperform their industry average than the least ethnically diverse workplaces.
  • 15% - Firms with the most developed diversity policy are 15 percentage points more likely to financially outperform their national industry.

Diversity of Thinking Mitigates Business Risk

As well as the potential financial rewards, the greater insight formed from a diverse range of backgrounds helps mitigate risk. ‘The whole being greater than the sum of its parts’ rings true, especially when the ‘parts’ bring a diverse range of backgrounds and experiences to the table. This echoes the reasoning given by Qantas’ CEO Alan Joyce for its turnaround and is backed by research which suggests that a culturally diverse organization reduces its risk by 30%.

The business case for a diverse workforce is compelling enough on a risk/reward basis, but there’s also evidence that building an inclusive workforce is essential future-proofing when it comes to the changing dynamics of the modern workforce.

To explore practical steps on how to build a diverse and inclusive working culture, download your copy of the ebook 'Diversity & Inclusion: How to mitigate the invisible business risk'.

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