Challenges to diversity and inclusion – and how to overcome them
The commercial benefits of being a diverse and inclusive business are not just theoretical. A large and growing body of literature presents the evidence for more diverse businesses being more profitable. This does not mean small and mid-sized private enterprises find building a diverse and inclusive business easy. Becoming more diverse and inclusive can, in practice, lead business owners and entrepreneurs to make well-intentioned mistakes.
We discuss three types of diversity and inclusion challenge—or misconception —and suggest some alternative perspectives and potential solutions.
There's no "one size fits all" approach. Legal, political, and social conditions vary considerably across countries. Every business will therefore have a different strategy for diversity and inclusion.
Diversity and inclusion do not have equal commercial and societal impact across industries or sectors either. Diversity and inclusion yield greater benefits in the knowledge economy—in sectors such as the legal, financial, creative, or technology industries—and in high-value-added service sectors. Diversity and inclusion may yield fewer (commercial) benefits for businesses with homogeneous products or services or where a firm follows a consistent, repetitive process—the roles most ripe for automation in the Fourth Industrial Revolution.
Business owners and entrepreneurs should not underestimate the roles of middle managers, teams, and employees in driving diversity and inclusion.
Over-reliance on top managers and dedicated diversity and inclusion departments to drive change can be counter-productive. One 2013 study found that having a diversity department—mandated by top managers—may not drive grassroots organizational change. Employees may think diversity is not one of their objectives because someone else is managing it7.
A 2016 meta-study of 260 diversity training studies concluded that diversity training is most impactful when it is included with other practical diversity practices. And studies conclude that employees attending diversity training feel more motivated (and more willing to implement their learnings) if the company’s own managers deliver the training8.
Unconscious biases and prejudices can mean that certain groups of people are under-represented, overlooked, or discriminated against in hiring and promotion decisions. These biases can be reinforcing such that it requires cultural change to break the mold of a monoculture. Diverse and inclusive companies work to reduce these biases and prejudices by designing policies that promote equality of opportunity.
Positive or affirmative action programs—such as quotas for applicants from particular backgrounds—may help to boost equality of opportunity but with limitations. Certain types of affirmative action programs cannot reduce prejudice against invisible differences. A quota for hiring of LGBTQ+ employees in theory may be a quota for “out” LGBTQ+ employees in practice.
Affirmative action programs for a particular group also risk overlooking “intersectionality,” or the combination of different characteristics. Mandating for a fixed proportion of women in board or executive management teams may not be sufficient for diversity of thought if managers still all share the same ethnicity, educational background, or workplace experiences. Teams must be sufficiently inclusive and tolerant of difference to reduce the risk of peer pressure and conformity with the dominant group characteristics.
Ultimately, employees each have different talents and points of development. Diversity and inclusion maximize the chances that the right person gets a job independent of factors that are not relevant for job performance. Well-designed diversity and inclusion strategies help to overcome the unconscious biases and rules-of-thumb that all people have.
Three practical tips to promote diversity and inclusion in your business
There is no one-size-fits-all strategy for any business to become more commercially successful through diversity and inclusion. Nevertheless, we identify three practical tips for business owners, executives, and entrepreneurs to consider when designing a diversity and inclusion process for their firm.
Interested to learn more? Start a conversation with us to find out how diversity and inclusion can help you deliver better financial performance and more positive social outcomes.
1Hunt, , Prince, Dixon-Fyle, and Dolan (2020). “Diversity wins. How inclusion matters.” McKinsey and Company [online], May 2020. Available from: https://www.mckinsey.com/featuredinsights/diversity-and-inclusion/diversity-wins-howinclusion-matters#
2Please see the UBS Chief Investment Office report The Future of humans for more on the longer-term investment implications of the Fourth Industrial Revolution. Available from: https://www.ubs.com/global/en/wealthmanagement/chief-investment-office/investmentopportunities/investing-in-the-future.html
3Bourke, J. (2016), op.cit.
4Lorenzo, Voigt, Tsusaka, Krentz, and Abouzahr (2018) “How Diverse Leadership Teams Boost Innovation”, BCG Henderson Institute [online], 23 January 2018. Accessible at: https://www.bcg.com/en-ch/publications/2018/howdiverse-leadership-teams-boost-innovation
5Donovan (2020). Profit and Prejudice: The Luddites of the Fourth Industrial Revolution, Routledge Group: London and New York.
6Kunkel, Carter, et al (2020) The Future of humans, UBS Chief Investment Office GWM, 16 September 2020. Available from: https://www.ubs.com/global/en/wealthmanagement/chief-investment-office/investmentopportunities/investing-in-the-future.html
7Kaiser, C. R., Major, B., Jurcevic, I., Dover, T. L., Brady, L. M., & Shapiro, J. R. (2013). Presumed fair: Ironic effects of organizational diversity structures. Journal of Personality and Social Psychology, 104(3), 504–519. https://doi.org/10.1037/a0030838 quoted in Kaplan (2020), op.cit.
8Kalinoski, Z. T., Steele-Johnson, D., Peyton, E. J., Leas, K. A., Steinke, J., & Bowling, N. A. (2013). A metaanalytic evaluation of diversity training outcomes. Journal of Organizational Behavior, 34, 1076–1104, quoted in van Knippenberg et al. (2020), op.cit.