What is diversity?

Not surprisingly, diversity is a complex topic and there is no clear definition of it. Diversity is used as an all-inclusive term that incorporates people from a multiplicity of backgrounds, e.g. gender, ethnicity, religion, age, mental and physical abilities, geographic location, sexual preferences and a myriad of others.

Why do organisations keep talking about diversity?

Thompson Reuters has recently released a diversity and inclusion (D&I) index of top 100 most diverse companies. The index is at its third year and shows the growing business case for diversity. But why?

“The topic of diversity has continued to dominate industry mindshare in 2018. Not only have firms been increasing their corporate disclosure with the intent of improving corporate governance and transparency, regulators have also been compelling change and 2019 will see the introduction of the second Shareholder Rights Directive in Europe to this end. Investors are keen to see much more data related to topics such as diversity to factor these into their ESG strategies, which have been gathering pace over the last 12 months.” (Virginie O’Shea, research director at Aite Group)

Often the business case for diversity is based on evidence that diversity & inclusion are correlated to value-creation & profitability. Academic literature is dived on this. Some research (e.g. Cox, 1993) suggests that diversity “pays”: it helps generating insights on different customers, it enriches the workplace and managers’ perspectives, strengthens teamwork (see my co-authored chapter on Groups and teams at work). These studies tell us that diversity strengthens a company’s competitive advantage. For example, Cedric Herring’s findings (in “Does Diversity Pay?: Race, Gender, and the Business Case for Diversity”, 2009) suggest that racial diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits. At the same time, gender diversity is associated with increased sales revenue, more customers, and greater relative profits.

But is this really the case?

Other studies are skeptical about the extent to which benefits of diversity are real. The costs of diversity are high, especially when ethnic and racial diversity are present. Skerry (2002) points out how  racial and ethnic diversity might lead to increased conflicts, especially emotional conflict among co-workers.

Whichever side of the argument you take, the case for diversity in organisations is undoubtedly a hot topic at the moment.