Diversity: more than a business issue

It’s time to stop focusing on the business case for workforce diversity and start thinking about the moral, ethical and demographic aspects of the debate. Why? Because positioning diversity as a business issue fails to take account of the tension between individual and collective interests and makes it too easy for firms to argue that they do not need to change.

It also gives diversity lower priority over aspects with higher return on investment (ROI). Instead, we need to look at this as a social issue that benefits all of us collectively.

When we enter a conversation about ROI in diversity, we are implicitly accepting the idea that there may not be a return – and thus it is logically acceptable to reject diversity. I studied a large successful engineering firm, for example, where they looked at whether or not there was a business case for them to make diversity a strategic issue, including employing more women in management. 

They analyzed the question very seriously and decided that the business case was weak and thus they were not going to devote any resources or particular priority to this matter. Within ROI parameters this was not a bad decision for the business, at least in the short term, but it was probably a poor result for society.

So why is there tension between what is good for business and what is good for society? There has been a decades-long trend that minimizes that connection, which has led to us seeing business as responsible for doing what’s good for themselves and their shareholders and politicians as the chief representatives of doing what’s right for society. The end result is that businesses may think that moral issues are someone else’s responsibility, not theirs and that social justice is for politicians to discuss. 

But over the last few years in particular we have seen that business and society cannot be separated and that narrow financial concerns can bring down entire societies; as a consequence, look at the way in which large parts of the financial services industry have needed government support to survive and some are essentially owned by the taxpayers – you and I.

It is good to see, however, that certain companies and CEOs have in fact become proponents of diversity, sustainability and social fairness. Some have even gone as far as suggesting taxation based on ecological and societal metrics. In large, a wide stakeholder approach, cooperation across boundaries and changing governance models, may just be the answer to real progress for diversity and capitalism.

Despite this, some businesses are still hesitant about the idea of seeing diversity as a moral issue. Many are waiting to see what legislation will be produced to force them to act on it and only a few are likely to voluntarily move things forward much beyond “windows dressing” or tiny incremental steps. 

In our research, we have described this as a social tragedy. If the people who lead our businesses continue to think first and foremost about what is good for them, or perhaps for a limited range of stakeholders, society at large will suffer. It is society that has to pick people up when these business policies mean that they are unable to secure work, for example. It is also society that funds the education of most potential employees.

Taking it personally

One obvious element of the solution is regulation that requires firms to promote or support workforce diversity: European legislation around women on boards is one example. But legislation is not the only way to bring about change. Each of us personally must remember the capital that we have as employees and consumers to press for improvements and changes. 

Customers used to be fairly fragmented, but they can now connect through social media, which means that people who don’t have individual economic power can join forces in groups that are large enough to have significant power. And people really do care about issues like diversity – particularly as we start to see millennials and the next generations of talent move into the workforce.

There are numerous activities that organizations and their leaders, can do now to prepare themselves for changes, possibly driven by legislation or stakeholder demands, by looking at how they can manage the diversity that they already have more effectively. This involves a number of steps, including creating an inclusive environment in which people feel safe speaking up – their ideas are respectfully considered and everyone can reach his or her potential – and tailoring the firm’s strategies and policies so that it can implement diversity in a way that best fits its own particular situation.

Individual managers can also make an effort to look at these issues in a way that takes the wider environment and not just their business or their unit, into account. A manager, at his/her best, is a mensch with a holistic responsibility and sense of social fairness.

Together, this will help their organizations to create an environment that will continue to foster diversity in the future. Without this sort of environment, however, even the accepted benefits of diversity will not come to fruition. For example, a diverse team can offer much value in the shape of creative thinking and innovation, but only if it is managed in such a way that damaging conflict is avoided and people dare speak their minds; not easy. 

In sum, time is ripe to think about diversity through the lenses of people, planet and modern human rights, as opposed to being another investment proposal. The business situation and commercial strategy of a company should probably impact how diversity is implemented but not constitute the decision itself.

Dr. Karsten Jonsen is a Research Fellow at IMD (www.imd.org)