Skip to main content

Even though there are numerous and recent studies indicating that diversity in the workplace leads to improved sales revenue, customer growth, greater market share and higher profit levels, there is still a of progress in some industries. This suggests that business leaders are either unaware of the relationship between diversity and improved business or worse yet, that they refuse to believe it.

We’ve compiled a few reasons on why diversity leads to improved financial performance.

Diverse organisations better serve diverse customers

The customer-focused benefits of a more diverse workforce begins with the impressive buying power of women and consumers of colour. 

The demographic within South Africa that have the largest share of buying power are middle-class households. While historically, this has been an income bracket that was dominated by white households, since 2008 black households’ share of this income bracket has risen from 25% to 32%. 

Therefore, a diverse workforce is better enabled to understand their diverse client base. These companies have a more competitive edge in terms of selling their services to their diverse consumer market. This is known as “matching the market”. Diverse individuals are better attuned to satisfy the unmet needs of clients like themselves.

According to the Innovation, Diversity, and Market Growth article, teams with one or more members who represent the target end-user, are 158% more likely to understand the end-user.

Diverse organisations can recruit better talent 

Businesses that are committed to hiring employees from diverse backgrounds have an obvious advantage: they have a larger pool of talented candidates than businesses that focus their hiring on a limited demographic.

There are further benefits of broadening your talent pool. Younger candidates are more likely to find it appealing to work at your business if you are committed to diversity. A Glassdoor survey found that 66% of job seekers indicated that workplace diversity was a key factor when choosing job offers. And additionally, current employees are more likely to recommend the business to job seekers.

Diverse organisations are more innovative 

A diverse environment not only causes people to reconsider preconceived notions but also creates a positive push that requires people to work harder to achieve solutions to business problems. 

In fact, according to the Innovation, Diversity, and Market Growth article, diverse groups of less experienced workers generally perform better than a group of more experienced workers if they all come from the same demographic.

Diverse organistions perform better financially

All of the above helps us understand why a diverse workforce makes firms more successful. It indicates that there is a link between greater diversity and stronger financial performance. 

A US study showed that gender and racial diversity correlates with the three key measures of business performance: number of customers, market share and profitability. Businesses with higher levels of diversity outperform businesses with low levels of diversity by almost 7%. To put that into numbers, that’s an outperformance of $709.4 million.

Businesses with high levels of racial diversity (60%) and gender diversity (62%) are more likely to report higher than average percentages of market share than are those with low or medium levels of racial and gender diversity. Also, organizations with high levels of gender diversity are more likely to report higher than average profitability.

Overall, this analyses strongly supports the case for businesses to adopt a diverse mindset.

Close Menu