9 min read / January 10, 2022 / Komatsu Staff Writer
Need to expand your customer base? Diversify your offerings. Looking for a safety net for investments? Diversify your portfolio. Want to grow your business? Diversify your staff.
As the U.S. becomes increasingly diverse, companies have been prioritizing their equity, diversity and inclusion programs to keep up. Recent reports confirm it’s a smart business decision. From recruitment to ROI – companies that rank high in diversity are beginning to outperform their peers thanks to the advantages it brings.
According to analysis by The Wall Street Journal, the 20 most diverse S&P 500 companies generally performed better financially over five- and 10-year periods. The analysts created a diversity ranking based on ethnicity and age of employees, whether a company has a diversity and inclusion program, the percentage of women leaders, and the board’s composition.
A May 2020 report from global management consulting firm McKinsey & Company, “Diversity wins: How inclusion matters” concurs: “The business case for inclusion and diversity is stronger than ever…The most diverse companies are now more likely than ever to outperform peers on profitability.”
For instance, McKinsey found that companies whose executive ranks were more than 30% female were more likely to outperform companies where the number of women executives ranged from 10%- 30%. In the case of ethnic and cultural diversity, the top companies demonstrated similar success.
That success extends to companies that are inclusive of LGBTQ and nonbinary persons. The Human Rights Campaign (HRC) Foundation’s Corporate Equality Index 2021, a survey of leading companies and law firms, showed that the highest number of companies in the annual report’s 19-year history — 767 — received top scores for advancing LGBTQ policies. Organizations receiving a 100% score collectively employed over 13 million people.
“Our participating companies know that building an LGBTQ-inclusive workplace is not just the right thing to do — it is also the best business decision — allowing companies to attract, retain and engage top talent,” said HRC Foundation President Alphonso David.
McKinsey & Company found there are two common threads for successful diversity leaders in top-performing companies: a systematic approach and bold steps to strengthen inclusion. Fairness and transparency are important to ensure the representation of diverse talent and enable equal opportunities.
Research by The Wall Street Journal analysts found that the 20 most diverse S&P 500 companies generally performed better financially over five- and 10-year periods. A McKinsey & Company report showed that the greater the diversity, the higher the likelihood of outperformance.
There are several contributing factors to why diverse companies outperform their peers. One theory is that diversity enables companies to reach more people.
“A mix of employee backgrounds leads to results that can resonate with a wider audience,” said Adrianne Troilo, chief administrative officer and director of human resources, American Society for Engineering Education. “Including a mix of backgrounds, heritage, experience and education into a team has immense benefits.”
Another is that it advances innovation.
“Innovation comes from multiple and diverse perspectives around the table, not to mention the strong business case that innovation brings to your business,” stated Dr. Joel Olufowote, director of academic affairs at The Indiana Academy for Science, Mathematics and Humanities at Ball State University. Dr. Olufowote has served as a professor of political science with academic and administrative responsibility over diversity, equity and inclusion for more than a decade.
In a recent diversity report that the Associated Equipment Distributors (AED) commissioned Olufowote to produce and present, the executive summary states, "How businesses, like those found within the construction and equipment distribution industry, prepare themselves to embrace the arrival of the impending demographic cliff will shape their fortune for the foreseeable future. Unlike today, only preemptive, not reactive, organizations will survive.”
Companies that prioritize diversity understand the future of their workforce as the U.S. becomes increasingly diverse. The 2020 Census revealed that for the first time in history, the white population in the U.S. declined. The multiracial population, however, increased nearly four-fold – from 9 million in 2010 to nearly 34 million in 2020. People who checked “white” in combination with another race grew by more than 300%. Hispanic and Latino, Black, Asian and other minority populations increased as well.
A 2015 Census Bureau report projects that by 2044, the U.S. will no longer have a white majority. By that time, people of color will comprise more than 50 percent of the population. And while “the non-Hispanic white alone population is projected to remain the largest single group no group will have a majority share of the total, and the United States will become a ‘plurality’ of racial and ethnic groups.”
Additional data in the report showed that five different generations will be in the workforce, bringing a broad range of ages to the workplace. All of this demonstrates the importance of beginning diversity initiatives now, if companies want to recruit the workforce of the future.
“We should care about diversity, equity and inclusion because of the changing demographics we see that are happening today around us with college-age students — the changing demographics of the eligible workforce,” Olufowote noted. “This is not just about putting black and brown bodies in seats. This is about recognizing the value and perspective they bring. Your interview questions and your hiring mechanisms need to — in some way, shape or form — align with the organization’s stated values around diversity, equity and inclusion.”
It’s important for all industries to prioritize diversity, but this is particularly true for construction, an industry with low rates of diversity and a significant labor shortage.
The U.S. Bureau of Labor Statistics reports demonstrate that construction remains predominantly male and white at 89.1% and 88.6%, respectively.
Iris Farley, senior human resources director for Komatsu, holds certification in diversity from the National Diversity Council and started working on a diversity and inclusion council more than five years ago. She points out that promoting diversity and inclusion could help alleviate a decades-long worker shortage in construction.
“You have to look at ways to attract and develop talent from sources that maybe you have not considered before,” said Farley. “We need to make sure that anyone who comes to us and is interested in a job has the opportunity if they are qualified or can be trained to do it.”
Farley said there is a need to emphasize construction as a career with students at a younger age. She pointed out that the industry has close ties to the science, technology, engineering and math (STEM) fields that have been highly promoted as careers during the past several years.
“Highlighting that construction and mining careers involve operating and working on technologically advanced equipment is something we should be doing, as well as showing that you don’t have to be male to be in these fields,” said Farley.
She added that it’s important to think beyond the norm when it comes to promoting new people into the construction industry.
“We have to foster relationships outside our normal channels, and as businesses we have to collaborate and build with organizations and institutions that may have been overlooked in the past — the historically black colleges, the Society of Women Engineers and others, for example. We need to be more diverse in how we think and recruit,” said Farley.
Iris Farley, senior human resources director for Komatsu, said that the construction industry has close ties to the science, technology, engineering and math (STEM) fields that have been highly promoted as careers during the past several years. “Highlighting that construction and mining careers involve operating and working on technologically advanced equipment to gain interest is something we should be doing, as well as showing that you don’t have to be male to be in these fields,” said Farley.
While there are legal requirements for non-discrimination in hiring practices, there are practical business reasons as well. The idea of promoting diversity has become more commonplace but putting a hiring strategy into practice can be a little difficult. There are a few reasons for this, including misinterpretation of the definition of diversity, an adverse attitude toward the goal, or just a basic inability to grasp the concept, according to Troilo.
There is no handy checklist for hiring a diverse staff, and that is where most companies get hung up in their efforts, according to Troilo, who added that organizations limit themselves by trying to hire specifically for diversity purposes.
“Varying the work experiences, education levels and ages within a team can work toward accomplishing the goal the same way as race and gender do,” Troilo indicated. “It is up to you to decide how much diversity is required to maximize your group’s potential.”
She added that the best way to diversify is to enter the hiring process with an open mind and commitment to finding the candidates that best fit your needs, regardless of their background. For example, don’t limit your hiring process for a sales position only to people with sales experience. If you interview someone who is engaging and charismatic, but has spent years in marketing, he or she might be the right hire for your sales team. The same goes for education. While an Ivy League degree looks great on paper, maybe someone with a high school diploma and years of experience will relate better to your customer base. Opening the door to all types of applicants will give you access to a wider variety of people with diverse backgrounds and experience.
You may be closer to your diversity goals that you realize, according to Troilo. Diversity can come from inside your organization as well. Evaluate your current staff and see how teams and pairing can be designed to increase diversity within those groups.
“Shake things up. Who knows, maybe Jane from accounting has some ideas that the sales team might benefit from hearing,” Troilo remarked. Just like any plan, there should be some form of short- and long-term goals and a reasonable plan for success, Troilo noted. Developing the team is important, but the plan for the team is paramount.
“Create a culture where everyone feels comfortable and is encouraged to add their opinions and share input,” Troilo said. “It won’t happen overnight; however, establishing a workspace that invites insights from everyone will eventually generate big returns for your company.”
Farley said that diversity is not about making sure your organization’s makeup strictly matches the nation’s demographics.
“That’s just not practical, and if we say that you’re white and male that you’re outdated or unwelcome, that’s not doing any good either,” Farley emphasized. “At the end of the day, it needs to be about valuing each person’s uniqueness and giving them a place to belong. To me, diversity is the uniqueness, belonging is inclusion. That’s what we need to work toward.”