31 AUG 2020 WHAT DO YOU THINK?

Why Don’t More Organizations Understand

the Power of Diversity and Inclusion?
by James Heskett

Inclusive organizations consistently produce a competitive advantage over peers. So

why don't more CEOs insist on racial diversity in their leadership ranks? asks James
Heskett.

iStock
(iStock)

Several large organizations announced recently they would increase efforts to recruit persons of color, in
part a response to the Black Lives Matter movement. Some of the same organizations made similar
announcements in the past—yet the numbers of persons with minority backgrounds in those
organizations have remained about the same.

This is in the face of research findings that organizations with significant minority representation are
stronger than their peers. A McKinsey & Company study in May of top executive teams in more than a
thousand organizations in 15 countries concluded that the most diverse organizations have an edge in
their markets. These firms are “more innovative—stronger at anticipating shifts in consumer needs and
consumption patterns that make new products and services possible, potentially generating a
competitive edge.”

Of equal significance is a finding that the top third of the organizations in the study are pulling away
from the other two-thirds in diversity and inclusion, registering increasingly higher probabilities of being
the most profitable. They are exhibiting progress in achieving greater gender and ethnic diversity, and
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increasingly positive impacts on bottom-line performance, according to the researchers.

Differentiating between diversity and inclusion

I differentiate between diversity and inclusion by thinking of progress in diversity as depending primarily
on successful recruiting of diverse talent. It can be measured. It’s what we see on the corporate
dashboard of performance measures. It is quite likely that the rich get richer in this effort; organizations
exhibiting greater diversity are more attractive to talented people with diverse backgrounds.

Talent retention depends to a large degree on inclusion. At least that’s what people of diverse
backgrounds tell us. Inclusion is related to such things as “voice”—the belief by workers that they are
heard—as well as recognition and equal opportunity in rewards and promotions. Harder to quantify than
diversity, inclusion is more nuanced and measured in comments in interviews and surveys. It doesn’t
provide the numbers and simple headlines often associated with diversity.

Some organizations are good at both diversity and inclusion; others can’t seem to get either right. Some
companies, for example, are strong recruiters but lack the ability to be inclusive of talent with diverse
backgrounds. Try as they might, they are not making progress on diversity. Instead, they have low
retention rates for their diverse talent. In many cases, the “last in, first out” phenomenon may apply in
times of crisis.

The key to achieving both diversity and inclusion is committed leadership at all levels, not just a few at
the top who have already made it. Transformation has to take place on the front lines and the middle
levels as well. This takes effort and time, perhaps more than many organizations are willing to invest.

Inclusion may present too many challenges; it requires leaders with the hearts and minds to understand
personal challenges and provide mentorship for all of their direct reports, listening to them, and being
willing to accept new ideas from them. They must recognize those with diverse backgrounds as resources
rather than consumers of their effort.

Achieving these objectives requires more than training. It involves constant measurement, counseling,
and follow-up with managers at all levels in the organization to produce results. Given the potential
payoff, is this too much to expect of well-meaning leaders? Why don’t more organizations “get it”
regarding diversity and inclusion? What do you think?

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