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Diversity Recruiting -- The Compelling Business Case

by Dr. John Sullivan

There are many excellent legal and social arguments for recruiting diverse employees.

However the most powerful and effective arguments that I have made for excellence in diversity recruiting relate to the business and the dollar impact that diversity recruiting can have on the bottom line. Does having a workforce with diverse backgrounds, experiences, and ideas have impact on the firm's profitability? Well the answer is a resounding yes!

The dollar amounts of the impact of diversity do vary somewhat between firms depending on several factors (including geographic location and who the customer is) but overall the dollar impact of diversity is relatively easy to demonstrate.

The following are the prime factors that can be used to demonstrate the dollar impact of having a diverse workforce.

HOW DIVERSITY CAN AFFECT THE BUSINESS:

  • Product sales - Sales can increase as a result of decisions made by executives with a broader and more diverse background. (A recent AMA study demonstrated a clear correlation between diversity at the executive level and an increase in sales).
  • Customers demand it - In cases where there is a great deal of customer contact (either face-to-face or on the telephone) the number of customers and sales can increase dramatically when the customers can see that people serving them understand their unique needs. For example, a major bank found that by increasing the diversity of its counter staff it attracted a more diverse range of customers as well as increasing its overall sales at the branches that more closely "mirrored" the population of the neighborhoods in which they were located.
  • Avoiding major blunders - A diverse product development team with a broad range of experiences can more easily "question" and spot product features and advertising elements that can potentially offend or turn off a significant portion of customer base. Both Nike and Chevrolet for example received a good deal of negative publicity as a result of product decisions that failed to account for cultural variations in different countries and cultures.
  • Products that meet customer needs - Companies like Quantum have found that the use of cross functional product development teams resulted in products that more closely fit the needs of their customers. In a similar light, teams with a diversity of backgrounds are more likely to understand the variations in customer needs and usage that can occur in a large customer base. By broadening the range of ideas, you can broaden the usability of your product.
  • Our customers are changing - As the percentage of diversity increases in the over-all population the percentage of customers that are diverse also increases. If companies are to increase their penetration into these markets they must have product development people that understand the diverse needs of this "new" market.
  • Advertising and marketing are more effective - "Mainstream" ads don't have the same impact on diverse populations. As the diversity in the marketing and advertising staffs increase, a firm's ability to design campaigns that meet the needs of our expanded customer base also increases. Our image as a firm and our ability to recruit will also improve as an indirect result of the change in our advertising.
  • Globalization and competitive advantage demands it - If a corporation is to be truly global, its workforce must understand the unique needs of people from different cultures and regions. If a company's workforce does not include people that have lived, traveled, or understand the unique needs of customers in different countries then product development and sales may suffer dramatically. If we are to gain a competitive advantage we must not only just build a diverse workforce, but do it faster than our competitors.
  • Productivity - Working through diversity issues is an excellent preparation for learning how to change and innovate. Lessons learned in managing diversity can help managers and employees work through complex problems and to deal with other fast change issues that occur in an Internet economy. Also because a large percentage of production and service workers come from the diversity population, an increase in managers that understand their needs will increase their (and our) overall productivity in these important business functions.
  • Loss of talent and increased recruiting costs - Statistically in the U.S., the diversity population is becoming "majority." And as unemployment rates continue at record lows, failing to recruit from an ever increasing segment of the population will have a direct impact on the company's level of talent. As the diversity population grows, failing to recruit from its ranks means that a corporation will miss out on a huge talent pool as well as dramatically increasing its recruiting costs as it "fights" over the increasingly smaller pool of non-diversity candidates. Eventually, as the diversity population grows, and if unemployment stays high, excellence in diversity recruiting will no longer be "optional." In a global economy companies can exploit labor surpluses in some regions by hiring "remote workers" and by importing talent. Global recruiting requires managers and recruiters with diverse perspectives and experiences.
  • "Why" questions - People from diverse backgrounds and experiences (as well as those new to an organization) often "challenge" and question business processes and practices. As "outsiders" or people that think differently, they wonder why things are done "that way" as opposed to "another way" which may seem more natural to them. This questioning, if managed correctly, can lead to the dropping of antiquated processes and to the adoption of a continuous improvement mindset.
  • Better decision-making - Team members from the same backgrounds and experiences generally make decisions within their narrow range of experiences. By expanding the team to include more diversity of ideas (and more out of the mainstream ideas) and experiences, you increase the chances of getting both a broader range of ideas and criticism. Although this diversity of ideas may initially slow the decision process, the overall quality of the decisions are likely to improve and the number of times that decisions need to be revisited decreases.
  • Employees and stockholders may demand it - As a result of the current difficulty in attracting top talent, companies have been forced to do market research in order to identify what factors cause top applicants to consider a firm. What companies have found is that both applicants and current employees demand a diverse workforce, even if they themselves are not from the diverse population! In addition, companies with "liberal" or socially conscious stockholders often find that these stockholders question the firm's lack of diversity in shareholder meetings. These "activist" shareholders expect the firm to respond to their "social" agenda. Suppliers and strategic partners may also be more willing to do business with you if your workforce is as diverse as theirs is.
  • PR - Diversity programs and efforts can attract a great deal of favorable press coverage. For example, Fortune magazine annual "best places to work" list includes diversity as one of the selection criteria. Ranking high on this list can dramatically increase a firm's image and its ability to recruit. In the similar light, landing on Fortune's top 50 diversity firms list can also bring the firm significant PR. In the reverse, failing to meet diversity goals or the negative publicity from lawsuits can cost a firm millions of dollars in damage both its ability to recruit and its image for years. In addition, workplace harassment and discrimination (which can occur more often in non-diverse work environments) can dramatically decrease individual worker and team productivity.
  • The ability to execute - The ability to execute plans in all business areas may be improved as a result of diversity efforts which teach employees how to deal with "different" people and different ideas. By learning how to work through problems and difficulties rapidly employees can then transfer that skill to a broader range of business problems.
  • Retention - Because diverse employees are in such high demand, programs that are developed to successfully retain them can also be used in hard to fill/ retain jobs and to help our overall retention efforts.
  • Customer service - If your corporation has a broad customer base, having diversity in your customer service workforce is likely to lead to higher customer satisfaction. This is because as the diversity of the customer service workforce increases, the likelihood that a customer will get someone who understands his or her unique needs, language, or culture also increases. Individual one-on-one interactions between diverse and non-diverse workers may also result in a better understanding of individual and cultural differences.

OTHER MISCELLANEOUS REASONS

  • Lower-cost as a result of a decrease in the number of lawsuits and EEOC actions as well as management time spent on them.
  • Retention rates may increase as employees take pride in the leadership that a firm has taken to increase diversity in a time when affirmative action is often under criticism. Having a diverse workforce may result in the strengthening and reinforcement of a corporate culture (and values) that supports innovation and a diversity of ideas.
  • A lack of diversity can inadvertently give union organizing efforts stronger support.
  • A diverse workforce may make your firm more attractive in the stock market or as a merger partner.
  • If a firm is in a "rapid growth" mode, the diversity "pool" is so large that it becomes an essential element of any recruiting strategy.
  • Having diversity in the human resource function can result in benefits, training, and policies that are more effective because they are developed by people that better understand the needs of the "entire range" of our workers.
  • Products that are easier to use because they have been developed and "tested" by people with a wider range of needs.
  • Some of the diversity population may live a different lifestyle (older workers and stay at home parents) that prefers part-time work. This may allow us to fill in "spot" needs while at the same time providing this diverse group with additional income opportunities.

CONCLUSION

By looking at the many business impacts of diversity, it is easy to see the potential financial impacts on a firm. Generally the impact of having a diverse workforce on an individual firm is well in the millions of dollars. This impact will continue to increase as the previously "minority" population becomes a "majority." At that point, excellence in diversity recruiting no longer becomes an option. I would argue that this point has already been reached and that excellence in diversity recruiting is already a business necessity!

Originally published via the Electronic Recruiting Exchange (www.erexchange.com)

Dr. John Sullivan (johns@drjohnsullivan.com) is a well-known thought leader in HR. He is a frequent speaker and advisor to Fortune 500 and Silicon Valley firms. Formerly the chief talent officer for Agilent Technologies (the 43,000-employee HP spin-off), he is now professor and head of the HR program at San Francisco State University. He was called the "Michael Jordan of Hiring" by Fast Company magazine.  Information about his numerous other articles, books and manuals about recruiting and HR can be found at www.drjohnsullivan.com. Dr. Sullivan is also the editor of VP of HR, an e-newsletter providing "out of the box" solutions for senior HR managers. Free subscriptions can be obtained on his website.