INTRO

The pandemic and racial reckoning have highlighted the appalling inequities that negatively impact the lives and livelihoods of Black Americans in the United States. The inequities permeate every aspect of our society, including, of course, major employers. Despite earning a college degree, Black Americans have only 9% of the net worth of their white peers with college degrees and only 40% of that of White Americans without a college degree.

Employers are the most important pathways for all Americans to achieve social and economic mobility and financial stability. It’s the right thing to do, and it matters for business.

George Floyd’s gruesome murder sparked an unprecedented and long overdue racial reckoning in our nation. The need for change is clear and the time is now. Employees, customers, suppliers, and other stakeholders demand more equitable workplaces and hold companies accountable for creating them. DE&I isn’t a distraction from more urgent challenges—it’s a critical part of the solution. (BCG)

Given the large and ever increasing number of socially conscious consumers, investors, and professionals, demonstrating a commitment to Black equity not only enables employers to stop perpetuating the Black inequity problem and start propelling the Black equity solution, it also helps their bottom line.

There is no question and the research is clear: companies with diverse workforces perform better. Here are 7 reasons why diversity matters for business, and why the time for change is now.

7 REASONS DIVERSITY MATTERS

Reason #1: Puts you on the right side of history

As the one year anniversary of George Floyd’s tragic death draws closer, there will undoubtedly and appropriately be intense attention paid to whether anything has changed for the better. Black Americans face profound and persistent inequities compared to White Americans in wealth, income, and health outcomes, to name just a few. The stark inequities are the product of past and present systemic and individual racism. Our sincere hope is to be able to see tangible progress and forward movement from organizations and in society as soon as May 25th. We must shift from discussing a commitment to change to taking real action.

Reason #2: Improves your bottom line

The business case for diversity remains strong as companies that are more diverse outperform those lacking in diversity. In 2019, companies in the top-quartile for ethnic and cultural diversity were 36 percent more profitable than companies in the fourth (Source: McKinsey & Company) quartile.

Businesses with diverse management teams make 19% more revenue (Source).

• 43% of businesses with diverse boards saw increased profits (Source).
• Diverse companies are 70% more likely to capture new markets (Source).
• Diverse teams make better decisions 87% of the time compared to individuals (Source).
• 85% of CEOs with diverse and inclusive workforces said they noticed increased profits (Source). (Guider)

When companies commit themselves to diverse leadership, they are more successful (McKinsey)

• Improved ESG and credit ratings, and could lead to increased access to capital
• Stronger revenues
• Increased interest from impact-minded investors
• Companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians (McKinsey)

Diverse workforces outperform non-diverse workforces every time. As the World Economic Forum states, ‘the business case for diversity in the workplace is now overwhelming’. (Guider)

Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results. (McKinsey)

In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent. (McKinsey)

Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians. (McKinsey)

Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians (exhibit). (McKinsey)

Reason #3: Attracts and retains top talent

Often times, hiring managers hire people who look like them. They don’t look for diversity or difference, they look for similarity and compatibility.” (Forbes) That’s particularly true for their talent pipelines: attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of organizations. (McKinsey)

Yet that’s not effective for team building, and it’s not forward thinking either. Thinking ahead to future generations, hiring managers need to keep in mind:

• The younger workforce values social justice (BCG article: A focus on DEI will be particularly critical in recruiting younger generations, who value inclusion and social activism)
• Having diverse teams leads to improved creativity, innovation, and tension. It’s not always going to be easy, but that’s a good thing. Differences of opinions, perspective, and experience create for better solutions in business, avoid groupthink, and ultimately help teams hit their mark. See more in our team building section.
• This in turn suggests that other kinds of diversity—for example, in age, sexual orientation, and experience (such as a global mind-set and cultural fluency)—are also likely to bring some level of competitive advantage for companies that can attract and retain such diverse talent. (McKinsey)

Reason #4: Makes your company more resilient in times of crisis

Companies with inclusive workplaces—defined as those where key employee groups and women and people of color reported positive experiences at work—were far less affected by the global financial crisis. From 2007 to 2009, the S&P 500 index declined by more than 35%, but the stocks of inclusive companies actually increased by 14%. (BCG)

Reason #5: Builds better teams

Makes for more innovative, creative and highly-effective teams

The truth is like minds think alike. But it’s so much more than that.

• Diverse teams means better decision-making
• Diverse teams beat homogenous teams every time in terms of performance.
• Diverse teams are more creative

“What I found incredibly interesting [about this research] is that homogenous teams felt great during the process and yet they lost, while diverse teams felt miserable during the process until they finished and met their target. No one is telling us how hard it is…but you have to embrace that because the ultimate outcome will be better.” (Forbes)

Reason #6: Positions you as an industry leader

• Recognition as an industry leader committed to achieving Black equity and the opportunity to motivate other major employers to follow

Reason #7: Puts you at a competitive advantage

• Competitive differentiator for your company as you compete for talent, customers, investors, and new opportunities.
• Increased recruitment and retention of valued business partners who expect greater transparency around racial equity
• The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies.(McKinsey)

CONCLUSION

It is time for employers to move past statements about being committed to diversity; they must commit to concrete, system action that drives sustainable progress toward Black equity internally and in society.

While the benefits are clear, there is much work to be done. The key is commitment. Employers that are truly committed to Black equity can make urgently needed, tangible progress.

We recognize employers are at different stages in the journey toward Black equity and we also recognize that making progress in certain areas can be a long-term effort. MLT Black Equity at Work Certification establishes a clear and comprehensive Black equity standard for employers. It provides the roadmap and the recognition necessary to enable and encourage employers across America to propel the Black equity solution and contribute meaningfully to Black equity in society. Only by adopting standards on Black equity and holding ourselves accountable to achieving them can we start to raise the bar for racial equity. Pursuing and ultimately achieving the MLT Black Equity at Work Certification will be a competitive differentiator for your company as you compete for talent, customers, investors, and new opportunities.

The MLT Black Equity at Work Certification was created to establish a measurable standard for Black equity in the workplace to enable employers to demonstrate their commitment to Black equity through strategic and sustained action that leads to real progress. Find out how your organization can be part of the solution below.