How Diversity in Organizations Improves Performance

How Diversity Can Improve Your Organization’s Performance

Having a diversity, equity and inclusion (DEI) program has proven advantages. Measuring the impact of diversity and inclusion isn’t always straightforward, but research indicates five common benefits of diversity in organizations.

1. Increases Productivity

A report by McKinsey & Company found that diverse companies perform better, especially if an organization's leadership is diverse. The research showed that:

  • Organizations in the top quartile with gender-diverse executive teams were 21% more likely to experience above-average profitability than their industry peers.
  • Organizations with ethnic and culturally diverse leadership are 33% more likely to outperform their peers.

Why does diversity have such a strong impact on financial performance? For one, diversity increases productivity. A more productive workforce translates to higher profits. Secondly, diverse teams tend to be more creative and better at problem-solving.

In the private sector, this can give you an edge over your competitors. In the public sector, a more productive workforce can serve your community more efficiently and at a lower cost.

2. Builds a Positive Organizational Culture

Recruiting a diverse workforce injects personality into an organization’s culture. But diversity is just one part of the equation. Equity and inclusion are important too. Together, they build a strong organizational culture.

Equity refers to providing equal opportunities to all employees, especially those who have historically been afforded fewer opportunities. Inclusion is the act of making all employees feel embraced, supported and valued.

Implementing diversity and inclusion training to address unconscious biases and setting up policies and processes to support diversity can build a more inclusive and positive organizational culture. If everyone in your organization feels included, they become happier and more engaged employees.

3. Sparks Innovation

A study by the Boston Consulting Group found that organizations with policies and practices that support diversity increased innovation revenue by up to 12.9%.

Public sector organizations often have to adhere to government regulations and getting tangled in the red tape can stifle creativity and innovation. Diversity in the public sector can help overcome that.

Diversity refers to more than just race, gender, disability, or religion. It can also include employees of different ages, education, skills, levels of seniority, and local and international backgrounds. The knowledge, experience and skills of such a diverse workforce can bring a range of innovative ideas and solutions to the table.

This collective creative power can help your organization:

  • Streamline processes and create new, more efficient systems.
  • Create more functional organizational structures.
  • Influence policy-making.
  • Introduce new projects, both internally and within communities.

Furthermore, these innovations can be shared to benefit other public sector organizations.

4. Increases Employee Retention Rates

Recruiting employees is often easier than retaining them. If new recruits don’t feel accepted or don’t relate to the organizational culture, they may leave.

If an organization is inclusive, it’s more likely that employees will enjoy working there and want to remain with the organization for a long time. That means less employee turnover and less time and money spent recruiting new staff.  

It’s also important to recruit leaders, not just entry-level staff, from diverse backgrounds, as an organization’s attitude towards inclusion is often reflective of its leadership. Leaders from diverse groups can help shape an inclusive culture. When employees feel they belong, they’re more inclined to stick around.

5. Helps You Better Serve Your Constituents

The public sector serves a diverse population, many of whom view government organizations negatively. Some perceive them as inefficient, disinterested and out of touch with the needs of communities.

One of the benefits of diversity in public sector organizations is gaining a better understanding of your constituents' needs, challenges and desires.

  • You’ll communicate more effectively with community members and they will feel more comfortable engaging with your organization.
  • You’ll be able to create programs, projects and public spaces that better meet the community’s interests and needs.
  • You’ll be better positioned to find effective solutions to the community’s problems.

Why Diversity is Important for Public Sector Organizations

Despite the strides made to represent diversity, the average US workplace still hasn’t fully leveled the playing fields. Interestingly, the public sector currently leads the way on diversity. According to McKinsey, 34% of C-suite jobs in the public sector are held by women and 22% by people of color compared to 21% and 15%, respectively, in the private sector.

While this is encouraging, more work lies ahead to expand diversity beyond race and gender and across different levels of organizational hierarchy. The public sector has a responsibility to represent its communities and to set the standard for the rest of the nation's workforce to follow.

Regina W. Romeo

Ms. Romeo has more than 20 years of experience in public sector human resources as an analyst, manager and director. In her role as Chief Human Resources Officer, she is responsible for managing the day-to-day HR operations and organizational development for CPS while also consulting and managing special projects for clients. Regina has worked for both large and small public sector agencies and brings a unique perspective and real-world experience to her role.

About CPS HR Consulting

CPS HR Consulting is a self-supporting public agency providing a full range of integrated HR solutions to government and nonprofit clients across the country.  Our strategic approach to increasing the effectiveness of human resources results in improved organizational performance for our clients.  We have a deep expertise and unmatched perspective in guiding our clients in the areas of organizational strategy, recruitment and selection, classification and compensation, and training and development.