Diversity goes beyond differences in physical appearance—and the importance of diversity in the workplace is more than just good public relations.
In this quick guide, learn more about diversity and why it matters in the workplace.
What is Diversity?
Merriam-Webster defines diversity as: “the condition of having or being composed of different elements; the inclusion of people of different races, cultures, etc. in a group or organization.”
Another definition is this: Diversity refers to the range of human differences, including ethnicity, race, gender, sexual orientation, age, and ability.
Diversity in the workplace looks like employees who represent a range of human differences. This can include people with different identities, experiences, and backgrounds.
What is Diversity in the Workplace?
A diverse workforce is comprised of employees who are different than each other. When employees feel like they can celebrate their differences in the workplace, the company benefits. Let’s break this down.
Types of Diversity in the Workplace
We have an entire article detailing the different types of diversity in the workplace, so here’s just a quick look.
In the workplace, diversity can be divided into three distinct categories: internal, external, and organizational diversity.
Internal dimensions of diversity relate to an individual’s core identity. These types of diversity are the primary dimensions that shape a person’s perspective. They include:
- physical/mental abilities
- sexual orientation
External dimensions of diversity relate to a person’s experiences and choices. These types of diversity often change over time. Even if one or more of these dimensions is no longer true for an individual, that past experience still affects their life. External dimensions of diversity include:
- geographic location
- personal habits
- recreational habits
- educational background
- work experience (including veteran status)
- parental status
- marital status
Finally, organizational dimensions of diversity relate to a person’s place within an organization, whether that’s a company, a school, a volunteer organization, or a social group. Since we’re discussing diversity in the workplace, we’re looking at types of diversity within a company. These include:
- functional level/classification
- work content field
- work location
- union affiliation
- management status
Once you have a diverse workforce, what next? What’s the benefit to the company?
Why Diversity is Important to Your Business
Study after study shows that diverse companies—especially companies with diverse leadership—outperform homogeneous companies. Here are just a few relevant statistics.
- Companies with above-average diversity in management reported innovation revenue that was 19 percent higher than that of companies with below-average leadership diversity.
- “Chief Investment Officers of leading institutional investors said they would allocate twice as much capital to the more gender diverse private equity firm if choosing between two otherwise comparable firms. More ethnically and racially diverse private equity deal teams would receive 2.6 times as much capital.”
- “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.”
- Companies in the bottom quartile for both gender and ethnic diversity are 29 percent more likely to underperform financially compared to their industry peers.
Financial returns aren’t the only benefit of diversity in the workplace.
How Diversity Can Improve Employee Retention
If you’re worried about your company’s attrition rate, employing a diverse workforce can actually help. Multiple studies indicate that employees are more likely to stay with a company that’s committed to diversity, equity, and inclusion. On the other hand, research shows that employees tend to leave jobs when they’re part of an underrepresented group.
Women Want Gender Equality in the Workplace
Deloitte surveyed 5,000 women across 10 countries about their experiences in the workplace. This research identified a group of “gender equality leaders” (companies who supported women in the workplace) and “lagging” organizations (companies who don’t adequately support women in the workplace).
Women who worked for “gender equality leaders” were considerably more likely to stay at their current job. Here’s a quick breakdown of the differences.
- Among the surveyed women who worked for “gender equality leaders,” none were currently looking for a new job with a different company; only 9 percent said they planned on leaving their company within two years; and 23 percent said they planned on staying with their current employer for more than five years.
- Among the surveyed women who worked for “lagging” organizations, 24 percent said they were currently looking for a new job with a different company; 39 percent said they planned on leaving their company within two years; and only 1 percent said they planned on staying with their current employer for more than five years.
McKinsey’s Women in the Workplace 2022 report draws similar conclusions on employee retention, revealing that women leaders are leaving their companies at the highest rate in years. This choice is primarily driven by three factors:
- Women leaders face more challenges than men in similar positions, signaling that it will be harder for them to advance in their company.
- Compared with men at the same level, women leaders are more overworked and underrecognized.
- Women leaders want to work for companies with a good company culture.
Employees Increasingly Value Diversity in the Workplace
Women are not the only demographic interested in working for a diverse organization. A survey by Gallup found that young Millennials and Gen Z employees want to work for an organization that is diverse and inclusive of all people. Gen Z is the most diverse generation in the workplace, and they want to work for companies that value their diversity.
A survey by Buck on wellbeing and benefits found a direct correlation between perceived DEI in the workplace and an employee’s intention to quit. Employees were more likely to want to quit if they thought diversity was not respected by their company.
Data aside, it just makes sense that diversity in the workplace would improve employee retention. People want to work for a company that values differences and encourages mutual respect among employees.
In addition, people are more likely to stay with a company if they have the opportunity to learn and grow. When employees from underrepresented groups see people like them in leadership, they believe in their own potential for career advancement.
Insight Global Can Help with Diversity Recruiting
If you’re looking to recruit diverse candidates this year, but you’re not sure where to start, Insight Global can help. We have a team of hiring partners ready to find your next new employee.
Discover how Insight Global can help.